Category: Uncategorized

Jan 4th

Investment Management Tips: Three Things to Consider When Buying International Assets

Expert advice for making sure your global financial investments are secure

The recent passing of international celebrity Olivia Newton-John was devastating to her fans, but estate and trust lawyers probably had an added reaction of wondering whether or not she had her estate set up properly. Newton-John most likely owned property in her native Australia and in the United States, if not other homes around the world, and owning any foreign assets can make things complicated at the best of times.  

Here are three things to know about estate planning and international holdings. 

Share Information with Your Team Immediately 

It’s important to inform your team of any foreign real estate investments, properties, stocks or other investments as soon as you purchase them so they can help you come up with a strategy to incorporate them into your estate plan, says Heidi I. Bitterman, J.D., a Whittier Trust vice president. 

“Your United States-based estate planner needs to liaise with experts based in the countries where the assets are,” she says. “Every country has its own system of probate and its own planning requirements. You’ll need to secure an estate planning attorney in the country you’re purchasing in to make sure the asset passes the way you’d like it to.” Most countries will have a clear probate system to honor your plan, but some don’t, so make sure you understand how that asset gets transferred. This helps ensure that the transfer happens the way you intended when the time comes.  

Bitterman cites a cautionary tale involving a foreign-born client who had become a U.S. citizen. The client retained real estate and assets in her home country, and when she passed, it was discovered she had stocks in her name outside the U.S. “We had no way of knowing they existed and discovered the assets late into the estate administration,” says Bitterman. “They were still sending statements to her address in her home country.”

The client’s team couldn’t file for probate in the foreign country because they were only serving as trustees of her trust, not executors of her will. The client’s beneficiaries were requesting things that couldn’t be done because there was no jurisdiction. “It took us three years to figure it out,” says Bitterman, who adds that the team had a hard time finding attorneys in the home country who specialized in the help that was needed, and they had to solve complex problems like whether the U.S. will could be admitted for probate in a foreign country, and who had the burden of paying for counsel. “We couldn’t give the trust beneficiaries the answers as quickly as they had hoped,” she says.  

The moral of the story: if you have foreign entities or ownership, share the information with everyone on your financial team to ensure they’re equipped to act in your best interests. 

Consider Tax Implications

Prepare yourself for more complicated taxes when including international property or other holdings in your estate plan. “As a general rule, U.S. citizens are taxed on all their assets, worldwide,” says Bitterman. “If you buy a house in Scotland, the value of that house will have to be included on your U.S. estate tax return.” It’s an important thing to consider if tax efficient investing is a priority. 

The tax treaties with other countries and/or estate or inheritance tax regimes in those countries could further complicate things. “Make sure that, in addition to an estate planning attorney in that country, you have a tax lawyer who understands the ramifications of ownership from a tax perspective. You may be subject to different tax regimes,” she says. Additionally, consider an overlay of estate or inheritance taxes on the holdings when you pass. 

Make Sure the Right Hand Knows What the Left is Doing 

It’s important to have someone connecting the complex dots associated with international holdings. Bitterman advises checking with your U.S.-based counsel for referrals in other countries to ensure that your bases are covered with respect to taxation, as well as wealth and asset transfer. If you have engaged the services of an investment and wealth management firm such as Whittier Trust, they can connect the full picture so nothing gets overlooked or stuck in the transfer process. “We can help facilitate clients getting those boxes checked so it’s one less thing to worry about,” says Bitterman. “That way our clients can just focus on enjoying the property.”

International estate planning doesn’t have to present insurmountable challenges if you share information as soon and as widely as possible with your financial services team, which could include counsel, tax attorneys, trust lawyers, account managers and others. “Talk to your team,” says Bitterman. “The more you disclose, the easier it is for us to find things to follow up on so that your wishes are carried out and your estate planning goals are met.” 

 

Dec 22nd

Smart Stocks to Own When Inflation is High

The best investments to make or have right now

The question on everyone’s minds is “what kind of stocks do you want to own when inflation is high?” To ask it a different way: what is the best place to invest money right now? 

“The short answer is that you want to own stocks with the pricing power to preserve and grow their profits, but finding these investments is easier said than done,” says Sam Kendrick, portfolio manager and vice president at Whittier Trust, who oversees investment and wealth management solutions for clients. 

Here, Kendrick outlines three key types of equity that are the best investments during times of high inflation.

