Category: Uncategorized

Jan 22nd

Market Insights – First Quarter 2024

Watch this video of Sandip Bhagat, our Chief Investment Officer, discussing the latest market insights.

Slow... But Steady

The last four years have felt like one endless blur of unprecedented events ... all unfolding in rapid succession. And 2023 was no different; it was perhaps even more extraordinary than the previous three years.

The surprises in 2023 were numerous. Much like the spectacular spike in inflation, the pace of disinflation in 2023 was remarkably rapid as well. Even as long-term interest rates rose unexpectedly in the second half, the U.S. economy remained remarkably resilient. As a result, U.S. large cap stocks performed magnificently in 2023 as the S&P 500 index gained 26.3%.

At the dawn of a new year, we reflect on our 2023 predictions with fond satisfaction.

We had practically ruled out the possibility of a deep and protracted recession in 2023. Our base case for the economy last year was a soft landing – with a short and shallow recession as the worst case scenario.

Our optimism on economic growth was based on what we believed were under-appreciated tailwinds from the post-pandemic stimulus. We perceived that the residual effects of prior monetary and fiscal stimulus were likely to offset the headwinds of higher inflation and higher interest rates.

Our view on inflation at the beginning of 2023 was relatively benign. We felt that fears of sticky and stubborn inflation were overblown. We predicted that core measures of inflation would be closer to 3% by the end of 2023. As a result, we also felt that the Fed would end up with more flexibility on future rate cuts than it believed or the market expected.

And finally, our constructive views were also reflected in our stock market outlook for 2023. We had ruled out the possibility of retesting prior lows in stock prices or making new ones. Our expectation for solid double-digit gains was based on the view that earnings growth would bottom out by mid-2023 and then rise subsequently.

We are pleased that these views were validated by what transpired in 2023. We were misguided, however, in our forecast that bonds would provide a decent term premium. Bonds were in negative territory for most of 2023 and finally eked out positive returns in the midst of high volatility.

Today, the odds of a recession have receded significantly and a soft landing is now the consensus view. We begin to develop our 2024 outlook from this vantage point.

Drivers Of The 2024 Outlook

Even as market optimism turned higher at the end of 2023, a number of concerns still linger in the minds of investors. Here, in no particular order, we walk through a long list of worries that investors may yet harbor.

  • An inverted yield curve has been a reliable predictor of recessions in the past. At this point, the yield curve has been inverted for more than 300 days.
  • Leading economic indicators have declined steadily for almost a year and a half.
  • Bank deposit growth and money supply growth are both in negative territory and close to levels seen in the 1930s.
  • The adverse economic effects of Fed tightening tend to be felt on a lagged basis – many fear the worst is yet to come.
  • The last mile of disinflation may prove difficult or even elusive.
  • The Fed may make a mistake by keeping policy too restrictive and interest rates too high for too long.
  • And finally, investors fret that stock valuations and earnings growth expectations are too high.

We address these concerns in forming our 2024 outlook by taking a closer look at inflation, growth, interest rates, profit margins, stock valuations and the earnings outlook.

Our headline summary is more constructive than the concerns highlighted above.

a. We believe GDP growth will continue to slow but only to below-trend levels; it is unlikely to turn negative.

b. We assign low odds to a moderate or deep recession and believe that growth may surprise to the upside.

c. Inflation will continue to recede but may normalize above the Fed’s 2% target.

d. Earnings may exceed expectations due to a potential improvement in profit margins.

e. We expect that both stocks and bonds will deliver modestly positive returns.

We validate our outlook with a closer look at four key fundamental drivers: inflation, interest rates, growth and earnings.

Inflation

We have made significant progress with disinflation in recent months ... probably more than many had expected.

And yet, two concerns remain on the inflation front.

  1. Will any unusual economic strength rekindle inflation and send it higher?

  2. Will the last leg of disinflation simply be too stubborn and difficult to achieve?

Inflation is unlikely to revert meaningfully higher for a number of reasons.

One, the sticky shelter component of inflation has just turned the corner and will continue to head predictably lower.

Two, the job market has long peaked in strength and will continue to weaken further. This will exert downward pressure on wage inflation.

And finally, we believe that the recent gains in productivity will continue into 2024.

Pandemic-related disruptions caused productivity to plummet. Employers had to scramble to train new workers who initially were not as productive as their predecessors. As the labor force normalizes, a pickup in productivity gains will ease overall inflation.

And this brings us to our second question: Can inflation subside all the way down to the Fed’s 2% target? And if so, how soon?

Our view here is a bit mixed. We believe inflation will continue its orderly decline in 2024. We expect headline and core inflation to soon head below 3%. However, we suspect that inflation may eventually come to rest below 2.5%, but above the Fed’s 2% target.

A couple of factors inform our view here. We expect growth to remain modestly resilient in 2024. We also expect an ageing population to constrain labor supply and put a higher floor on wage inflation.

Finally, we believe that even inflation of almost 2.5% will still be favorable for stocks and bonds.

Interest Rates

Our positive outlook on inflation makes it easy to develop a view on interest rates. We begin with the Fed and then move to long-term interest rates.

The Fed’s policy rate of 5.4% is already far above inflation which is averaging 3-3.5% on a year-over- year basis. The implied short-term real interest rate, which is simply the spread between policy rates and inflation, of 2-2.5% is already quite restrictive. We rule out any further rate hikes; the Fed is done with tightening.

Figure 1 shows just how restrictive Fed policy has become in recent months.

Source:  FactSet

The blue bars in Figure 1 show 12-month core PCE inflation (PCE stands for Personal Consumption Expenditures). Core PCE is the Fed’s preferred inflation gauge.

