First off, what is disintermediation? Dedicated readers of the investment blogosophere probably already know that much of what is written is focused on giving investors the information they need to make more informed investment decisions. Much of this has to do with how one can form portfolios at a lower cost (and hopefully) higher return than that provided by mainstream investment providers.

Instead of paying some one 1% annually to provide asset allocation advice an informed investor can do the very same thing via low-cost means, like ETFs. Instead of paying 1% or more, for active security selection an informed investor can utilize the many sources of information on the Internet to help select individual securities.

This post was prompted by a post by Larry Nusbaum at Millionaire Now! where he breaks down the process one might use to re-create a so-called “structured product.” Using off-the-shelf instruments an individual can create a synthetic product that banks and brokers are already selling. While this requires a bit of investment expertise it is by no means beyond some one with an interest in finance.

Informed investors can therefore bypass retail providers, like full-service brokers, investment advisors, mutual fund companies, so as to frequent wholesalers. However convenience is, at times, something worth paying for. Who hasn’t stopped into a convenience store for an overpriced soda and bag of chips? Nor is wholesale always the way to go. Who hasn’t left a warehouse store with an item like a 10 pound of can of pork and beans that will sit ad infinitum in their cupboard untouched?

Every investor needs to approach with their own portfolio with their unique needs in mind. It will often be the case that a combination of products and services, retail and wholesale, will best serve their investment goals. For the dedicated individual investor the internet and the blogosophere has opened up new avenues for education and research that only a few years ago were either prohibitively expensive or non-existent.  This happy confluence of events will (hopefully) only get better over time.

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