Betterment Rebuffs Buffett, Says Sage’s Advice ‘Doesn’t Work Anymore’

Stein disagrees, arguing that Betterment portfolios can top S&P 500 Index funds via tax-loss harvesting.

While he described the performance upside tied to such strategies as around 1- 2% a year, a white paper issued by the robo firm said its tax-loss harvesting service can add 0.77% to yearly performance.

Betterment also says that using its technology to coordinate if assets are held in taxable vs. tax-deferred accounts can result in a separate 0.10-0.82% annual upside.

"We maximize money for you in ways that traditional financial firms cannot, because they do not have the right technology or products to help investors," Stein said.

"The industry is dominated by mutual funds just trying to sell you what is on their shelf or brokers selling whatever makes them the most money," he explained. "No institution is standing up for customers [and] what is best for them."

As for Vanguard, Stein insists, it is "not fighting for you."

The fund family says "invest in our funds," he adds. "That's the old way of thinking – just buy an index fund. That doesn't work anymore. You can do a lot better than that."

— Check out Buffett Backlash: Fund Execs Criticize Sage's Grim View of Active Investing on ThinkAdvisor.