Paul Volcker, the former Federal Reserve chairman, quipped a few years ago that the only useful financial innovation of the past three decades is the ATM.

Now, there's been a proliferation of financial innovations over the past 20 years, from JPMorgan Chase's (JPM 0.06%) invention of the credit default swap to double-leveraged ETFs.

But have they done any good for investors?

I asked Liz Ann Sonders, chief market strategist of Charles Schwab, what she thought. Have a look. (A transcript follows.)

Liz Ann Sonders: Certainly the alphabet soup of credit derivatives, when we look back and look at the ripple effects of the fall of Lehman, was an unmitigated disaster, and it was lack of transparency and lack of regulatory oversight and lack of open exchanges, and quite frankly, just very little knowledge about the worst-case scenario, even by the creators of many of these things.

I think the scrutiny and the additional capital controls that have born down on the banking system puts the financial system in much healthier shape now. Leverage ratios are down. That does not mean we've eliminated the possibility of all accidents, but I think we've taken away a lot of that risk that existed in 2008. You're right, there are going to be some innovations that ultimately come back and backfire on investors, but I think there's plenty that are to the benefit of investors, too.

Certainly in general we've seen whether it's true, the proliferation of exchange-traded funds or just the cost structure of this business, have not only made it much less expensive for individual investors to get involved in investing in the long term, but now through some of these vehicles, particularly low-cost vehicles, it is opening up the opportunity for individuals to get a level of diversification that simply wasn't available to them in the years past. So they can almost take more of a foundation and endowment approach to managing their money.

The rub in the past few years is that diversification hasn't mattered that much, because we've been in this risk-on/risk-off environment. So you have to make, "I'm going to buy any and all risk assets" or "I'm going to be out of any and all risk assets," and it was a binary decision you needed to make and that is starting; we're starting to move away from that environment. Correlations are coming down, so I think we're heading back into an environment where diversification will work again, is working again, certainly is in general to the benefit of individual investors, and some of those innovations, I think, have been to the credit of individual investors, not the detriment.