Cycle of Loot
This was one of my biggest pet peeves regarding 3rd Edition and Pathfinder, and one I was sad remained in both evolutions of those games. How adventurers never actually accrued wealth, but simply gained more power via the intermediary step of treasure.
Much of the source fiction for gaming involves poor mercenary warriors who are broke after spending the last of their treasure celebrating. There’s very little saving or investment in businesses. But this continually drives the stories forward, as the heroes need more funds. Which makes a lot of sense, as adventuring is a dangerous occupation with a short life expectancy and no retirement plan. It’s not something you want to do for an extended period. If you earn enough to start a lucrative business and retire, it’s better to do so than risk death by the side of the road. The only long-term adventurers would be those with poor financial skills who don’t know how to invest or manage their funds.
But 3e/ 4e and the Pathfinder systems flip this concept on its head. Because adventurers earn an escalating amount of money. Even 2nd and 3rd level adventurers are making more money in a weekend than most workers would see all year. By 6th or 7th level, most adventurers should be able to cash in their treasure and retire comfortably.
In these systems, the acquisition of wealth simply doesn’t work as a motivator for adventure.
Putting that aside, I also dislike the other side effects. You’re constantly cycling through your gear, chasing additional bonuses, and can fall behind in power without this additional bookkeeping. It’s also a trap for inexperienced GMs who might not award enough treasure or provide enough downtime to sell or craft replacement gear. And I dislike how it makes characters so dependant on their stuff rather than their own abilities.
Because it’s a cycle, it also leads to a flat power curve. You don’t get better with better gear, but maintain your power level. You might as well drop advancement from the game and stick with the simple low level math, with its speed and simplicity, but changing level increases to a matter of flavour. Use the statistics for a goblin warrior but describe it as a flaming darksteel iron golem.
You have a point that treasure in and of itself stops being a motivator for gameplay, but I have a question: So what? I don’t need to be “motivated” to play D&D. It’s already something I want to do. Magic items have always been a method of character customization that helps makes two characters of the same class feel different – an aspect that has been lost in 5e now that magic items are no longer as prevalent and feats aren’t even guaranteed. Finally, I agree that it doesn’t make sense for the characters to keep adventuring when they’ve gotten a lifetime of gold by level 3, but the characters aren’t the ones in control. The player is. And the player wants to keep playing that character. What’s fun for the people actually playing the game is always going to trump what makes “sense” for the characters to be doing.
“So what?”
Well, it removes one of the major potential character motivations, and eliminates a major reason for adventuring found in the source fiction that inspired the game, including Conan, Fafhrd and the Gray Mouse, and some of the writings of Delany, Asprin, and Fox. The game is basically telling people they’re wrong for wanting to tell that kind of story.
And it creates a disconnect for players who might not realize this, and then need to create a whole new justification for their character, which can be forced or awkward. Which isn’t fun.
Plus, magic items are just as prevalent in 5e as they were in 1e and 2e. They’re now an option the DM can choose to include or not rather than being a mandated part of the balance where removal is awkward.
This is without going into the host of other problems that come from the loot cycle, such as not being able to award large, expensive things (a castle, a ship) without throwing off the character’s power level, or being unable to aware fun or random magic items (like the wand of wonder) without it just being reduced to gold to increase the plus on the fighter’s belt of strength. Or rendering characters ineffective when removed from their gear, such as in a prison or after being captured. Losing your gear in 3e/4e/PF is worse than death, as it’s a permanent reduction in effectiveness not easily remedied.
And, really, the coolest and most fun magic items character can get are often the ones they wouldn’t have chosen. Because the mechanically optimal choice is seldom the most interesting. But when you can’t just turn a found magic item into gold to boost a plus and instead keep said item, it can become a fun, signature part of the character, taking them in an unexpected way.