We can see how core PCE has fallen steadily in 2023 and is projected by the Fed itself to fall further in 2024.

The green line shows the Fed funds rate which is now higher than inflation by well over 2%. Under normal conditions, the Fed funds rate exceeds inflation by about 0.5%. A real short-term interest rate in excess of 2% is clearly restrictive. If inflation falls by another 1% or so in 2024, the Fed will have the flexibility to cut rates several times.

We expect five to seven rate cuts in 2024 beginning in March or May.

We are cognizant of the possibility that the Fed begins later and implements fewer rate cuts. Such a policy misstep would undoubtedly magnify the depth of the slowdown. But it is still unlikely to be a devastating event for the markets; we reckon the economy is just less rate-sensitive now than before.

Our view on the 10-year Treasury bond yield is derived from our outlook on inflation. We expect inflation to normalize below 2.5% in 2024. We expect a positively sloped yield curve to evolve over time. We also predict positive real rates and a positive term premium in the future.

We coalesce these thoughts to form our forecast for the 10-year Treasury bond yield in the range of 3.7-3.9%.

Growth Prospects

A long list of reliable indicators argue for a traditional, perhaps even a deep, recession in 2024 – just like they did in 2023.

In 2023, our counter-view on the topic was based on the under-appreciated tailwinds of massive prior stimulus from 2020 to 2022. A simple example of this support was the excess savings that consumers had accumulated from the post-pandemic fiscal stimulus. One of the legacies of ultra-low interest rates from that period was that consumer and corporate debt got locked in at low fixed rates.

For 2024, we argue against a modest or deep recession along different lines.

The biggest concerns right now revolve around the consumer and the job market. Many fear that it is only a matter of time before the consumer wilts under the pressure of high interest rates. And as the job market begins to soften, the skeptics fear it will eventually lead to the dreaded 1% increase in the unemployment rate.

We tend to disagree with both narratives.

We have pointed out extensively that the U.S. economy is less sensitive to interest rates now than it has been in the past. The consumer may, therefore, be more insulated from the lagged effects of Fed tightening. We also note that discretionary spending for lower income households is more affected by rent, food and energy costs than it is by interest rates.

And as resilient as the job market has been, we find it hard to believe that the unemployment rate will go above 4.5%. So far, employers have hoarded labor to prevent disruptions; we expect this trend to continue.

We conclude with our key under-appreciated takeaway on the growth front. Lower inflation in 2024 will help support consumer spending and offset the lagged impact of higher interest rates.

Earnings Outlook

Stocks have sold off in the early going so far in 2024. There is now a growing sense of foreboding that both earnings expectations and stock valuations may be too high. It is feared that these, in turn, may lead to mediocre stock market returns in 2024.

S&P 500 earnings for 2024 are projected to grow by about 11%.

Investors perceive risk in this 11% earnings growth estimate for 2024 because of a well-documented historical pattern. Analysts chronically overestimate earnings at the beginning of a year. As the year progresses, those estimates come down predictably by 4 to 8 percentage points.

We are aware and respectful of that trend. However, we identify a couple of potential positive offsets to that downtrend.

Profit margins have been compressing for the last year and a half because of high inflation. Higher input costs for labor and raw materials generally cause margins to decline.

We see this downtrend in Figure 2.

Source: FactSet

Inflation in 2024 will be a lot lower than it was in 2022 and 2023. We expect that a lower cost of goods sold will improve profit margins and provide some upside to earnings. The decline in interest rates should also help profit margins to some extent.

We also note that earnings have been unusually erratic in the last ten years or so. A crisis in commodities and currencies roiled markets in 2016. The Trump tax cuts abruptly boosted earnings in 2018. The pandemic wreaked havoc in 2020 and then war and excessive stimulus unleashed inflation and curtailed profits in 2022 and 2023. We see this wayward trajectory of earnings in Figure 3.

Source:  FactSet

S&P 500 earnings per share for 2023 will likely come in within a range of 219-220. This is well below the trend level of earnings assuming historical growth rates from 2015 onwards. We notice that even the 244 level of earnings forecasted for 2024 remains below the trend line of normalized earnings. As macro headwinds diminish, we are optimistic that the consensus earnings forecast for 2024 will be met or exceeded.

And finally, a word on stock valuations.

The forward P/E ratio for the S&P 500 currently stands at about 19 times. While it is high by historical standards, it is not so different from recent averages. We believe that the stock market is gradually evolving to a structurally higher normalized P/E than its long- term historical average.

The S&P 500 index in aggregate produces free cash flow margins of about 10% and return on equity of around 20%. These are unprecedented levels of high profitability. We believe these are sustainable levels of profitability for large U.S. companies going forward and, therefore, supportive of higher stock valuations.

We are more tolerant of today’s P/E ratios than most investors.

2024 Outlook

We are aware of the long list of indicators that still argue in favor of a recession. These include the continued inversion of the yield curve, steadily declining leading economic indicators and negative growth in bank deposits.

  1. We acknowledge these factors will continue to slow down growth. Our base case calls for below- trend, but still positive, GDP growth. Our worst case scenario is a short and shallow recession. We assign low odds to a traditional or deep recession.

  2. Lower inflation in 2024 will support consumer spending and offset any lagged effects of higher interest rates. Even as the job market softens, the unemployment rate will remain well below 4.5%.

  3. We do not anticipate any meaningful uptick in inflation from here on. Inflation should continue to decline in a fairly orderly manner to below 2.5%. The impetus for lower inflation in 2024 will come from declining shelter inflation, a weaker job market and continued productivity gains.

