“Their money, they feel, should buy them something superior compared to what the masses receive.”<br />He continued, “The financial ‘elites’ — wealthy individuals, pension funds, college endowments and the like — have great trouble meekly signing up for a financial product or service<br />that is available as well to people investing only a few thousand dollars.”<br />Mr. Buffett said that wealthy individuals get drawn in by consultants selling them big promises.<br />That’s the figure that Warren E. Buffett recently calculated<br />that pension funds, endowments and wealthy individuals have lost over the last decade to hedge funds and other money managers that charge sky-high fees.<br />In his letter, Mr. Buffett offered an unusually cogent, honest and blunt appraisal of the human behavior<br />that drives individuals with money to avoid index funds — and their willingness to pay huge fees.<br />Large fees flow to these hyper-helpers, however, if they recommend small managerial shifts every year or so.”<br />That advice, Mr. Buffett added, “is often delivered in esoteric gibberish<br />that explains why fashionable investment ‘styles’ or current economic trends make the shift appropriate.”<br />Mr. Buffett’s index-loving advice may seem counterintuitive coming from a man who is considered the most successful investor in history —<br />and who became so by actively making individual bets in the market.<br />Perhaps Mr. Buffett’s advice is being taken: Last year, according to Morningstar, about $505 billion flooded into index funds<br />and exchange-traded funds; $340 billion was pulled from active money managers
