I get the sense that the vast majority of professional investors are just being swept around by the tides of the market. Over the past 70 years in the United States, that has generally been upward. Until they get dashed against the rocks, but the professional consequences are so low that they can pick themselves up and start again once the tides are better. People attribute so much individual human agency to financial professionals, but 99.9% of them are at the mercy of forces outside of their control, like technological advancement, population growth, federal reserve policy, and globalization.
It works exceptionally well based on data. You can pull up almost all of the actively managed mutual funds on something like morning star and compare them to an sp500 or total market index fund. Once you pull the time horizon out to 30 years, you will basically see zero funds that outperform the indexes. Most underperform based on just performance. But all of them underperform once you take the fees into account. So basically every actively managed fund is being run by someone who is faking it.
Hedge funds are supposed to be uncorrelated, but I don't think many long-only equity funds make that claim. They just count it a win if they do better than the market (which often happens, but seldom continues).
Then there are the financial advisors. Last time I talked to one, the selling point was nothing but "trust us, we have a team of Ph.Ds."
You'd be surprised. There is an entire "Fund of Funds" industry for example[1] that literally just takes people's money and takes a fee for putting it in other people's funds. The people putting money in the FOF could just as easily put it in the other funds themselves (the FOF disclose which funds they are in) and would get more money because they would have one less layer of fees to pay. Yet it exists. Their returns are intrinsically poor[2], their rationale for existance (that they do additional due dilligence on the underlying funds) is manifestly untrue[3].
[1] Check out people like skybridge capital as the most high-profile example https://skybridge.com/
Let's say you get paid a 2% management fee (on funds under management) and a 20% incentive fee (levied only on gains).
What keeps you from investing half your clients making bets in one direction, and the other half making bets in the opposite? If you do this, what total fees do you collect? How long can you follow this strategy?