8. What Is Finance For?

The role of finance in society has changed. Its primary function in intermediation has shifted over the past 40 years, owing in part to deregulation, the ongoing spread of technology, as well as the growth of a “transactional” business model. All of this has put the client at a greater distance, helping to facilitate the types of behavior that we have seen in the post-crisis period. The current generation of leaders at the largest banks are unlikely to see fault with their strategies, putting shareholder value ahead of the fiduciary responsibilities. However, generational change is coming, with younger people demonstrating values toward business that includes a greater sense of “shared purpose,” essential to a strong and ethical culture. Understanding the primary purpose of finance is essential to any efforts to reform conduct and culture.