Evolution of financial services

Ownership at its core is something very simple — “an act, state, or right of possessing something”. No matter what you own, you should have full control over it.

However, with the advent of the financial services industry a complex system of regulation was introduced, replacing a simple concept with complex ecosystem, consisting of multiple middlemen. The result is a heavy and inefficient system, especially around assets like equity, real estate or financial instruments. You want to buy a stock? You have to go to a broker. You want to safely deposit your money? You go to a bank to which you transfer the rights to control over your capital.

If you want to trade on Wall Street you are dependent on an array of services spanning from central depositories, to custodian, brokers and clearing houses. Systems that require so many different intermediaries have a number of disadvantages. Take information asymmetry as an example, it is a cumbersome process to distribute information between several parties which is also costly, leaving space for corruption and misuse along the way. It creates a paradox, as the original role of each and every one of these middlemen was to protect the investors and make the system more efficient.