Finance has always had a middle layer — advisers, brokers, regional banks, active fund managers standing between capital and markets. That layer is thinning. Not disappearing entirely, but transforming in ways that redistribute power, obscure accountability, and leave ordinary investors navigating a landscape designed for someone else.
The Layer That Is Vanishing
For most of the 20th century, investing meant intermediaries. Investing meant calling a broker, consulting an adviser, trusting a fund manager to allocate your capital. These professionals formed the connective tissue between savers and markets — and charged accordingly.
Two forces are dissolving that structure simultaneously. From below, retail investors are going direct. Apps like Robinhood and Trade Republic have made self-directed investing frictionless and free. Boring Money reports that over 11 million self-directed investment accounts now exist in the UK alone — with more than half of retail customers managing their own portfolios without professional advice.
From above, passive vehicles are absorbing institutional flows. The rise of ETFs and index funds has systematically defunded active management. Capital that once paid for research, stock selection, and human judgment now flows into algorithmic replication at near-zero cost.
The middle — the adviser, the active manager, the local investment specialist — is being squeezed from both ends.
Disintermediation Is Only Half the Story
The standard narrative frames this as liberation. Retail investors gain access. Costs fall. Democratisation wins. But the full picture is more complicated, and the evolving role of intermediaries in the financial industry suggests the middleman has not disappeared — it has transformed.
This is the concept economists call re-intermediation. As Wikipedia’s entry on re-intermediation frames it: digital platforms do not eliminate the middle layer. They replace visible intermediaries with less visible ones. The broker gave way to the app. The app is also a market maker, a data harvester, and increasingly, an algorithmic adviser.
Research from the Internet Policy Review makes the structural problem explicit. Retail trading platforms now function simultaneously as market access providers and market makers — profiting from the very trades they facilitate. The middle has not become transparent. It has become a black box with a cleaner interface.
Retail Rises, but Into What?
Edison Group’s analysis documents the growing weight of retail investors in public markets — a development that listed companies can no longer ignore. The institutional dominance of equity markets is eroding. Individual investors now move prices, drive volatility, and constitute a meaningful share of trading volume.
This is partly what financialisation looks like at scale — the gradual absorption of everyday savings into market logic, a shift explored in “The Quiet Financialisation of Everyday Life.” The expansion of self-directed investing is not simply more people choosing stocks. It is the extension of financial market exposure into demographics and life stages that were previously insulated from it.
The risk is asymmetry. Retail investors arrive just as the professionals are leaving. They enter markets increasingly shaped by algorithmic participants operating at speeds and with data sets that no individual can match. Access has widened. The information gap has not.
Private Markets and the New Exclusion
While public markets democratise, a parallel dynamic runs in the opposite direction. Private markets — private equity, private credit, venture — have historically been the domain of institutional and ultra-high-net-worth investors. That boundary is shifting.
Platforms and fund structures are now opening private market access to wealthier retail investors. But the CFA Institute argues this expansion deserves scepticism. Private markets carry illiquidity, opacity, and valuation complexity that professional due diligence was built to navigate. Retail entry into these structures risks reproducing the worst of the old middle layer — fees, misaligned incentives, information asymmetry — without the fiduciary obligations that once governed it.
The middle investor is not simply being replaced by better tools. In some segments, the middle is being reconstituted in less regulated, less transparent forms.
Finance Is Losing Its Middle Layer — and Gaining a New One
Three things are happening simultaneously, and they pull in different directions. Disintermediation gives individuals direct market access at low cost. Institutional retreat removes the active managers and research infrastructure that once priced securities. Re-intermediation installs platforms, algorithms, and private market structures as the new connective tissue — operating with less visibility and fewer obligations than what they replaced.
The result is a financial landscape that looks flatter than it is. The middle has not disappeared. It has been rebuilt by entities that benefit from being mistaken for infrastructure. The adviser was expensive and visible. The algorithm is cheap and invisible. Whether the investor is better served is a different question from whether the investor is paying less.
Finance is losing its middle layer. What replaces it will define who investing actually works for.
Key Sources
- Edison Group – Listed Companies Can No Longer Afford to Ignore Retail Investors
- FOW – The Evolving Role of Intermediaries in the Financial Industry
- Wikipedia – Re-intermediation
- CFA Institute – Private Markets: Why Retail Investors Should Stay Away
- Boring Money – Over Half of Retail Customers Are Now Self-Directed
- Internet Policy Review – Obfuscated Brokerage: Retail Trading Platforms
Subscribe to EuroLuminant for independent European journalism.
