robert Stirling Phipps, III
Per stirling captial management
Where have you spent most of your life? Born? Grew up?
I was born just outside of Washington, D.C., in Alexandria, Virginia, and moved to Austin at around 6 months old, when my father took a job as teacher, coach and minister at St. Stephen’s Episcopal School. That was almost sixty years ago. While I did spend twenty years just up I35 in Georgetown, where we had the opportunity to buy the Victorian home of my wife’s dreams, I've really always considered myself to be an Austinite. I love everything about this city. If I have my way, I'll never live anywhere else.
Why did you decide on Washington and Lee University and what did you study?
I wanted to attend a university that had a great reputation, and one that featured smaller class sizes and, since I was born in Virginia and still had relatives there, it was a great fit. I wish that I could say that I always knew what I wanted to do professionally, but I just did not have that level of clarity when in college. At the time that I attended, Washington and Lee University was known for producing two professions, attorneys and politicians, and so I did what almost everyone else did. I majored in American history.
How did you transition to the professional world after graduation?
I took a job at a bank straight out of college, with the goal of earning enough money to go to law school, and ultimately decided to take a variety of economics and finance classes at Texas State University to improve my value at work. It was truly a moment of edification for me that changed my professional life, as I discovered a world that literally captured my imagination, and that seemed to come to me very naturally.
It almost seemed to be more than one could even ask for that someone could actually make a living doing something so internally rewarding. I feel a bit like the embodiment of the old expression about “if you have a job that you love, you never work a day in your life”.
Did you always have Wealth Management in mind as a career path? When and why did you realize you wanted to focus in this area?
My first love was investment management and capital markets analysis. The ever-changing nature of the capital markets keeps me engaged and energized every single day. That is where I have concentrated most of my 36 years in the industry, and Per Stirling was initially primarily a portfolio management firm. However, we have been very fortunate over the years to have been joined by an extraordinary group of Certified Financial Planners, C.P.A.s and other financial professionals, and Per Stirling is now first and foremost a comprehensive wealth management firm.
How was Per Stirling created? How did the recession of '08 impact your decision to start the business?
On a certain level, Per Stirling was started two decades ago when I first started working with my main business partner, John O’Sullivan. Over the twenty years, we worked together at four different firms, and served in a number of capacities ranging from President and Chief Investment Officer to hedge fund managers. While we worked with some great people, we also witnessed far too many business practices that made us very uncomfortable. We ultimately came to the realization that the only way to guarantee the quality of the client experience was to build our own company, and to create a universal culture that everyone buys into, which is what we have managed to do quite successfully at Per Stirling.
In regard to the financial crisis and its impact on our decision, I will quote Warren Buffet, who said, “Only when the tide goes out do you discover who's been swimming naked”. The Great Recession provided a very effective litmus test of which leaders were worth following and which ones weren’t.
What have been the most challenging aspects of the business since inception?
Without question, it has been making sure that Per Stirling’s rapid growth never had a negative impact on our ability to maintain the premium, high-touch client experience that our clients have come to expect. Again, I think that we have accomplished it quite successfully. However, it took a lot of planning, and a significant investment in staff, training and technology.
How does the management team from Per Stirling assess its own wealth managers?
Really, from the perspective of a client. We evaluate our advisors based on whether or not they are acting in the best interests of their clients and providing great service. When done right, our business is all about service and relationship. When you do that well, we find that things like garnering significant assets under management tend to take care of themselves.
How do you assess a wealth management firm's performance?
While we do set out goals every year, our day-to-day activity is based largely on the premise of what we call “business karma”. It all goes back to that same perspective that, if you take outrageously good care of your clients, everything else (including the goals) take care of themselves. That said, we do get some “report cards” along the way. For example, over the past two years we have received two very prestigious awards for business ethics, we were selected as one of the fifty best places in Austin to work and were just selected by InvestmentNews as one of the fifty best financial firms in America to work for.
I think that it is also a credit to the strength of the company that members of our team are frequently quoted in many of the world’s leading publications, including The New York Times, Reuters, US News & World Report, The Wall Street Journal, et cetera.
How have you seen the wealth management industry change throughout your life? In what direction do you think the profession is heading?
It is gratifying to see our industry make significant progress in the right direction over recent decades. Fiduciary standards of care are being made much more accessible through Registered Investment Advisors and Certified Financial Planners. Transparency has been greatly improved, conflicts of interest are being reduced, and there is a significant move underway from commissions to fees.
Can you give us a breakdown of Per Stirling’s growth since inception?
