There is an argument to be made that this is a psychological phenomenon, as financial upheavals and crises have scared investors into a simpler approach. The post-2008 era has seen a huge inflow into passively managed index funds. Does this reveal anything about investor psychology? The answer surely is yes, but the manifestations and implications are worthy of another column entirely.
So again, are there too many products? The market eventually manages to sort out and clear away those funds that investors deem unnecessary. It may take a long time, as we have seen with the abundance of actively managed funds that are overpriced and underperform. Eventually, investors do manage to figure out what is important -- fees, costs and taxes -- for their returns.