[bryananderson]

This is based on a common misunderstanding of what “Wall Street” does.

The Hollywood-inspired folk concept of Wall Street is that they trade stocks. That’s what everybody in those big buildings in Manhattan does all day. They yell buy/sell orders into red phones and drink Scotch.

Except they don’t. Wall Street firms like Goldman Sachs make money by providing services such as mergers and acquisitions, IPOs, market making, etc. That is, they make money by selling shovels in a gold rush, not by speculating on where gold will be found. Other firms are in the business of buying and selling illiquid assets such as private companies and commercial real estate (with illiquid assets, there is far lower price efficiency, and thus it is possible to generate excess returns). Still others are in the business of managing people’s money for them—an industry which is mostly about managing volatility, not about generating excess returns (a pension fund usually cannot afford to have its portfolio go down by 50%, even if it’s temporary, so they’re not going to put it all in the S&P 500).

Proprietary trading (where firms use their own money to buy and sell public securities) has been in decline for decades at the big banks, precisely because they don’t have a scrying crystal, and they know it. Public stock trading on Wall Street is mostly the domain of companies in niches like high-frequency trading (such as Jane Street). HFT firms gain an edge through arbitraging different prices faster than anyone else (for example, sell Exxon in New York a few microseconds after oil futures drop in Chicago). In other words, the only people on Wall Street who do what Hollywood-Wall-Street does are the few who do have a scrying crystal.

WSB is not “exposing” anything except the fact that most people (understandably) have no idea what the financial industry does.

[opportune]

There is a cottage industry of financial advisors who do work with people on their personal wealth management. Of course there is a big difference between an investment bank, trading firm, and a person who does wealth management (I'd google it for precise terms, but I'll get hounded by ads for it for weeks). I know because my parents have a "wealth management guy"/broker and some of my friends' parents growing up were also in that business. And there are also of course mutual funds and pensions as you mention.

I am not super plugged into the financial industry so I can't say for certain, but I think while people may not understand the difference between traders shouting on phones, "wall street", and wealth management, people think about wealth management the most in the context of "wall street", because that's what they're personally most familiar with. They think that even though wealth management seems to me to be very decentralized and not really something physically centered around Wall St.

I think wallstreetbets is mostly a pretty unsophisticated subreddit (which somehow declined in quality even more as it grew) but I think the parent was valid in pointing out that they willingly eschew the old-school strategy of diversification + "value investing" done by a third party on your behalf and the new-school (boglehead) strategy of putting literally everything in the S&P 500 or a bond index with the allocation mix dependent on retirement date/age.

There has undoubtedly always been a group of people micromanaging their personal portfolios with less risk-averse strategies like this, and WSB mostly takes things way too far, but at least for me it exposed me to the idea that maybe I could personally do better picking stocks on my own than just blindly throwing everything into VOO (and for people not plugged into the online-personal-finance-geek community, it could be the first time they even realize they don't need to have a third party manage their investments for them).