Per Stirling has basically at least doubled in size each year of its existence. We recently added a second office in Austin and brought on a new office in Dallas earlier this year. Over the past nine years, Per Stirling has grown from $20 million to just under $900 million in total combined assets.
Who is the right client for Per Stirling?
Someone who is looking for a relationship with an advisor who will take a holistic look at their financial life and offer advice on a fiduciary level that puts the client’s best interest above all else. Per Stirling’s clients tend to be fairly affluent and have a need for the expertise that the firm provides. However, we are very proud to have an interesting and diverse clientele that stretches from Maine to Hawaii and includes everything from famous musicians, race car drivers, and professional football coaches to high tech executives, doctors and retirees.
It looks like a significant amount of Per Stirling’s growth has actually come from other companies joining Per Stirling. Can you talk a little bit about that?
In light of the growing complexities of the financial world, and the growing challenges associated with everything from cyber-security and compliance to operations and market research, a number of independent RIA firms that shared our fiduciary philosophy and commitment to service have found it very beneficial to join us under a common banner. In fact, I think that they would tell you that they still enjoy the benefits of ownership, but without the many headaches.
Can you give us a brief outlook on the economy?
Well, we are experiencing the second longest economic expansion is US history, and it is very long in the tooth. We have full employment and full capacity utilization, and inflation is starting to be a legitimate concern. The economy has gotten a jump start via tax reform and deregulation, but shrinking monetary liquidity, higher rates, and a slowing in western Europe and Japan will continue to weigh on the domestic economy. While we do not expect a recession in the next twelve months, we think that one will be very likely within the next three years.
What are the major macro-economic factors that equity investors need to be paying attention to?
I’d say the foremost factors are dramatically expanding profit growth but within an environment where, because of higher rates and increased trade and political uncertainty, investors are willing to pay less and less for each dollar of earnings. In the industry, it is known as multiples compression. In addition, the new Federal Reserve Chairman, Jerome Powell, has made it very clear that he is less inclined to bail out investors than have been his predecessors, so we expect for volatile markets to continue to be the “new normal”.
What about income-oriented investors?
It seems like the Fed is no longer “data-dependent” and that monetary policy is now on auto-pilot, which means that they are likely to keep raising rates until it starts to hurt the economy in a tangible way. Inflation is a growing threat, and is being aggravated by capacity constraints and very low growth in productivity.
In addition, the issuance of Treasury debt is actually doubling this year due to a combination of an exploding federal deficit and the Fed’s unwinding of its quantitative easing programs.
On top of everything else, most investors, and even most investment professionals, have never even seen a bear market in bonds. In fact, many bond investors do not understand that bonds lose value when interest rates climb. It will be very interesting to see how investors react if the 10-year treasury moves from 3% to 3.5% or 4% over time.
What is your biggest concern about the capital markets today?
There is an old saying that markets never sell off on the same news twice. Since most other concerns are already “known knowns”, we worry about one risk that the markets do not seem to be paying particular attention to yet, which is the mid-term elections and the policy implications if Democrats, as expected, retake control of the House of Representatives.
Where does Austin stand in regards to economic stability and prosperity relative to the rest of the country?
Austin is a bit capacity constrained by its lack of sufficient transportation infrastructure, and by a lack of affordable housing. Austin’s frothy housing market is the primary reason why Austin’s cost of living is 17% higher than that of the average American city.
Austin also has a fairly non-diversified economy, which could be problematic. At the same time, Austin has a strong entrepreneurial culture and an educated workforce. Further, Austin has a very young population, with only 7% of the population over the age of 65 and almost ¾ of the population below the age of 45.
Where would you put 10k to work if you were a young professional living in Austin?
Well, it obviously depends on what they are trying to accomplish and what their overall financial picture is. However, there is a strong argument to be made that the best investment would be to use the money to further their education or to pursue other forms of professional development.
Where can we find you outside of the office?
I love the Texas hill country and try to be out in it as much as possible, whether it be hiking, walking my dog, or riding my bike.
What are some of your favorite spots in Austin?
I have loved Zilker Park for more than fifty years, and it is still one of my favorite places. It is also not unusual to see my car parked in front of some of Austin’s better BBQ restaurants.
What is a quote you seek to live by?
There are two, the first comes from Mark Twain, who said that “History does not repeat itself, but it oftentimes rhymes.” I love this pithy statement that actually defines one of the core tenets of capital markets analysis. The second, is from Chief Justice of the U.S. Supreme Court Potter Stewart who noted that “Ethics is knowing the difference between what you have the right to do and what is right to do.” That guiding principal defines how we manage Per Stirling and how I try to live my life.