  4. It may be difficult to achieve the Fed’s 2% inflation goal in the next couple of years. A higher floor on inflation may emerge from a couple of factors: modestly resilient growth in the near term and an ageing population which limits labor supply in the long run.

  5. With the significant progress on disinflation, the Fed is already quite restrictive in its policy. If inflation falls further in 2024, the Fed will have the flexibility to cut rates several times. We expect five to seven rate cuts in 2024 beginning in March or May. We expect the 10-year Treasury bond yield to normalize just below 4%.

    6. We are more comfortable with earnings estimates and stock valuations than the current consensus view. We believe that lower inflation in 2024 will lead to higher profit margins overall. We also believe that higher P/E ratios are fundamentally supported by the higher profitability of companies within the S&P 500 index.

  6. We do not expect political or geopolitical risks to materially affect stock or bond returns.

  7. For calendar year 2024, we forecast mid-single digit bond returns and high single digit stock returns. We see more upside for stocks than we do for bonds. We remain bullish on stocks but at a lower portfolio weight than in prior years.

We are confident that the battle against inflation has been largely won and will soon come to an end. Investor focus is now squarely on growth, which becomes the key determinant of investment performance.

We realize that a lot of uncertainty still persists about the future trajectory of economic and earnings growth. As a result, we emphasize high quality and sustainable competitive advantages in our investment decisions. After a highly rewarding year, we will exercise even more caution and care in client portfolios.

 

Download PDF

We believe GDP growth will continue to slow but only to below-trend levels; it is unlikely to turn negative.

 

Inflation will continue to recede but may normalize above the Fed’s 2% target.

 

Earnings may exceed expectations due to a potential improvement in profit margins.

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

Contact Us
An image of a silver and gold ring intertwined together.

Jan 11th

How Philanthropy Unites a Family

Giving together can create a lasting bond.

“Philanthropy has the power to bring a family together,” says Pegine Grayson. “It can be life-changing, not just in its impact on a community, but also its impact on the donors.”

Invitation to Share

As Director of Whittier Trust's Philanthropic Services department, Grayson and her team help high-net-worth families meet their charitable goals, but the personal rewards for families are sometimes among the most meaningful outcomes.

Grayson recounts the time she helped plan a family retreat with the goal of getting three young adult children involved in the family foundation. While the two sons were enthusiastic, the daughter had been largely estranged from the family and only reluctantly agreed to attend.

“About an hour into the retreat, we asked the father to talk about why he wanted a foundation—what happened in his life that made him want to use his wealth in this way,” Grayson recalls. “He began talking about his reasons for joining the military decades ago, the experiences he had during his service that left a lasting impression on him, his own experiences as a veteran, and why he cares so deeply about helping fellow vets. As his story unfolded, he broke down and cried. The kids were stunned. They had never heard this story. After so many years, they finally had a key to begin to understand what their father was about.”

The father's vulnerability created a major shift in the room, Grayson says, which transitioned to asking each of them about their own lives and areas where they'd like to have an impact. Although no one's causes were the same, there were no wrong answers, and everyone was truly listening and hearing each other. “By the end, the kids realized that it's not always going to be the dad show; it can be the family show,” Grayson concludes. “And they've all been active in the family foundation since, including the daughter.”

The School of Philanthropy

Because the work of Philanthropy is steeped in personal values, it's an ideal vehicle for a family to talk about what has shaped them as individuals and what it means to them to align their wealth and values. Philanthropic pursuits open the door for a family to work together as a team on projects or initiatives that will benefit others outside of the family unit. Grayson discusses her top five:

1) Values and succession

As a parent, you don't want wealth to undermine your children's initiative and drive for success. You want them to be equipped with the tools and values they need for a good life. Philanthropy provides that foundation, prompting discussions of family members' backgrounds and beliefs and helping everyone embrace family history and carry forward important values.

2) Life skills 

Even once you have settled on a charitable mission, it can be surprisingly challenging to select grantees, develop a decision-making process, decide the type of impact you want to have and how to evaluate it, etc. Making these decisions as a family provides a rich learning environment, as members research the causes they care about and learn how to communicate respectfully, make persuasive arguments, appreciate other perspectives, and compromise. You also have to learn how to represent your family effectively in the community so that every encounter leaves people, grantees, organizations, and other philanthropists with a positive impression. 

3) Financial literacy

By tending to the business of the foundation, family members learn about investments, financial planning, budgeting, market fluctuations, and other financial management practices, including how to calculate the 5% required distribution for private foundations.

4) Resolving ambivalence 

It's not uncommon for family members to have a love-hate relationship with the family's wealth, particularly for those who didn't earn the money themselves. Sometimes, there are expectations of achievement; sometimes, politics and unconscious messages of distrust. But coming together to decide how to use the wealth for good can serve as a pressure relief valve for some of those issues and get family members rowing in the same direction as they focus on the positive impact they can have on issues they care about.

5) Togetherness

With families spread all over the country, or even the world, philanthropy can keep you united around a common purpose and provide an impetus to physically come together, visit grantees, see your work in the community, and then talk about what you've seen.

Strategy for Family Continuity

“One longtime Whittier client had a situation that demonstrated all five of these benefits,” Grayson says. 

The origin of the family's wealth went back many generations, and as the family branched out, they created a variety of foundations. By the fourth generation, everyone had their own separate interests, and they were no longer collaborating. 