Budget-Friendly Essentials

When inflation hits, everything typically costs more. Therefore, the portion of businesses’ and consumers’ budgets that gets allocated to the essentials, or non-discretionary purchases, such as gas, food and rent, goes up. Both types of entities have less money left over to spend on things they might want rather than need. Non-discretionary businesses often have some degree of pricing power, and they congregate in certain sectors, such as healthcare, utilities and consumer staples.

“Another dynamic that takes place during inflationary periods is trade-down demand. Across all categories—discretionary and non-discretionary—consumers and businesses seek out the cheapest version of a good or service to save money. Low-cost providers also have an easier time raising prices, to a point, given that they are starting at a low base,” says Kendrick. All else being equal, high-end clothes from Nordstrom won’t see as much demand as budget-friendly clothes from an off-price retailer like T.J. Maxx. 

Higher-Margin Companies

“High-margin companies are attractive in any environment, but margins take on even greater importance when inflation is elevated,” Kendrick says. Invest in higher-margin companies because the percentage of revenue that goes to covering cost is lower. This means that when inflation hits costs, these companies can maintain their profit levels with fewer price increases, which equates to maintaining their stock prices. 

“Your profits are less likely to drop,” Kendrick says. “This is one reason why investors typically like real estate during periods of high inflation. Margins are typically high, so cost inflation has less impact and rent increases fall more directly to the bottom line.”

Asset-Light Business Models

Other companies that are beneficial to invest in during inflation are those with asset-light business models, meaning they have to spend less to grow the business. 

“This matters for inflation because the cost of assets goes up. The cost to build a factory, drill an oil well or hire more people is all going to increase, making it more difficult to grow assets and therefore revenue.”

Kendrick notes that software and technology are great asset-light categories. These companies can continue to invest and grow profitably, even as costs rise. “In the end, growth is a great inflation hedge,” Kendrick says.  

A Company That Checks All the Boxes

Visa is an example of a company that has all three of the above things going for it. It has 65% operating margins, which means $65 out of every $100 of revenue is profit. Because Visa has an existing global network and people are using credit cards more each year, it does not have to invest heavily to grow its revenues. And when it comes to discretionary vs. non-discretionary spending, it is agnostic—any dollar you spend on a Visa card is essentially the same to Visa. So if you’re spending more during times of inflation (even if you’re getting less), that benefits Visa—and its investors. 

“Visa isn’t likely to just maintain its profits during periods of high inflation but grow them in real terms as well,” Kendrick says. 

Whittier Trust portfolio managers look at the macro-economic picture and choose the best investments for their clients to own to compound their wealth after taxes. “In this environment, where inflation is having a major impact on markets, we work to guide and position clients well so that they grow their spending power and their assets over the long term,” says Kendrick.

Dec 14th

The Key to Good Estate Planning? Talking About It

Don't let potential discomfort stop you from discussing your wishes

Many people are afraid to talk about what happens when they die. Some think it’s bad luck, and others prefer to put off the discussion because it can be uncomfortable. Still others think sharing this information is personal and not something to discuss with family in the present, but rather something the family can “deal with” after they’ve passed. Some of the biggest in-fighting in the world’s most prominent families can be attributed to assumptions made regarding estate plans and trusts or simple bad communication. 

A well-laid-out and well-communicated plan can help assuage any future issues and keep a family’s legacy on the right track. Here are three tips for safeguarding your estate plan to ensure that your wishes for family harmony and legacy continuation are followed. 

Pay Attention to the Living Directives in Your Estate Plan 

A comprehensive estate plan is designed to cover you in life and in death, explains Whittier Trust Vice President Heidi I. Bitterman, J.D. Documents such as financial and medical powers of attorney are important components of an estate plan. “These documents are only valid during your life and are designed to protect you in instances where you are still alive but unable to make financial or medical decisions,” she says, noting that there are many nuances in these documents that need to be part of the bigger picture. “People often overlook what happens when you are still alive.” 

As your wealth and plan get more sophisticated, it’s important to not neglect these living directives. You’ll want your financial power of attorney to work with your beneficiaries and any trustees, for example, to ensure all your assets are properly titled and that any gifting you may be doing as part of a wealth transfer plan is not interrupted. “Medical decisions matter too,” Bitterman says, to ensure your desired level of care and/or end-of-life decisions are properly expressed and carried out if you become incapacitated. 

