I'm out on a shaky limb here, but from my experience, 75% of what differentiates professionals from retail is a) their ability to assuage clients from panicking. Thinking about selling everything because there is some po-dunk war starting? Call your investment manager, get a "professional opinion", and sleep better. Since there are only a handful of situations per generation where selling everything is really called for, this makes empirical sense (until it doesn't).
And secondly, the magic sauce is in sales. Perfecting the art of making the client feel they should be thankful one is working for them -- that's what the pros do.
But do pros generate consistently better returns based on harvesting the few real anomalies that really exist? I don't think so. So I agree with your article 100%, once again.
I agree. Even on the sell side, half of my job is to stop fund managers from panicking.
I think professional fund managers and retail investors are both human, so they are prone to make the same mistakes.
But professionals have a solid investment process behind them and don’t work in isolation. So they are much less likely to fall prey to their biases. Indeed, while fund managers on average fail to beat their benchmarks, they on average beat retail portfolios (we did that analysis internally at a previous employer).
I'm out on a shaky limb here, but from my experience, 75% of what differentiates professionals from retail is a) their ability to assuage clients from panicking. Thinking about selling everything because there is some po-dunk war starting? Call your investment manager, get a "professional opinion", and sleep better. Since there are only a handful of situations per generation where selling everything is really called for, this makes empirical sense (until it doesn't).
And secondly, the magic sauce is in sales. Perfecting the art of making the client feel they should be thankful one is working for them -- that's what the pros do.
But do pros generate consistently better returns based on harvesting the few real anomalies that really exist? I don't think so. So I agree with your article 100%, once again.
I agree. Even on the sell side, half of my job is to stop fund managers from panicking.
I think professional fund managers and retail investors are both human, so they are prone to make the same mistakes.
But professionals have a solid investment process behind them and don’t work in isolation. So they are much less likely to fall prey to their biases. Indeed, while fund managers on average fail to beat their benchmarks, they on average beat retail portfolios (we did that analysis internally at a previous employer).
dont underestimate survivor bias as a reinforcing factor in professionals.
a recent, enjoyable 2025 podcast displays this :
b.ritholtz fires decades of strongly held heuristics vs data-driven dr.bernstein