Warren Buffett Says Money Managers Charge Too Much

Frank Byrd was a 25-year-old stockbroker at Merrill Lynch in Memphis when he first read Warren Buffett’s annual letter to Berkshire Hathaway shareholders. He recalls thinking, “It’s the first thing that I read that I said, ‘This makes sense.’ ” Byrd had noticed that his clients who did the best in the market hardly ever traded; like Buffett, they bought stock in companies they admired and stashed it away for years. “I knew it wasn’t theory,” he says. “I knew it worked.” He later decided to study investing at Columbia Business School—Buffett’s alma mater—and then worked for 15 years in the hedge fund industry.

The billionaire investor has been on Byrd’s mind recently. Buffett inspired a generation of financial pros to believe beating the market was possible, but lately he’s been lecturing about how money managers and investment consultants aren’t, on the whole, worth their fees. He’s become an outspoken booster of low-cost funds that passively track stock market indexes such as the S&P 500. Last October, Byrd was invited back to Columbia to give a talk on Buffett. The question at hand: “Why is our hero, Warren, steering people away from active managers?”