Tom Sedoric

What exactly is transparency in the context of financial advising? 

We’ve all learned a lot in the last three years. After some post-crisis and exhaustive due diligence, I’ve crafted a great mantra that I can live with – we need to know what we own and why we own it. This goes for stocks, bonds, alternatives or any kind of investment in which we entrust our money. “Just the facts, Ma’am” is an appropriate saying for the “post crisis investor”. 

Why has transparency become a top priority? 

Since the market collapse and subprime bubble in 2008-09 it has become clear that financial innovation was considerably ahead of regulation. The CDO (collateral debt obligations) and CDS (collateral debt swaps) phenomenon represented the gulf between a fad that everybody wanted (precisely because everyone was doing it) and an understanding what these innovations actually were. Not unlike the prior dot com bubble, everyone “wanted in” without fully understanding the inherent risk in their investment. 

Why did transparency become a secondary concern? 

In a bubble, investor psychology shifts. No one wants to be left standing on the platform when a seemingly profitable train leaves the station. The need for transparency was usurped by, for lack of a better term, greed. From the 17th century tulip mania in Holland to the tech bubble in the late 20th century, economic bubbles grow rapidly and large when transparency wanes. Too many investors forgo long-term fundamentals and shoot for a seemingly potential painless and risk-free gain. It’s true that some do profit but they are a well-placed minority who understand the rules of the casino – especially the caveat that those controlling the house know that it takes a sizable majority of losers to finance the healthy gains of a small minority of winners.

Why does transparency matter for long-term investors? 

Simply, transparency is a critical and necessary component to insure that investments are aligned with objectives. Whether one’s focus is on income, appreciation, or to hedge risk, transparency is one of the best navigational tools available.

Is transparency making a comeback? 

Traditionally, transparency returns after an economic bubble bursts. It is clear in my experience that the more transparency is ingrained in the system, the less severe and catastrophic the next bubble will be. The key is this – transparency becomes the rule and not the exception when we demand it. The French writer and physician Louis Ferdinand Celine wrote “what is written clearly is not worth much. It’s the transparency that counts.” It has become clear to investors that we can’t necessarily trust the SEC, the FDIC, Standard and Poor’s or Moody’s to do our work for us. Transparency works best when it flows up and down the decision chain. For example, when I demand it from asset managers to whom we entrust our money, then they will do the same with their counterparties. The pros are paid to seek much greater transparency and clarity today. Sy Syms, the late retail visionary, said “an educated consumer is our best customer” – another great historic piece of wisdom for the “post crisis investor”. 

How does transparency fit into the bigger social picture?

Transparency matters not just in the financial realm but in other elements of our society. It is required for a healthy economy and democracy. In light of the crisis, we are now less likely to blindly sit at the local school board meeting or participate in our next political conversation. We can see the collective need and drive for more transparency and accountability not just in this country with people frustrated with the paralysis of our political system, but in the profound democratic expressions of bravery in countries such as Egypt and Tunisia. The geopolitical turbulence we are experiencing can make us better participants in our own democracy. Like any lofty ideal, the pursuit of transparency is never ending but it is a necessity. The alternatives are: more chaos, more destructive economic bubbles, and more shortcuts to greater corruption and financial manipulation. Ask for transparency.


Statistical information has been obtained from sources believed to be reliable but its accuracy and completeness are not guaranteed. The views expressed by Tom Sedoric – Partner, Executive Managing Director and Wealth Manager are his own and do not necessarily reflect the opinion of Raymond James or its affiliates.