“We saw a way to bring everyone back together,” Grayson explains. “For the fifth generation, we had the idea to create a junior board to start talking about seamless succession planning for the family foundations, identifying promising charities, and learning about making grants. So, we formed a group of cousins and started to educate them on the responsibilities of being a board member of a foundation and the legal and tax constraints in which they operate. We focused on fundamental activities such as researching grantees, making site visits, and budgeting. As the training sessions progressed, the cousins wanted to know more. Some of the questions that came up were, While we're talking about philanthropy, can we also talk about why my parents set up a trust, what it means, and what are the differences between stocks and bonds and other investments? They were hungry for knowledge.

“As the group started to learn together, they started respecting each other. That has led to even deeper relationships over time. They're all still very close and doing collaborative grant-making across branches of the family. Every other year, they have a ‘G5’ retreat in person, and they plan it themselves!” Grayson says. “Philanthropy created those relationships. That fifth generation got to know each other in a way that never would have happened without the common bond of using the family's wealth for good. It's the best feeling to be able to help facilitate that.”

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

Contact Us
An image of a silver and gold ring intertwined together.

Jan 3rd

David Dahl Reflects on Thirty Years With Whittier Trust

To our Whittier Trust Family,

I want to express my deepest gratitude to each of you--clients, employees, and partners--who have been an integral part of the Whittier Trust family since I started here over 30 years ago. This journey has been extraordinary, and your unwavering support and commitment have made it all possible. This is a significant milestone, and as I reflect on the past 30 years, I am reminded that success is not a solitary endeavor. Success is a collective achievement, a testament to the incredible people around me.

My journey in wealth management began with a personal connection, perhaps foreshadowing the mantra that so many of my colleagues at Whittier and I would be guided by as we worked to serve our clients. I vividly recall a neighbor noticing my fervent, insatiable curiosity about investing, and him making the time to share the Wall Street Journal with me. From that curiosity, I began my career in institutional money management. My role often included presenting performance results to large public funds. If the investment performance was good, the meeting was short. There was very little personal connection with the actual investors. When visiting smaller public funds – the entire fire department would show up. I will never forget a fireman approaching me after a meeting and saying, "Mr. Dahl, I really don't understand much of what you just said here today, but I want you to know that you have everything I own – my pension – and it is there for my wife and daughter. Just don't blow it!" Now, that is a personal touch. Truly successful people in this business have to be able to deliver exceptional performance and also have the ability to connect. That same emphasis on personal touch and genuine connection ignited a passion within me and has made Whittier Trust feel like home all these years.

For almost the entirety of its existence as a multifamily office, I have been proud to help grow the wealth and legacy of our clients and privileged to welcome so many into the Whittier Trust family. Over the past three decades, we have navigated various challenges, from the dot-com bubble to the rise of Silicon Valley, the 2008 financial crisis, and the hurdles posed by a global pandemic. We have witnessed the birth of the internet, smartphones, gene therapy, gene editing, and artificial intelligence. Yet, through it all, Whittier Trust has not just adapted; we have thrived. We have embraced change, continuously thinking like entrepreneurs, evolving our methods, and incorporating new technologies while holding to the timeless principles of the “Whittier Way” and putting our clients above all else.

In a world increasingly moving towards less personalization, Whittier Trust remains committed to being that second call for our clients in times of great need (after their spouses, of course). We empower our team to provide holistic, tailored approaches across all five pillars that build families and grow value. We seek to be a beacon of safety for our clients.

Through our unique approach, we are honored to bring families together, create visions for legacies today and tomorrow, offer meaningful career paths for our team members, and bring preeminence to the multifamily office arena. As I reflect on the last 30 years, I find immense pride in knowing that Whittier Trust has been a guiding force in our clients' journeys and our team members' professional pursuits.

Looking ahead to the next 30 years, our vision remains unwavering. With the recent opening of West LA and Menlo Park offices, alongside the relocation of our largest office to Pasadena, we continue building momentum and unlocking opportunity. While we are growing, our focus remains on fostering success from within for the benefit of our clients. We are committed to nurturing and developing our talent, ensuring that our team continues to drive our success.

In closing, I want to express my deepest gratitude. Your belief in Whittier's mission and continued trust and dedication to that mission truly shine through. It’s this shared spirit drives us towards our goal of being the preeminent multifamily office, and I am confident that each of our team members embodies and embraces that ambition.

Looking ahead, I am confident that we can reach even greater heights. With your talent, drive, and collaborative spirit, there's no limit to what we can achieve together.

With heartfelt appreciation,

David A. Dahl, CFA

President & CEO 

Dec 5th

Federal Tax Updates

On November 9, the IRS released its annual inflation adjustments for tax year 2024 covering updates to more than 63 tax provisions. The 2024 adjustments will affect tax returns filed in 2025.

On December 31, 2025, a significant amount of the individual tax provisions passed under the 2017 Tax Cuts and Jobs Act (“TCJA”) will sunset, including: the TCJA’s lower tax rates, the 60% AGI threshold for cash gifts, the doubling of the Unified Gift and Estate Tax Credit, the elimination of the $10,000 state and local tax cap, the return of the 2% miscellaneous tax deduction, and more. Whittier Trust’s Tax Department can assist with modeling these upcoming changes.

2023 tax year filings are due in 2024; certain tax due dates fall on a weekend or holiday. A list of 2024 federal tax due dates can be found available for download in the attached PDF.

DOWNLOAD PDF

Nov 20th

Providing for Pets in Your Estate Plan

In 2022, the United Kingdom’s Queen Elizabeth passed away at 96 years old, leaving behind four beloved dogs, Candy, Lissy, Sandy and Muick. The Queen, famous for being a dog lover, worried about the fate of her pets and planned ahead for her children and staff to adopt them after her death. Ultimately, it was a happy outcome for the royal pooches. 

