In my opinion, skill and chance both play a role in producing exceptional portfolio performance. Where investment advisors can really add value is in using their expertise to mitigate “bad luck”–i.e., bad things that are unpredictable.
Clients often assume that an advisor’s skill consists mainly of choosing investments. But even Warren Buffett, a master stockpicker, uses diversification to minimize the negative impact of random events. There’s always a butterfly flapping its wings in Namibia that will eventually create an unforeseen problem somewhere in the market.