Share Your Wishes with the People You are Nominating 

The impact a surprise can have is amplified when applied to estate planning. The people who are nominated to positions of power, whether during your life or after, need to know the decisions they’re expected to make. In some cases, the gravity or complexity of the situation might not be something they’re willing to handle. 

For example, someone might not feel emotionally equipped to carry out a medical directive they don’t necessarily agree with, such as a child fulfilling a do-not-resuscitate order for a parent. “Some might have difficulty living with those decisions, even if it’s something they know you want,” Bitterman says. Another example is appointing a family member to handle an estate that holds complicated or closely held family assets. “Administration of an estate is fraught with difficulty and liability for those unfamiliar with it. Not everyone will want to undertake the responsibility but might feel guilty saying no because they were nominated,” she says. 

Planning documents are important, but it’s equally important to communicate them to anyone who will be involved in them and to share the reasoning behind your choices. “Your wishes are outlined in a general way in your estate planning documents, but they don’t tell the whole story. There could be nuances around why you feel you needed to structure your plan the way you created it,” she says. 

For those who don’t feel comfortable having face-to-face conversations, Bitterman recommends writing out your intentions in full detail, including your reasoning and any context that may prove helpful.

The one thing not to do? Stay quiet. “Silence is usually filled with what people want to believe or what they think is best from their own perspective,” Bitterman says. “There’s a lot of litigation around personal property and estates because of what people thought was going to happen, not the reality, and what they convinced themselves their departed loved one would have wanted to happen.” 

While Whittier Trust brings expertise in these delicate situations to the table, trust appointees aren’t necessarily who your loved ones want to be hearing from, especially if there’s a personal story attached. “It’s not the same as hearing it from your relative directly,” she says. 

Use a Wealth Management Firm or Trust Management Company to Execute

While it’s always best for families to hear from their loved ones personally, there are advantages to using a wealth management or trust management company such as Whittier Trust. “We work with families long-term,” says Bitterman. “We know our clients very well and have a deep relationship with them.” Once your family knows who is responsible for what and why it’s best to engage the services of a professional because the execution needs to be handled delicately by a team who can see the full picture. “There are fiduciary duties, which can be hard to do if there’s an emotional component,” she says. “Additionally, the more complex your asset makeup, the more potential pitfalls there are and the more difficult the execution will likely be.” 

While individuals have every right not to disclose all of their wishes while they’re alive, Bitterman stresses the importance of including those individuals or entities that are nominated to serve in your estate planning documents as soon as possible. “Good communication ensures a seamless transition to the next generation. The nominated parties need to feel ready for their responsibilities,” she says. 

Bitterman cites a current example: Her team is working with a client who owns a business and wants the business to continue to thrive after his death in order to take care of his employees. “When asked about how his children were involved with the business currently, it was revealed that all but one participated in running the business, and none of them seemed to have expressed an interest in participating in it after the owner dies one day,” she says. “To the owner, the value of the business was less monetary, but more of moral importance.” Bitterman’s team recommended the family talk honestly about whether the next generation would be able to honor the wishes of the owner in keeping the company running in the future.  

Bitterman hates to see a family struggle because estate plans were not communicated properly. “It can take an otherwise functional family and change the dynamics,” she says. “When it comes to estate planning, communication is key,” she says, because clarity can help pave the way to peace of mind for all concerned.   

Dec 12th

Whittier Trust Opens New Office in Menlo Park, California

Whittier Trust Company is proud to announce the opening of a new office location in Menlo Park. 

Whittier Trust is a holistic wealth management company providing comprehensive investment, philanthropy, trust, family office and real estate services for wealthy individuals and families. The opening of the new Menlo Park location reflects the success seen by the San Francisco office and Whittier Trust's ongoing mission to serve clients locally. The company recognized the need to expand operations to a second location in the Bay Area to accommodate the Northern California team’s growing family of clientele. Menlo Park was an easy choice due to its central location in Silicon Valley and Whittier Trust’s established presence in the area as a sponsor of the Menlo Charity Horse Show. 

“Menlo Park is a natural extension of our Bay Area offering and a fantastic opportunity to reach the next generation. We already have a number of clients on the Peninsula, and we’re only going to see that number grow. As a wealth and trust management company that offers comprehensive family office services, we want to make sure we’re meeting individuals and families where they’re at.” — Thomas J. Frank Jr, Whittier Trust Executive Vice President & Northern California Regional Manager

The team consists of local residents, Katherine Wiechmann, CTFA, Vice President, Devin Wikke, CTFA, Vice President and members of the broader Bay Area team including Craig Ayers, CFA, Senior Vice President, Cory Berceau, CFA, Assistant Vice President and Tom Frank, JD, Executive Vice President.  

