Category: Uncategorized

Mar 7th

Family Philanthropy Benefits Givers in Surprising Ways — We’ve Seen It Happen

Last year’s National Nonprofit Day was a welcome reminder of the significant impact philanthropic activities can have on communities and the world. But at Whittier Trust we have also witnessed how helping families engage with philanthropy, whether by establishing a nonprofit, a family foundation or forming a philanthropic strategy, can significantly transform family dynamics and relationships, forging and strengthening bonds by a shared desire to do good.

One family we worked with illustrated the power of incorporating philanthropy into a wealth portfolio. To facilitate the creation of a family foundation, our team organized a retreat for the father, mother and their three adult children. The two daughters were enthusiastic about participating but their brother, who was estranged from the family, was less so and only reluctantly agreed to attend. During the retreat, the father became emotional as shared the childhood experiences that inspired him to support vocational training for low-income kids and motivated him to establish the foundation. 

His heartfelt words came as a surprise to the children, who had never seen their father so passionate. It prompted them to open up about their interests and passions. The father’s moment of vulnerability sparked a deeper understanding and connection among the family members, leading to their active engagement in the foundation — including the once-estranged son. Through philanthropy, this family was able to gain a meaningful appreciation for each other and the experiences that shaped them.

While a simple story from a father about why he gives back can inspire family involvement and reconnection, there are benefits derived from family philanthropy.

Values and Succession

Discussions about family members' backgrounds and beliefs help everyone embrace family history and carry forward important values and civic responsibility. Through philanthropic activities, parents can also help ensure that family wealth does not undermine their children's drive for success. 

Life Skills

Deciding on a charitable mission, selecting grantees, creating a decision-making process and determining and evaluating desired impact can be challenging. Making these decisions as a family allows members to research causes they care about, learn to communicate respectfully, make persuasive arguments, appreciate different perspectives and find compromises. Representing your family well in the community ensures every interaction leaves a positive impression on people, grantees, organizations and other philanthropists.

Financial Literacy

By setting a foundation's strategy and mission, family members gain knowledge about investments, financial planning, budgeting, market fluctuations, tax considerations and other financial management practices — including how to understand and evaluate the financial health of organizations they might support. 

Resolving Ambivalence

Family members, especially those who didn't earn the wealth themselves, often have mixed feelings about the family money. Collaborating on how to use the wealth for good can help alleviate these tensions, uniting family members around positive impact.

Togetherness

With wealthy families often dispersed across the country or the globe, philanthropy serves as a unifying force around a common purpose. It encourages family members to come together, visit grantees, observe their work in the community and discuss their experiences.

When families select a cause based on their own experiences, interests and life journeys — as opposed to external influences — they maximize the odds of reaping the benefits discussed above. A family office can help identify each member's passions and develop a strategy that unifies the philanthropic focus and doesn’t seed resentment or frustration. 

As we celebrate National Nonprofit Day, consider how family philanthropy can strengthen bonds, impart valuable life skills and create a lasting legacy. By thoughtfully establishing and managing a vehicle for family giving, families can unite around shared values and make a meaningful impact on the world for generations to come.

Written by Pegine Grayson, JD, CAP®, Senior Vice President and Director of Philanthropic Services as well as Ashley Fontanetta, Senior Vice President and Client Advisor, both in Whittier Trust's Pasadena Office.

Featured in Financial Planning Magazine. To learn more about how Whittier Trust can support you, your family and your legacy through our philanthropic services, start a conversation with a Whittier Trust advisor today by visiting our contact page.

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

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Feb 28th

Thinking of Selling Your Business? Sell Smart

Smart entrepreneurs look far beyond financials.

“The difference between great people and everyone else is that great people create their lives actively, while everyone else is created by their lives, passively waiting to see where life takes them next,” Michael E. Gerber wrote in his book, The E Myth. The sentiment applies to entrepreneurs approaching the impending sale of the business they built: They must create the most favorable conditions to achieve their desired outcome, which can go far beyond optimizing the balance sheet and achieving a high valuation multiple.

Business owners are used to looking at all sides of a transaction, and that skill comes in handy with the ultimate transaction–the sale of the business itself. It is vital to consider not only the financial and tax consequences of such a sale, but also the impact on one’s family situation, next generation planning, other business holdings, and charitable giving pursuits. When all is said and done, you want to know that you maximized opportunities, minimized regrets, and positioned yourself for a rewarding next chapter. This doesn’t happen without thoughtful and timely planning.

