Coffee Break: 'We are seeing an increased focus on financial planning'

Posted3/27/2022 1:00 AM

Q: Describe your company.

A: Phase 3 is a wealth management firm that integrates investment management with holistic financial planning. That includes lifetime tax planning, goal estate planning and settlement.


We help individuals, families and small business owners align their financial plans with their values to ensure the plan first and foremost supports and promotes their values.

As examples, we formed a plan to help a client transition from a very good career in engineering to his dream of establishing a medical practice. Recently we have helped a client through settling his mother's estate and taking over the family business of a resort in Wisconsin. I am also thinking of our work with a director of a Fortune 500 company who was so busy with his position he was missing several tax, retirement and charitable planning options for his family.

One of the most important goals I have as a business owner and financial planner is to engage in meaningful conversations.

Q: Do you plan to hire any additional staff or make any significant capital investments in your company in the next year?

A: Our plan is to add a younger adviser to our team who fits our culture and supports our mission. Staffing is a big challenge in the U.S. and in my opinion will continue to be a problem for years to come. The calculus is not good. It will benefit those of us who focus on quality vs. quantity.

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Q: What will your company's main challenges be in the next year?

A: First, uncertainty from the geopolitical landscape and changing Fed policy. The Fed has telegraphed four interest rate increases for 2022. At the beginning of the year, there was some rumbling of possibly more, but the rapid and significant increase in oil prices may increase the chances of a recession later this year impacting the Fed's interest rate policy. No one really knows at this point in time what they will do, not even the Fed.

Add on top of that a midterm election year and we are likely to see continued volatility. But in our industry, volatility creates opportunity.

Second, a strange increase in morbidity in 2021. The implications could be vast. In my 38 years in the industry we have only seen decreased morbidity and lengthening life spans. However, we processed 10 estates in the last half of 2021 when we normally process three in an entire year. We are just beginning to understand what is happening.

Our clients in funeral services are busier now than in 2020. Several life insurance companies experienced an increase in death claims in 2021, particularly in the working age group. This became worse as the year progressed. It was more prevalent in group life vs individual life. Certainly direct COVID-19 cases contributed, but our anecdotal evidence does not support COVID infections as the main cause. On average life insurance companies saw their earnings decline sequentially each quarter in 2021, not in 2020. This could affect rates for group renewals and new issue personal policies. Life expectancy dropped an entire year by the end of 2021. This also has negative implications for the U.S. stock market.

As financial planners we typically have the closest professional relationship with families in the estate settlement process, even closer than their attorneys as we help the survivors and beneficiaries with all the decisions and paperwork to settle life insurance claims and transfer investment accounts.


On a larger scale, effects on the economy include a reduced workforce along with a low birthrate that results in continued labor pressure. This is inflationary for wages. In the COVID-19 environment we have learned to live with longer lines, longer wait times on hold, more mistakes from service providers. Will this result in declining product quality as quality control is pressured in manufacturers due to a lack of qualified labor? This is a big ongoing issue for businesses.

Q: What's the hottest trend in your industry?

A: It's not meme stocks. We are seeing an increased focus on financial planning, away from the myopic focus on investment management. This is a normal trend change that accompanies bear markets.

Q: If you had one tip to give to a rookie executive, what would it be?

A: Ask a lot of questions. Don't be concerned about what other people will think about your questions. Be humble.

Q: Do you have a business mantra?

A: Hire character, skills can be taught.

Q: From a business outlook, whom do you look up to?

A: Pete Carroll, Seattle Seahawks coach. He manages to his players strengths.

Q: What is one interesting fact about you or your company that most people may not know?

A: When my former partner, Randy Stewart, and I started Phase 3 back in the early 1980s, we had one of the first typewriter/parallel port printers. It was the coolest thing.

Q: Was there a moment in your career that didn't go as you had planned? What lesson did you learn from it?

A: After my first year in financial planning working for another firm, a group of us chose to report our firm to the SEC. I didn't know if this would end my career. It actually taught me how to look under the hood of companies to spot malfeasance, and it led to founding Phase 3 and choosing integrity as our No. 1 value.

Q: What do you like to do in your free time?

A: Golf and home remodeling.

Q: What book is on your nightstand?

A: Gospel Patrons.

Q: What keeps you up at night?

A: The ongoing breadth of government regulations that pressures small businesses, forcing them to close or merge with larger companies.

Q: If you were not doing this job, what do you think you would be doing?

A: At this point in my career, I would volunteer with a charity or two. I have been involved in Christian lay work for practically my whole life.

Q: What was your first paying job?

A: Working for my father's carpet cleaning business. I saw my dad put the customer first, even when it cost him. I started at age 10 (no child labor laws when you work for your father). I remember one time when I broke a nick-nack. I developed courage as I told the customer what happened and paid her out of my own wages.

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