In fact financial markets when left to free-market forces, can generate activity that is privately profitable but not socially useful. There can be too much finance, too much trading, and too much market completition.
numerous studies have shown that much active asset management adds no additional value but does add significant cost, compared with passive index-linked strategies
This made me think of the fee structure of tracker certificates (structured products) which are set up for a period of 2-4 years and cost* 3% issuing premium and 1.5% p.a. management fee to average over 2% costs, depending on the situation.
That cost is definitely not socially useful and will always reduce the investors performance substantially, espacially in low interest rate environments, like we see now.
It’s my job to reduce these costs for clients. If you’d like to discuss more, please write me at firstname.lastname@example.org .
*these costs were shown to me by an issuer of such a strcutured product tracker certificate