The Whittier Trust Menlo Park office is located at: 525 Middlefield Road, Suite 110, Menlo Park, CA 94025 and may be reached by phone at 650-609-2300.

The Menlo Park location is the eighth office of Whittier Trust Company. The other offices are  located in South Pasadena, Newport Beach, West Los Angeles, San Francisco, Reno, Portland and Seattle.

Dec 7th

Wealth Management: How to Discuss Wealth and Values With Your Family

Steps to jumpstart these important discussions about legacy 

Wealth and values play a starring role in family philanthropy, whether through a private foundation or a Donor Advised Fund. However, wealth and values conversations can be daunting to undertake for some families. “For fear of being divisive or difficult, many families avoid the conversation completely,” says Ashley Fontanetta, vice president of Philanthropy Services at Whittier Trust. “Even those who are willing to go there often simply don’t know where to begin.”

Communicating is the only way to move forward with furthering the legacy of a private family foundation, though. “The first step is to take a step—any step—to start the conversation,” says Fontanetta. She outlines some helpful steps for families to begin or advance their talks about wealth and values.

1. Select the right place and time.

Important dialogues like these need time and space to develop and aren’t a one-and-done type deal. When the goal is to open up and share heartfelt values and beliefs, talking face-to-face can feel intimidating. Instead, consider opening up the conversation by speaking side-by-side while on a walk or during a car ride, which can dramatically decrease the feeling of being an interviewee on the hot seat. 

From there, you might consider holding a distraction-free weekend retreat for legacy planning or simply setting aside an hour or two during a holiday gathering, such as Thanksgiving, to further the discussion. These invaluable moments will add to the depth of family bonding and create a more collaborative forum for defining the tenets of legacy, particularly as it applies to charitable giving.

2. Give everyone the opportunity to be heard.

When setting the stage for communicating about legacy, it’s important for younger generations to feel their voice is valued. This is a time to put aside family hierarchy and give everyone an opportunity to share their viewpoints. Without wholeheartedly inviting all family members to share equally in the conversation, one can’t expect involvement or buy-in from the younger generations.

3. Break the ice with a set of thought-provoking questions.

Arriving at a place of thoughtful reflection will bring out the right mindset and temperament for going deeper into family values. Start out the discussion with open-ended questions that allow each individual to share their own thoughts and feelings, such as: 

  • What’s your greatest accomplishment? 
  • What opportunity would you want others to have? 
  • What was the most significant event of your childhood? 
  • What was the world like when and where you grew up? 
  • What does “wealth” mean to you? What are the challenges, opportunities and responsibilities it brings? 

Despite familial closeness, everyone might be surprised at each other’s answers.

4. Work with an expert.

You don’t need to go at it alone. If you’re having difficulty with the steps above, Whittier Trust can help facilitate the conversation about legacy as a neutral third party. Working with a private philanthropy services expert to provide a framework or bring the dialogue to life can move families past the first obstacle of getting started. In the long run, following an organized plan or engaging a facilitator to guide these key discussions around family philanthropy and family foundations can pay off. 

Remember that most breakthroughs don’t happen overnight but rather are the culmination of many small steps forward. At a minimum, family members should agree to participate in these discussions and strive for a mutual understanding that considers the perspective of each generation and allows room to adapt to future realities. Whichever way you choose to begin this wealth management journey, breaking the taboo of talking about money and values will enrich the legacy of a family.

Dec 1st

Whittier Trust Presents: The Roaring 2020s

“History never repeats itself, but it rhymes.” The purported quip by Mark Twain leads us to ask if the 2020s will rhyme with the 1920s, a decade of booms and busts, tremendous economic expansion and dislocation, and dramatic changes in social mores and fashion.

Like the 2020s, the 1920s began with great uncertainty about what would follow the Great War and the Spanish Flu, which together killed approximately 40 million people. Like the 2020s, the 1920s stumbled out of the gates with sickening stock crash and a “mini depression” that lasted seven months.

Former Forbes publisher and now editor-at-large and futurist, Rich Karlgaard, will speak to Whittier Trust clients on the hope and fears of the 2020s, using the 1920s as a guide.