Many of us can relate to pets feeling like full-fledged family members. In fact, according to the American Veterinary Medical Association, in the United States, 85% of dog owners and 76% of cat owners consider their pets to be a member of the family. Those numbers are huge since, according to the American Pet Products Association, as of 2023, 66% of U.S. households have at least one pet. Still, the overwhelming majority of pet owners neglect to plan for their animals in their estate plans (Everplans reports that only 9% of people with wills include provisions for their cats, dogs, or exotic birds). 

More and more Whittier Trust clients have questions about how best to provide for their fur babies and feathered friends. Whittier Trust Senior Vice President and Director of Philanthropic Services Pegine Grayson sat down with Christine Chacon, a partner at Best Best & Krieger LLP. Chacon has extensive estate planning experience in the areas of trusts for individuals and pets, wills, powers of attorney and healthcare directives.

Pegine Grayson: Why do you believe it’s important for people of means to engage in advance planning for their pets?

Christine Chacon: Our pets are like family members. And despite their shorter life expectancy, it’s actually very common for pets to outlive their owners. Most of us can’t imagine a scenario in which our beloved animals are just dropped off at the nearest shelter with no idea how they would fare. Even if you have a family caregiver in mind, pets are expensive and most of us don’t expect others to have to shoulder the costs of caring for our pets into the future.

Pegine Grayson: That makes sense. What can we do to ensure the best outcome for our pets after we’re gone?

Christine Chacon: I usually begin by asking my clients whether or not they have a successor caregiver—a family member, friend or a neighbor—in mind. Their options will be different depending on how they answer.

Pegine Grayson: Then let’s take those one at a time. What are the options for people who do have a specific caregiver in mind for their pets?

Christine Chacon: First, make sure they know of your intention and agree to serve in this capacity. Consider naming a second person in case something happens to the first one or they become unable or unwilling to serve. The next step is to craft a letter with instructions to guide them (the pet’s medical history, medical conditions, vet contact, special dietary restrictions, habits, etc.). In short, these are tips for success. Finally, ensure your chosen caregiver will have enough resources to care for your pet in the way that you would want them to. This can be accomplished as a simple, outright bequest to the caregiver for this purpose or by arranging a pet trust. The best option depends on the pet owner’s assets, other chosen beneficiaries and circumstances.

Pegine Grayson: Let’s discuss the bequest first. That sounds easier than establishing a trust. Why not just opt for this solution?

Christine Chacon:  It’s a simpler option, but it may not provide sufficient protection under some circumstances. For example, what if your chosen caregiver falls ill or passes before your pet does? What if he or she turns out to be less financially responsible than you had assumed and squanders the money you leave them on a new car? I always advise my clients to hope for the best outcome but plan for the worst one.

Pegine Grayson: So it sounds like a trust structure would be safer, but is that possible for pets?

Christine Chacon: Absolutely! Many states have provisions in their Probate Codes for this type of structure. For example, in California, it is found in Section 15212. You’ll want to engage an attorney who is experienced in setting up these special trusts. Typically, people name the same personal or professional trustee that they have in place for their other trusts and specify that distributions can be made for all expenses reasonably necessary for the pet’s care. The trustee would be obligated to invest the funds prudently, so they may grow over time. The trust would stay in place even if the caregiver ends up changing over time.  Finally, you’ll need to decide what happens to any fund balance remaining upon the pet’s death. Most people designate a trusted animal shelter to receive the residue.  

Pegine Grayson: How does one determine the right amount of money to put into the trust?

Christine Chacon: I suggest you make a list of your typical monthly expenses (food, grooming, vet bills, walking, toys, medications, etc.) as well as the annual ones (dental cleanings, boarding for vacations, even plane tickets) and come up with an average annual amount. We can specify varying amounts to be transferred to the trust upon the owner’s death, depending on the age of the animal at the time of the owner’s death.

Pegine Grayson: OK, you’ve been talking about the situations where the pet owner has a specific caregiver in mind. What if they don’t have anyone willing or able to step in and take the pet?

Christine Chacon: In that case, most of my clients still opt to establish a trust with a professional trustee and name a trusted animal shelter or other appropriate nonprofit as the beneficiary. For dogs and cats, a local shelter is typical. For horses, they’ll need to find a ranch or stables willing to board them for the remainder of the animal’s life. It’s important to reach out to the organizational beneficiary in advance and get their consent to the arrangement. It would be tragic to make plans that you thought were iron-clad only to have the organization say that they’re not willing to take the animal in. The trust instrument will provide that if the pet is adopted, the organization may retain the funds as a charitable contribution.

Pegine Grayson: Can you share a story of a pet trust you established and how it worked out?

Christine Chacon: I counseled a Trustee through the administration of a pet trust which just ended a few years ago. The decedent left a large portion of her estate in trust for the benefit of her dog. Her dog was young when she died, so the trust lasted for the dog’s lifetime. A friend cared for the dog, and a professional licensed fiduciary managed the trust account. The dog was very well cared for, from grooming to boarding, supplies, food, equipment and anything else you can imagine. When the dog died of old age, the balance of the trust fund was given to a local pet organization. It was a lovely arrangement, because the dog’s life continued as her owner would have liked, and a charity was benefited as well. 

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

Contact Us
An image of a silver and gold ring intertwined together.

Nov 17th

Whittier Trust Positions for Growth with New Pasadena Relocation

Whittier Trust Company, the oldest wealth management firm headquartered on the West Coast, today announced the relocation of its South Pasadena office to 177 E. Colorado Blvd, Suite 800, Pasadena, CA 91105, effective November 20, 2023.

This move is a response to Whittier Trust's remarkable growth in recent years, fueled by its ever-expanding client base and its pledge to maintain personalized service.

