What seems way more detrimental to me than so much passive ownership would be people trying to pick stocks and time the market when they don't know much or aren't willing to do the homework.
You mean, basically behaving like a casino patron who thinks that putting one chip on red and one chip on black balances his or her risk on the roulette wheel? The stock market, and people who make their living by playing it, *thrive* on that person. They always need a fresh crop of starry-eyed "investors" who think that their shrewd business acumen or "system" is going to make them a fortune. Just as the deluded wannabe card-counters at the blackjack tables end up paying for the opulent carpets and free water shows in Las Vegas, the day traders are the ones who typically end up paying for other people's cushy penthouses and bespoke suits.
Bettors come and go, but bookies stay. That's what the system thrives on. Anything that threatens that-- anything that gives large numbers of people the notion that they don't *need* to pay a broker to execute an individual trade for them or an investment planner to provide advice that might or might not be in the customer's best interest-- is a threat to the cushy penthouse and bespoke suit lifestyle.
If an index fund can outperform a bunch of whizbang algorithms and expensive analysts or hedge fund managers who pahked a cah in Hahvahd Yahd, then unless a person has a specific need or desire to own an individual stock or specialized fund, is there any need to pay any of those exalted insiders at all? Unless the cah pahkers can find a way to show that, yes, they DO add value and that their hedge fund really is a hedge fund and not a Madoff-esque Ponzi scheme, their carefully built illusion will collapse like a house of cards. They've been running on hype for so long, they've started to truly believe it. They've also sold so much sizzle that they've forgotten they're in the steak business.
Overall, unless professional fund managers and investment advisors find a way to get relevant again and stay that way, they'll become just as obsolete as the assembly line workers and office support staff they rewarded other people's publicly traded companies for firing. But it's easier to agitate, lobby, grease palms and manipulate public opinion than it is to shift gears or change careers. That's why articles like this one get written.