Too many active money managers are managing too much money today, and investors are paying the price, AB Chairman and CEO Peter Kraus said Monday.
Open architecture — the option that allows a firm's clients to invest in investment vehicles offered by competitors — has created too many options, he said. Now, clients chase after managers who have outperformed over three- to five-year windows, he said.
The problem is they consistently buy into managers when their hot streak is about to turn cool.
"We know by looking at the numbers that, in fact, people sell at the wrong time and buy at the wrong time, and that costs them on average between 1.5 percent to 2 percent a year, which is a huge expense," Kraus told CNBC's "Squawk Box."