Complete Contradition in Individual vs. Institutional IM Approach behavioral, desires, completely, essential, structure

ASSet_MANagemen

So as I review the notes in the behavioral finance stuff, having just reviewed the insitutitonal IPs stuff, I find both these sections to be completely contradictory.

To summarize - the behavioral finance section makes a big deal about individuals being idiots and "pyramiding" their portfolios, with "essential" future needs at the bottom, and "aspirational" desires at higher "layers". Per the text, to put it bluntly, is a BAD way to structure a portfolio.

My question - how is that so different than what institutions do? Insurance companies, banks, DB plans - they all have "essential" liabilities that need to be fulfilled, which they usually cover with fixed income instruments/duration matching, etc. Then use surplus to be more aggressive and grow. Uh...isn't this pyramiding as well?

Honestly, I don't understand why the CFA makes a big deal out of modern portfolio theory being a "better" approach to pyramiding when most of the big institutions do the same dang thing. Makes me think this CFA stuff is more focused on theory than practicallity?