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Whittier Trust Company and The Whittier Trust Company of Nevada, Inc. are state-chartered trust companies, which are wholly owned by Whittier Holdings, Inc., a closely held holding company. All of said companies are referred to herein, individually and collectively, as “Whittier”. The accompanying materials are provided for informational purposes only and are not intended, and should not be construed, as investment, tax or legal advice. Please consult your own investment, legal and/or tax advisors in connection with financial decisions and before engaging in any financial transactions. These materials do not purport to be a complete statement of approaches, which may vary due to individual factors and circumstances. Although the information provided is carefully reviewed, Whittier makes no representations or warranties regarding the information provided and cannot be held responsible for any direct or incidental loss or damage resulting from applying any of the information provided. Past performance is no guarantee of future results and no investment or financial planning strategy can guarantee profit or protection against losses. These materials may not be reproduced or distributed without Whittier’s prior written consent.

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Nov 30th

Charitable Giving is Personal & Your Plan Should Be Too

Customizing your charitable giving plan is a game changer

When someone makes the decision to give back, it’s almost always motivated by a desire to make a difference and, hopefully, to make the world a better place. For those stewarding wealth through a family foundation or charitable trust, having a customized plan is vital to achieve your goals and to make planned giving seamless and sustainable for your lifestyle. 

Far from a one-size-fits-all approach, Whittier Trust approaches each client relationship individually, tailoring a plan to suit. For some, that might mean working just with the Philanthropic Services team. For others, it could involve engaging all five of the divisions (Family Office, Philanthropy, Investments, Trust Services, and Real Estate and Alternatives) to build an overarching strategy to manage various investments, create tax efficiency within your financial landscape and more. Often, it even involves doing research to chart a new course if that’s what the client needs. 

Case in point: A few years ago, a client expressed interest in giving to educational causes, but she wanted to think outside the box of college preparation. She realized that there was a void and opportunity in vocational schools. “It wasn't an area our client had given to in the past, so our team did all the research, vetted organizations and met with potential grantees,” says Whittier Trust Client Advisor for Philanthropic Services Amanda Buntmann. “Our client knew she could trust us to make sure her charitable giving was done properly and with the most impact.” 

Whittier Trust designed a boutique service to support families with their critical, often transformational, work for good, exemplified by more than 65 years of serving clients on their philanthropic journeys. Here are some of the key benefits of a customized approach: 

Personalized Service

You and your family enjoy a dedicated Philanthropic Advisor and Grants Manager to focus on your needs and interests. “A low client-to-advisor ratio allows us to get to know the families, and the things they care about, as individuals,” Buntmann says. “We make sure we really listen so we can tailor everything we do to their needs.” 

Cost-Effective Resources

Whittier Trust’s fees are based on the specific scope of services you require, so you’ll never pay for more than what you need. Outsourcing typically costs less than hiring your own foundation staff or maintaining office space, so more of your valuable foundation resources will go toward making a difference in the philanthropic causes that are important to you. 

No-Hassle Foundation Administration

Whittier can handle the less exciting parts of running a foundation, such as compliance, grantee research, grants management, board support and general administration. Taking these burdens off of your to-do list, your family is free to focus on the things you enjoy, like awarding grants and interfacing with grantees. Outsourcing lets you avoid the headache and potential liability of managing staff and handling payroll, hiring and firing, insurance and more. 

Advisor Integration

When you engage us to manage your foundation’s administration, your other advisors, such as accountants and lawyers, are free to do the work for which they specialize, saving their time and your money. Plus, as part of Whittier’s wealth management services, giving to philanthropic causes can be financially advantageous to your overall estate plan. Our team can seamlessly liaise with our other departments to help steward your wealth and legacy according to your goals. 

Expert Advisory

Philanthropy is what we do, and we make it our business to know the nuances of the issues your foundation faces. We’re experienced in managing a broad array of philanthropic vehicles and, for clients with more than one, we can ensure seamless coordination between them. We are completely comfortable with alternative assets; our unique donor-advised fund platform offers the flexibility of accepting and holding real estate, private equity and closely held stock, provided there is sufficient cash flow to support grants and fees. And our customized approach to portfolio management allows us to design a personalized ESG strategy, if desired, to help you align your philanthropic assets with your values.

Collaboration for Greater Impact

Because each professional foundation administrator manages a varied portfolio of philanthropic entities, Whittier Trust advisors are uniquely positioned to introduce clients to other philanthropists whose missions overlap. Collaborating on grants often enhances their impact. 