"Our recent expansion is a clear reflection of our unwavering commitment to our clients," said David Dahl, President and CEO of Whittier Trust. "Our new Pasadena location will not only enable us to sustain our high standard of service but will also position us more strategically to connect with additional families."

The relocation is set to support Whittier Trust's burgeoning team, ensuring that the increasing demand for its premier wealth management services continues to be met with the utmost expertise. The new, larger space in Pasadena will underpin the firm's ongoing recruitment of exceptional talent and support its staff's professional growth.

By establishing its largest office in Pasadena, Whittier Trust reaffirms its devotion to its core pillars of wealth management services, including fiduciary services, family office, investment management, philanthropy, real estate, and alternative assets. Strategically situated near key transport links and amenities, the office enhances client accessibility to Whittier Trust's services.

As it solidifies its presence in Pasadena, Whittier Trust maintains a robust network with branches in West Los Angeles, Newport Beach, Menlo Park, San Francisco, Reno, Portland, and Seattle, reinforcing its mission to serve its clientele on a local and personal level.

 

Nov 16th

Peace on Earth and Goodwill Toward Family

The holidays are a time to be together: Here’s how to ensure family harmony

For many, the holidays are the only time of year when the entire family gets together. From January to October, family dynamics may be easily avoided, but November and December usher in the season of togetherness as well as expectation. Studies show that roughly half of all Americans have increased stress during the Thanksgiving to New Year’s timeframe as they anticipate the minefield of family interactions around planning, travel, food, and gift-giving, combined with conflicts over the most common topics of politics, religion, and money.  

“The strains of family dynamics can be exacerbated by wealth,” notes Whittier Trust Senior Vice President and Client Advisor Brian G. Bissell. “Shared family assets, vacation homes, gift expectations, sibling rivalry, and family business affairs all add complexity and can lead to lingering issues. Addressing these issues and working toward family harmony throughout the year is imperative if the goal is to have a drama-free holiday gathering.”

Bissell recommends a few top tips for holiday family harmony: 

  • Try to have regular family communication throughout the year, especially if you have shared assets or an operating family business. Allow the holidays to be a time where you just enjoy each other’s company rather than talk business. Create opportunities for all family members to express their opinions, concerns, and aggravations separate from holiday gatherings.
  • Respect each individual’s personal version of success and happiness. Everyone is on their own life path and will achieve different levels of financial success. The banker may obtain a higher salary than the artist, though the artist may live a more creative life. Envy and rivalries can only be resolved if both parties put in the work. Parents can help by making sure everyone’s accomplishments are celebrated. Being fair in the amount of praise given can be just as important as fairness in the distribution of financial gifts.
  • If alcohol is prevalent at your family gatherings, it’s extra important to set boundaries. Stress that family Thanksgiving, Christmas, and other celebrations are a time to enjoy each other, not a time for weighty topics. And prepare for intervention if necessary. Plan ahead for what you might need to say or do to defuse a conversation that is headed to the abyss. 
  • Model good behavior. Even in the trickiest family interactions, you should maintain your own high standards. Practice compassion, open-mindedness, understanding, and active listening.   

One of the advantages of family wealth is the opportunity for outside assistance in managing family dynamics. If financial issues are regularly fueling the discontent, families should consider hiring an experienced third-party wealth manager who specializes in working through family dynamics to help keep the peace and build trust with all stakeholders. 

“By engaging the services of wealth management offices that prioritize objectivity and open communication, families can navigate the complexities of wealth and financial matters, ensuring that the holiday season is truly a time to be together in harmony,” Bissell says. Through his work at Whittier Trust, he has seen firsthand the value of three key steps families can take:  

  1. Form a family office to include a non-family wealth management team of advisors. These independent, impartial advisors can manage family estate planning and wealth transfer and deliver sensitive family communications. An advisor also serves as a mediator or unbiased perspective to help resolve conflicts among family members and foster long-term family unity. 
  2. Build a strong foundation of family identity and shared values. Work together to articulate shared goals, philanthropic objectives, and a family mission statement. An advisor can help you establish guidelines for communication, compassion, and conflict resolution.
  3. Design a family governance plan that ensures everyone understands how decisions are made about family financial, legal, and personal matters. The structure of the plan might include agreed-upon principles, conditions, and methods of communication. The family office team of advisors will guide you in creating, implementing, and monitoring the plan.

“Family Thanksgiving and the holidays in general are an opportunity to express your thanks for all that family means to you and strengthen family bonds,” Bissell says. “Families are the most enduring relationships of your life, and it’s worth the investment of time and energy to create family harmony.” After all, what better holiday gift could you ask for?

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

Contact Us
An image of a silver and gold ring intertwined together.

Nov 15th

3 Steps for a Generational Transition of the Family Business

As the oldest Multifamily Office headquartered in the West, we bring decades of experience helping families transition their businesses to the next generation. Over the years, we’ve identified several commonalities among families that have successfully navigated a family business transition. The following three concepts we believe are essential:

1. Create a family office to organize your family outside of the business.

Generational transitions in a family business can affect morale, liquidity, and security within the family. A family office can be particularly effective in identifying and addressing these issues, especially when family members share interests in complex assets, such as real estate or business stock.
A family office also plays a critical role in creating privacy, community, shared purpose, and a safe meeting space for all family members. Designed around your family’s unique needs and objectives, your family office can provide education about your family’s financial situation, estate planning objectives, and family history. It can help you articulate values, roles, and responsibilities for the business and the family.

