Isn’t it self-evident that in general if you are good at this you would not be selling your advice? By definition, if you are good, you can accept the risk and win. Why charge a couple percent in fees when you could invest the money yourself?
The fact of the matter is that a bound on theoretical returns is not what dictates people's choice of career. You have to consider the lower personal risk that you take on investing someone else's money and only getting a percentage of it versus investing your own money and getting 100% of it. You have to consider the aspect of being able to learn from others as you work, versus having no mentors when you lone-wolf it. You have to consider that being a financial advisor is not just looking at investments and making trades. Maybe they look forward to their 45 minute call with Jeff Bezos or whatever, and that's what driving them to that career option.
Finally, I think people are hiring financial advisors for prudence, not because they expect to beat the market. For example, how much of your money should be available in 1 day versus how much of it might be stuck in the market for 10 years because some politician made a dumb decision? How much of your stock should you sell this year in order to replace your roof, or should you get a loan? Nobody is expecting to beat the market; they just want to avoid doing dumb stuff that can be avoided.
They indeed do not have good writers.
It's really fun, but it's an optimization game, not a gambling game. There are basically a lot of known "right answers" and the trick of financial planning is applying and adapting them to the particulars of someone's situation.
I think that's the point the parent was trying to get at, it's an industry where all the best talent never become hireable in the first place.
But that doesn't mean there aren't good financial advisors. They're not helping you best the market, they're helping you ensure a good financial future within the scope of your existing wealth and income. They do apply their skills to themselves, but you need a job and a big base of money before s&p returns will make you rich. :)
The danger zone is for small investors, where it doesn't make sense to advertise to them because the regulations are too demanding, margins too small and people tend to be flighty or need lots of hand-holding. That is basically why it there aren't "invest in stock!" signs on every ad stand.
And good financial advice tends to be boring and doesn't change much. The same strategy tends to work in all weather - invest a little bit in everything, invest a bit more in things that do well and try not to take on unnecessary tax burdens.
Liquidity.
You don’t invest $100 and make $120 after a year for sure . You invest $100 and maybe an all knowing “god” knows the outcome but there is a probability distribution (a model which can vary based on opinion) for us mere mortals. Depending on your investment goals you might trade to have more risk and more expected upside. You may diversify away from US to mitigate US specific risk but maybe such a portfolio wont perform as well long term.
Liquidity. Investing a million vs. investing billions needs different approaches. Someone doing something sophisticated may only be able to invest so much without revealing their hand. Someone investing a million people’s pension will act differently and probably more prosaic and predictable. No one will fire you for turning 100k into a million over someones lifetime but they will be angry if you turned it into nothing.
A typical scenario for say a pension (aka superannuation, aka 401k) is that when you are young you go for higher short term risk and higher potential growth mix of investments and as you get closer to retirement you derisk.
The idea is that a crash when young is no issue as the market will recover and probably you’ll get some bargain stock soon after.
When you are older you don’t want to lose 20% of your savings to a crash so more money gets diverted into lower risk stuff.
The point is that there is not one investment strategy that suits all. Therefore there is a place for fund managers to provide different risk profiles. They aren’t really getting alpha but they are useful nonetheless. They won’t be picking stocks based on trading ideas.
To compound this, these large funds deal with billions of dollars. If you place a market order for a billion dollars people notice. Just like if you had to spend a million dollars on ebay on used apple watches you are going to affect the price of those watches because of your bids. Therefore they will find it hard to seek alpha anyway.
The point is there is a place for funds that might seem like “dumb money” but just broadly follow indices and there is a place for traders with a model and a theory to try and beat the markets.
Hedge funds generally charge a management fee plus a performance fee. This is why hedge funds and other similar structures are much more lucrative and acquire more talent.
So, this job thing you're talking about, at some point it will happen you, if even by taking your time, your children and family time.
There's likely a level where is really not worth any money to have one of those traditional contracts taking your time and energy for cash. That threshold is probably not as high as it seems to be, if not for land and housing prices.
Building wealth takes money and time. The money needs to come from somewhere.
For those who are good, who have been doing it for a long time, and are wealthy, it gives them something to do and a reason to get up in the morning. There is a lot to be said for that.