> why does the compensation need to be tied to the difficulty rather than the assets under management? you haven't actually made a case for that, just assumed it was naturally correct.
Because in a competitive market, the price of a good is equal to its marginal cost? "Difficult" here is being used synonymously with "expensive".
OK, then why do the fund managers don't just move elsewhere? The flaw in your argument is that you assume that investment services are a commodity, which obviously they aren't, otherwise everybody wouldn't have to be frothing about how some managers make better returns than others.
Because in a competitive market, the price of a good is equal to its marginal cost? "Difficult" here is being used synonymously with "expensive".