The financial crisis led to a loss of trust in providers, regulators, and financial innovation among consumers, Merton observes. Some have proposed technology can stand in for trust, but he says fintech cannot create trust or succeed without it. Two things, however, can substitute for trust: verification and transparency. Some forms of fintech can provide verification, but financial advice tends to be opaque rather than transparent. Merton also discusses data showing retail investors as less satisfied with cost disclosures and performance from active portfolio managers than institutional investors.
A session from the 2008 Financial Crisis: A Ten-Year Review conference held on 8-9 November 2018 in New York.
About the Speaker(s)
Robert C. Merton is the School of Management Distinguished Professor of Finance at the MIT Sloan School of Management and University Professor Emeritus at Harvard University. He was the George Fisher Baker Professor of Business Administration and the John and Natty McArthur University Professor at Harvard Business School. Dr. Merton is resident scientist at Dimensional Holdings Inc. and is the creator of Dimensional Managed DC. He currently focuses on the Target Retirement Solution, a global integrated retirement-funding solution system. Dr. Merton's research focuses on finance theory, including lifecycle and retirement finance, optimal portfolio selection, capital asset pricing, pricing of options, credit risk, loan guarantees, and improving the methods of measuring and managing macro-financial risk. In addition to numerous other awards, he received the Alfred Nobel Memorial Prize in Economic Sciences for a new method to determine the value of derivatives. Dr. Merton received a BS in engineering mathematics from Columbia University, an MS in applied mathematics from California Institute of Technology, and a PhD in economics from MIT.