Some families set out to create their own single-family office by hiring attorneys, accountants, administrators, trust officers, real estate professionals, and philanthropic advisors. They will also lease out office space to house these professionals and host family meetings. Our clients find significant value in having efficient access to our many resources, benefiting from economies of scale. With over 550 client families with distinct needs and unique family office structures, we are able to deploy the lessons learned and shared knowledge to help families establish their own platform and make critical adjustments as the business and family evolve.

2. Establish a strong foundation.

For any family to work together and make decisions collectively, it is paramount that a clearly defined vision, mission, and purpose is articulated, integrating their core values and long-term objectives. There should be a mission statement for the family office incorporating each of these elements that is different from the mission statement for the family business. The ability to effectively communicate and resolve conflict is crucial to longevity and work may need to be done to strengthen this foundation.

3. Design a structure that allows the flexibility to adapt, evolve, grow, and protect the family.

Once you have formed a dynamic family office and created a strong foundation, your family is ready to construct an entity structure that allows for ownership and control to transition smoothly ensuring continued success in a tax efficient manner. If there is one constant we can count on, it is that tax laws will always change. The family office will help keep your family at the forefront of planning ahead for these changes. The entity structure should either benefit from being grandfathered into current laws or have the flexibility to adapt to unforeseen future tax law changes. We’ve seen the struggle created when an owner dies, and the family hasn’t planned for the succession or the estate tax liability. There are many options available today that will reduce estate and other tax burdens and prepare the family and the business for the emotional, financial, and related burdens associated with generational transitions.

Having a skilled advisory team that knows your family and understands big picture objectives can make all the difference.

 

DOWNLOAD PDF

Nov 9th

Art As An Investment

Works of art can have significant value, both personally and as an asset

Fine art may not be one of the first categories that comes to mind when you consider diversifying your portfolio. But paintings, sculpture and other works of art can be a substantial asset in an estate while also bringing beauty and joy into your life.

Make a statement while making an investment

“Quality art is a dual investment,” says Elaine Adams, director of American Legacy Fine Arts who consults with Whittier Trust clients. “It has personal value because it gives you pleasure and because you’ll constantly be discovering something new in it. And if you’ve done your research—and particularly if you have something rare—the piece will also increase in value over time as an investment.”

But how do you shop wisely if you have no formal art education? “Approach it as an adventure,” Adams suggests. “Sometimes you don’t even know what your own interests are; you just see it and it hits you. Gallerists and museum staff love to educate and answer questions, so don’t be intimidated. The first piece you buy may not end up being among the most important, but it starts your collection, and one thing will lead to another. The detective work is the fun part, learning about individual artists while you learn the language. Take your time with it, and soon you’ll become an expert.”

Here are some of the initial steps that Adams and other art consultants recommend as you begin investing in fine art:

  • Read about different art styles, periods and movements. Go to galleries, exhibitions, museums and art auctions to understand the market. Get involved with local fine arts organizations. Learn about factors that can affect the value of art, such as historical significance, cultural and market trends, and the reputations of different artists. 
  • Set a realistic budget and remember to account for potential costs such as shipping, framing, lighting, installation, insurance and climate-controlled storage if needed. Art investment is typically a long-term commitment, so plan to keep your works for many years. 
  • Once you discover an artist whose work interests you, research their background, read about their inspirations and consider factors such as where their work has been exhibited and at what stage in their career each piece was created.
  • If you like what you learn about the artist, take the next step and ensure that their artwork is authentic and not an imitation of other works or simply an attempt to capitalize on a trend. Verify the piece's legitimacy through reputable authorities. 
  • Consider working with a trusted gallerist or hiring a qualified art consultant who can help you navigate the market and also help with aesthetic decisions, such as framing and placement in your home.
  • Diversify your collection, just as you would with stocks and bonds, by investing in different artists, styles and mediums. Consider both established artists and emerging new talent. There’s less risk with artists who have a record of strong auction or gallery sales and whose work has a proven appreciation in value. But you might see a bigger payoff in the long run, and perhaps have more fun, taking your chances on lesser-known works.
  • Prioritize quality and what speaks to your soul while keeping an eye on the development of artists’ careers and their evolving styles. Educate yourself about the art markets in your area of interest by following auctions, joining art investment forums and subscribing to respected art publications.

Make It Personal

You’re likely to find that many of the professional skills and investment acumen you already have will serve you well in navigating the art world. But be sure to balance market considerations with your personal goals: Do you want to become a collector of art from a certain region, specific era or of a particular style? Or would you prefer a more eclectic collection, buying items that catch your eye at different times or that fit into ideal spaces in your home? Are you looking for soothing pieces that invite contemplation or bold pieces that energize you, or both? 

Discussing and shopping for art with a loved one can become a lifelong passion, and each piece will reflect your interests over time. “Collecting as a couple opens a door to learning more about each other and yourselves,” says Adams. “Each year you’ll notice something new in the art because you’ve changed and you’re seeing yourself differently.” 

From a long-term perspective, your collection and the stories of how you discovered and selected each piece can be passed on to family members who will cherish the works that remind them of you and your home. 

So enjoy the journey, the stories you’ll gain along the way, and the lasting satisfaction of discovering and owning pieces that speak to you.

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

Contact Us
An image of a silver and gold ring intertwined together.

Nov 2nd

The Employee Experience at Whittier Trust

A Journey from Internship to Full-Time Excellence

At Whittier Trust, our clients are the core of all we do. We're dedicated to delivering a tailored wealth management experience that prioritizes our clients' families, estates, and legacies. To achieve this, we assemble exceptional teams around our clients, comprising top-tier professionals and talent cultivated through our robust internship program. Many of our interns become full-time employees, ensuring our team's expertise is deeply rooted in our values. For these individuals, working at Whittier Trust isn't just a job; it's a dynamic journey of learning, mentorship, and growth. We spoke with seven former interns, now full-time team members, to explore the Whittier Trust experience from their perspective.