No matter what your planned charitable giving goals are, having a customized approach is a smart way to get there.

Nov 29th

Portfolio Management: The Best Place to Invest Right Now Might Be Closer Than You Think

Buying U.S. stocks could be a superior way to gain international exposure

Smart investors balance their portfolios between domestic and international financial investments. However, what might not be obvious when selecting stocks is that often investments in domestic companies come with significant international exposure.

“Most investors I speak with unwittingly have way too much international exposure,” says Sam Kendrick, portfolio manager and vice president at Whittier Trust Company. 

Due to globalization over the last 50 years, U.S. companies have been investing more and more overseas, and the amount of international exposure in the S&P 500 has gone up over time. “Around 40% of domestic large cap company revenues come from outside of the U.S. so you’re actually getting a really nice amount of international exposure when you buy the S&P 500,” he says.

Here, Kendrick explains why you get a superior form of—and enough—international investments when buying U.S. stocks.

It’s Less Risky

When you invest in a domestic company that has invested abroad, there’s more oversight at a micro level. “You get U.S. accounting standards, U.S. auditors reviewing the financial statements and the SEC monitoring the buying and selling of the stock,” says Kendrick. “If I just buy Chinese stock in a Chinese company and they said they made $100 million dollars last year, I’m less sure that’s true. Whereas in the U.S., you can be more confident here than elsewhere that they made that money.”

On a larger level, by investing domestically, your investment is being domiciled in a large, stable, democratic country with stocks that trades in dollars, which is the reserve currency of the world. “There is less risk because in times of crisis, investors across the world seek dollar denominated exposure. Because our economy is large and resilient, investors want to own companies with the majority of their revenue generated here rather than from countries that are less stable,” Kendrick says.

It's More Diversified and Less Cyclical

The U.S. stock market is extremely well diversified in a few different ways. For starters, the S&P 500 gets 60% of its revenues from the U.S., 14% from Europe, 7.4% from China and 3% from Japan, according to Factset

“Then from a sector perspective, there are very robust allocations within the S&P 500 to healthcare, technology, communications and industrials. All of these sectors have large, high-quality companies with differentiated products,” says Kendrick. More commoditized sectors, such as energy, materials, financials and real estate, have a relatively low exposure in the S&P 500 compared to foreign markets.

On top of that diversification, Kendrick notes that the S&P 500 is less cyclical than foreign indexes, meaning it encompasses more companies that are less dependent on the economic cycle to grow. According to JP Morgan, 34% of the S&P 500’s exposure is to cyclical sectors, whereas emerging markets’ exposure is 49%, Europe’s is 53% and Japan’s is 57%.

“All else being equal, it’s better to invest in companies that have less volatility in their revenue and earnings growth,” Kendrick says.

It Has the Cheapest Cost of Capital

Kendrick often speaks with investors who are hesitant to allocate more money to domestic stocks because they are more expensive than foreign stocks. However, the other side of the coin is that the expensive price tag reflects a cheaper cost of capital for U.S. companies. 

“Higher valuations mean that U.S. companies can raise money more cheaply. This means large U.S. companies can raise capital and buy foreign assets rather than selling their assets to foreign firms,” says Kendrick. “When it comes to small companies, entrepreneurs, venture capital firms and private equity firms focus on the U.S. because of the higher valuations businesses receive here versus abroad. In turn, having many of the most successful startups based in the U.S. increases our country’s growth rate.” 

He cites Tesla as an example of cheap capital driving U.S. growth. “Despite not being profitable for 17 years, U.S. markets provided the funds it needed to grow. Now it has reached scale and is raising debt and equity in U.S. markets to expand overseas with large factories in Germany and China,” Kendrick says. “It’s hard to imagine the same growth story taking place in another country.” 

When thinking about your portfolio and buying domestic vs. international stocks, consider the above three reasons to buy U.S. over international. Also, consider this: giving up some outperformance in a bull market is ok if the downside protection is better. “Everyone focuses on how U.S. markets have outperformed since the global financial crisis, but the truth is, even if U.S. and international were expected to perform the same, we would still buy U.S. because it’s less risky,” Kendrick says. 

