Last fall, Robert Schiller and Gene Fama were both awarded the Nobel Prize in Economics. We’re well acquainted with both these gentlemen as their work is central to our entire philosophy and approach. For our potential partners, we thought it might be helpful if we shared the philosophy behind First Coast Wealth Advisors – we think it’s one of the key components that set us apart in the industry.
Gene Fama’s work is at the foundation of our money management philosophy. His “efficient market” concept says that markets price in all known information at any given time, making it very difficult for anyone to outperform the markets themselves. (Wall Street would have you believe otherwise, but the evidence is not in their favor.) Since markets are efficiently priced, Fama says, it’s cheaper to simply own the market itself, accept market returns, and manage your risk by diversifying into other assets. That’s been our belief all along.
Our strategic partners, Dimensional Fund Advisors (DFA) and Loring Ward, now share a fourth Nobel laureate on staff between the two organizations. (Harry Markowitz, the 1990 Nobel Prize winner, chairs the investment committee at Loring Ward.) To our knowledge, no single investment management organization can claim such a preponderance of recognized individuals in finance. It’s truly gratifying to see the folks responsible for our investment philosophy and approach getting the reward and the recognition they deserve.
This year’s other Nobel recipient, Robert Schiller, a pioneer in the field of behavioral finance (how human behavior affects markets), won for his work in asset pricing. But he had an interesting message at a conference hosted by Forbes last month. He said that a lack of good financial advice was one of the problems that led to the financial crisis in 2008. “People make better decisions with financial advisors,” Mr. Schiller said. “Financial advice is much more on par with medical advice. People who have the means will spend a lot of money on both.” He went on to say that ”if financial advisors had infinite time,” they should pursue a second degree in psychology so they could better manage the behavioral tendencies that lead some clients to make poor financial and investing decisions.
This approach to our business offers our clients both confidence and comfort knowing that the approaches we employ to shepherd their assets have – once again – been recognized with such a prestigious honor as the Nobel Prize.