Yes, they know that, and look for institutions that have good infrastructure and processes, like any major bank has.
None of which institutions can be accurately compared with centralized exchanges, which run under no promise for fund safety (beyond trusting their word, lol). Not only they are caught having insecure setups, but they even engage in illegal activities like practicing fractional reserve banking.
I guarantee you that a line investor at Goldman Sachs doesn't have his firm's billion dollar investment in Bitcoin locked in the top drawer of his desk.
So where does he have it? Inside the corp, in a locker? Maybe in a bank's vault? Maybe in multiple places using multi-sig? As I've already said, you can't keep your bitcoin to your name, it is simply not recognizable, neither by the state, and neither by the Bitcoin network. You either have the choice to be aware of your funds safety yourself (by protecting a seed phrase, and practicing security), or by trusting a provably incompetent stranger with no compensation in case their business goes bankrupt or gets hacked. I believe that a serious investor will go with the former.
I read your article. What's the problem with buying bitcoin and tiding it to your name? You explain why large amounts of money cannot / must not be kept anonymously, but you do not explain why they cannot be kept under your name, but with self-custody. When you buy bitcoin from a KYC exchange, you're giving up enough information to not be considered anonymous. However, nobody forces you to forfeit your custody. You can withdraw them to your wallet normally.