Nov 23rd

2023 Federal Tax Updates

With the 2021 tax filings behind us and the 2022 tax year drawing to a close, it’s already time for tax updates coming in 2023. The IRS released its 2023 tax year annual inflation adjustments covering updates to more than 60 tax provisions. The 2023 tax year adjustments will effect tax returns filed in 2024. For 2022 tax year filings due in 2023, certain tax due dates fall on a weekend. The actual due date is the following Monday. A list of 2023 federal tax due dates can be found in the attached PDF.

 

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Nov 15th

Portfolio Management and a Winter Chill

The 2022 holiday spending forecast and why this year will be different than last

It’s that time of year when Americans are making their lists and checking them twice, but for the 2022 holiday season, many will be slimming down their spending. “I don't think there's any question that holiday spending will be slower this year,” says Whittier Trust Senior Vice President and Senior Portfolio Manager Teague Sanders, a phenomenon that will impact every socio economic segment. Here are some of the reasons why we’re likely to see a chilling effect on holiday spending for the 2022 season. 

Most consumers have already made their sizeable pandemic purchases 

Late 2020 and 2021 were big years for consumers making durable goods purchases such as new washers, dryers and other appliances, as well as automobiles. “These one-time, large expenses have all mostly been bought,” Sanders explains. “Once you’ve made such a purchase, you don’t have to buy it again anytime soon.” There was somewhat frenzied buying activity around these categories due to supply chain disruptions and the early part of the pandemic when many consumers were saving money thanks to stores being shut down. 

“That wealth effect has begun to diminish. We have also seen some slowdown in home prices, amid higher interest rates, higher borrowing costs and depletion of a lot of the excess savings that was sitting in people's bank accounts for the last 18 months,” Sanders says. “There’s simply less of an inclination, across all demographics, right now for people to go out and spend.” 

Luxury travel and goods might be somewhat exempt from the downturn

However, for the top echelon of income earners in the United States, some categories of holiday spending might be less impacted by lower spending. The pandemic era saw the introduction of a trend called “revenge travel”—essentially where consumers were taking their bucket list trips (often more than one) as a reaction to being cooped up at home for months on end. While this spending trend is slowing some, certain segments of the population are still booking high-end, luxury trips to faraway destinations. 

“Two areas that are proving to be more resilient are ultra-high-end luxury goods and airline prices,” Sanders says. “While portfolios of these consumers are down perhaps 18 to 20%, demand continues to remain robust owing to an increased wealth effect and supply demand imbalances respectively.” 

Plan to spend wisely 

No matter how much money you have, it pays to be wise with it. “Even when people have a larger pool of funds to pull from, they tend to still be rational in their purchasing decisions. They're just rational in slightly different ways,” Sanders says. When the vast majority of the country thinks about a large purchase, it might be a home appliance, but when ultra-high-net-worth individuals consider a sizable purchase, the scale is much larger. 

While most Whittier Trust clients have a strong understanding of how wealth works, advisors make it a point to keep an eye on every facet of their clients’ portfolios. “We’re not doing our job if we're not counseling people on the direction of borrowing costs and where expenses are likely to run,” says Sanders. With higher interest rates and increased costs of just about every good and service, everything is pricier in 2022. 

While those things may not immediately impact someone’s lifestyle, the Whittier team realizes that wealth is just one important facet of a person’s overall peace of mind, and it can be emotionally charged. “When we counsel people, we take their thoughts and emotions into account as we make our recommendations,” Sanders says. “That approach is really helpful because our clients see what's going on in the world around them. No matter how wealthy someone is, it’s important to be empathetic and realize that what’s going on in the world at large is impacting them too.” 

Practical implications for this holiday season and beyond

Some people might be thinking about whether the gifts they’ll receive this holiday season will change, but more broadly, decreased spending can have significant implications for markets overall. 

“Consumer spending is 60 to 70% of GDP growth in the United States, so consumer sentiment matters quite a bit,” says Sanders, who notes that recent Google Trends reports—a predictor of what’s on people’s minds—have seen a sharp increase in searches for the word “inflation.” Higher prices on everything from gas to groceries tends to dampen consumer spending. “It really impacts your emotional state because those sharp price hikes are disconcerting,” he explains. 

His advice? Take a deep breath and keep an eye on the long game you’ve agreed with your wealth management advisor. “Adjusting to the new normal is going to take a little bit of time, because there's been an entire generation of spenders who have really known nothing besides zero interest rates,” Sanders says. Markets are fluid by nature, and the right advisors and advocates can help you weather the storm.  

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