Billionaire Warren Buffett, whose stock picks over several decades have turned Berkshire Hathaway Inc (BRKa. N) into one of the most successful conglomerates, delivered another black eye to the investment management industry on Saturday, saying investors should "stick with low-cost index funds.""When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients," Buffett, widely considered one of the world's best investors, said in his annual letter to shareholders."Both large and small investors should stick with low-cost index funds."
Buffett has often said he believes most stock investors are better off with low-cost index funds than paying higher fees to managers who often underperform.
During the financial crisis, Buffett bet a founder of the asset management company Protege Partners LLC $1 million that a Vanguard S&P 500 stock index fund would outperform several groups of hedge funds of over the 10 years through 2017. The index fund is up 85.4 percent, Buffett said, while the hedge fund groups are up between 2.9 percent and 62.8 percent. On Saturday, Buffett said the figures leave "no doubt" that he will win the bet. He plans to donate the money to Girls Inc of Omaha, a charity.
Wells Fargo & Co's wealth management business (WFC. N) said on Tuesday it would launch its new robo-adviser Intuitive Investor later this year in a bid to develop a new revenue stream from existing Millennial customers who may be looking to open their first investment account in a crowded online market. Devon McConnell, Wells Fargo Advisors' head of digital and direct investing, said the digital advice platform, which will initially be rolled out to employees in the first half of 2017, would be marketed to Wells Fargo customers who have savings and are comfortable taking big life steps online."We know that there are many customers ready to take an early step in their investing life, and for this population, a lot of things in their life happen online first," McConnell said. Wells Fargo is the latest Wall Street brokerage to join the robo-adviser party following competitor Bank of America Corp (BAC. N), which launched its Merrill Edge Guided Investing earlier this month, and independent firm Raymond James Financial Inc (RJF. N), which debuted its Connected Advisor in January.
Companies like Betterment and Wealthfront have made robo-advisers, which provide automated investment advice to clients through web-based platforms, popular investing options and traditional brokerages rushed to compete. Brokerages like that the technology allows them to serve clients at a lower cost, especially as a new U.S. Labor Department retirement regulation has boosted compliance costs for many wealth management firms. Wells is entering the market as it seeks to move on from a 2016 scandal in which employees were accused of opening as many as 2 million deposit and credit card accounts without customers' permission in order to meet sales targets.
Wells Fargo Advisors announced last year that it was partnering with technology firm SigFig to create its digital offering, and a pilot version of Intuitive Advisor will be rolled out to Wells Fargo employees in the first half of this year."We wanted to make sure we found the right partner and built the right technologies, and that takes time," said McConnell of Wells Fargo's timing. "We weren't going to let anything else dictate a timeline to us."
McConnell said Wells Fargo Advisors' partnership with SigFig involved engineers from both firms collaborating to create software that worked with the bank's broader systems. The bank has not broken out how much it spent to create the robo, but McConnell said Intuitive Investor is one part of the bank's broader technology investments.