The Internship Experience

"I think what really stood out to me throughout my first internship with Whittier was just the willingness for each employee to actually take the time and meet with you,” says Taylor Hughes, a former intern and now Officer and Client Advisor at Whittier Trust. “Not only did I get one-on-one time with top-level people, I was included in a lot of conversations and given projects that were actually interesting and not just busy work.”

Matthew Mackel, a former intern, now Investment Analyst with Whittier Trust adds, "I was really amazed by the people and the culture and really the growth mindset of the culture. You can go and talk to anybody, even someone who is at the highest level of the company, and often they'd come and talk to me first.”

These personal connections don’t stop once interns leave Whittier Trust as William Dodds, a former intern and now Client Advisor, notes, "My mentors really cared about me as a person and about my development... it wasn't a transactional relationship. It wasn't, 'Your internship is done, you're back to college, and hopefully you learned something.'”

Katie Muzzin, a former intern turned Officer and Investment Analyst, further highlights the emphasis on mentorship and personal development at Whittier Trust. "Everyone at the firm, especially the investment team, has taken the time to not only teach me and answer my questions, but they've also tailored my projects to areas where I was most interested in and wanted to develop my skills."

However, an internship at Whittier Trust isn't just about technical skills. Derek Galvan discovered the importance of EQ (emotional intelligence) during his internship. He explains that "what really makes a difference in business development and client relationships is being personable and learning that side of the business… as we value relationships with clients at the level we do here, it’s probably the most necessary skill."

Transitioning to Full-Time Employees

Danny Schenker, a Vice President and Client Advisor in the Reno Office, cites these client relationships as a major reason why he returned to Whittier Trust. “No two days are the same. We're a family office and with the family office, we offer our clients a lot of concierge services.”

Katie Muzzin points out that the internship experience at Whittier Trust showcased that the firm doesn't just overdeliver, but genuinely cares about its clients. Matthew Mackel concurs, “We have really close connections with our clients. You know, we're in their life. We're not just sending out a report saying ‘Here's how you're doing it for this year. See you next year.’ We learn how to approach things holistically and that necessitates a strong relationship.”

Muzzin expands on the firm's client-centric philosophy, noting that, "We measure success across generations rather than in years." This long-term, client-focused approach guides employees at Whittier Trust, ensuring that they continue to prioritize their clients over anything else.

Danny Schenker also notes the satisfaction he feels from solving unorthodox problems for his clients. "I feel like at Whittier, I'm challenged to come up with unique solutions to complex situations, and with each challenge that I work on and get to solve, I feel like I get to add another tool to my toolbox."

The journey from intern to full-time employee at Whittier Trust is marked by continuous learning and personal development. The trust that interns receive during their internship carries over as they step into more significant roles. Katie Muzzin highlights that the transition comes with ongoing support: "Whittier and my team have continued to support me in furthering my education and ensuring that I have the time and resources necessary to succeed."

Katie Muzzin also valued the trust she received immediately from her team: "They have always treated me as an equal part of the team since day one and have shown that they value my opinion throughout my time here." After starting as a full-time member at Whittier Trust, Katie was quickly asked to take on key roles in important projects, such as the due diligence of private asset managers and managing alternative asset funds.

Matthew Mackell adds, "It's where the culture of the firm comes from, everyone wanting to promote each other and help each other.”

This culture extends beyond client work. "Whittier is also really supportive of the nonprofit community which is something that I hold close to my heart. I'm on the Young Professionals Committee of Big Brothers, Big Sisters in Northern Nevada and also serve as the President of the Planned Giving Round Table of Northern Nevada,” says Danny Schenker. He notes that not only does his office give employees the full support they need to pursue philanthropic work important to them, but also organizes opportunities for all employees to volunteer.

What advice would you give to interns now?

Whittier Trust interns come from diverse backgrounds, but they all share a common trait: curiosity and passion. As Derek Galvan highlights, "A lot of people have those technical skills. But coming in, you really have to accept that you're not going to know a lot and you're going to have to ask a lot of questions, a lot of the right questions."

Reflecting back to his first few months at Whittier Trust, William Dodds notes, "Coming in with an open mind and accepting that you're not going to know everything and just learning from the people with experience... That's really what helped me grow within this company."

"I think the thing that could be the most helpful is just stay curious,” agrees Taylor Hughes. “Make sure that you continue to ask questions and demonstrate that you care deeply about the work that you're doing.”

William Dodds adds, "Asking ‘why’, is something that I learned over the course of my internship... all of those people that ended up in senior roles have spent their career asking ‘why’."

Matthew Mackel says, "One of the interesting things about the people here is that there's no ego. And, so I'd say take full advantage, and talk with your superiors and learn as much as you can and show a passion. I think one of the things about Whittier Trust employees is that they're passionate, and they care about their work. So I think if you're someone who is looking to go  full time, that's kind of how you want to approach work."

At Whittier Trust, we understand that the well-being of our clients’ estates is only as strong as the team behind it. Whittier Trust's internship program provides an exceptional foundation for young professionals to develop their skills and gain insights into wealth management. As evidenced by the number of interns who are now full-time employees at Whittier Trust, they carry with them a wealth of experience, mentorship, and a profound commitment to client satisfaction. The journey from internship to full-time employment at Whittier Trust is not only a testament to the firm's dedication to personal development but also a demonstration of the potential for individual growth within a thriving company.

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

Contact Us
An image of a silver and gold ring intertwined together.
empty image