Keep these three things in mind so that you can sell smart when you sell your business:

1. Enlist help.

Oftentimes, that’s where a certified exit planning advisor can come in to help strategize and execute the steps leading up to, and following, a sale. At Whittier Trust, the oldest multifamily office headquartered on the West Coast, we take a holistic approach that prioritizes investments, family relationships, and tax, estate, and philanthropic planning. By spending time getting to know clients’ needs and goals, we’re able to help avoid obstacles and optimize results. Often, by taking this approach and thinking ahead, we seek to help them achieve the best results possible. We focus on surrounding the entrepreneur with Whittier and non-Whittier professionals who will collaborate to educate, strategize, and help the business owner exercise more control over personal, financial, and business outcomes that might otherwise be left to chance.

2. Look beyond the bottom line.

One way our Whittier Trust team helps entrepreneurial business owners navigate a potential sale is by doing a deep-dive to understand the impact the sale of the business may have on your business goals and your personal life. In addition to fact-finding about the business itself and how it’s structured, the team works to understand the motivations behind why you built the business, why you’re prepared to sell, and how to best achieve your goals for the future. Here are some questions to help get you started:

  • What prompted you to start the business in the first place?
  • Why are you thinking about leaving the business?
  • Do you have a timeline in mind for your exit?
  • What’s your vision of the ideal transition?
  • What personal or business objectives would you like to see accomplished in the transition?
  • How do you expect exiting the company to impact your life?
  • Do you want to stay involved in the business after the sale?
  • Do you expect any family members to remain active in the business?
  • Are you concerned about any family issues?
  • How do you expect your key employees to be impacted?
  • Are you concerned about any employee issues?
  • Do you anticipate any partner or shareholder issues?
  • How important is preserving the legacy of the business?
  • Have you identified a successor(s)?
  • Have you taken steps to formalize a transfer arrangement?
  • What are you most concerned about relative to the transition?
  • Have you had the business appraised in the last 12 months?
  • Have you worked with anyone to evaluate the health of the business?
  • How will exiting the business impact your personal financial situation?
  • Does anyone else depend on the business for income or financial support?
  • Do you currently have a wealth management consultant?
  • Do you have an estate plan?
  • Do you have a plan for optimizing tax efficiency and savings related to the transaction?
  • Have you estimated your cash flow needs after the transaction
  • To what extent do you expect to rely on proceeds of the sale to meet your post-transaction cash flow needs?
  • What are your post-sale goals?
  • Are there any family dynamics that might be a cause for concern when the sale happens?

3. Establish a realistic timeline.

This list of questions isn’t exhaustive, but it’s designed to help uncover risks and planning opportunities that are best addressed months, or even years, before the sale. Understanding your priorities is the first step in maximizing the success of your outcome.

Keep in mind that to increase your chances for a big win, it is essential that you coordinate with your professionals to tailor the results to your needs. At Whittier Trust, we have years of experience working with legal, accounting, and business advisory teams to ensure that the specifics of your deal will focus on the outcomes you seek from a holistic perspective. No two businesses are alike, just like no two families are the same, and we take pride in being the partner business owners can count on to pave the way for the result they want. Clients who have the most successful sales start thinking about the process early and focus on the personal results they want to achieve as well as the financial payout.

To learn more about how Whittier Trust can help you with the transition away from your business, start a conversation with a Whittier Trust advisor today by visiting our contact page.

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

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Feb 18th

Managing Risk: Consistency Over Uncertainty

A calculated approach to risk management allows investment objectives to be met regardless of the conditions.

Managing risk is one of the most important portfolio management objectives. Risk is simply the possibility that an outcome will differ from what is expected or hoped for.

“Investment risk is like the wind on top of a mountain,” says Caleb Silsby, chief portfolio manager at Whittier Trust Company. “It’s unpredictable and often cannot be seen or even anticipated. The more calm the environment is around you, the less prepared you are likely to be when it hits.”

But with the right guidance and preparation, risk can be managed and planned for in a way that allows investment objectives to be met regardless of the conditions—to be understood rather than feared.

Whittier Trust offers a calculated approach to risk management that has served clients well through many market cycles. “We emphasize three interconnected mechanisms,” Silsby says, “And this trifecta has proven time and time again to generate strong returns for our clients.”

Recognizing the Risk Continuum

Most clients want more return than the bond market but less risk than the stock market. To achieve this outcome, Whittier Trust starts with an investment philosophy centered around owning quality companies. “With high-quality companies, you can own more of a higher returning asset class in your portfolio than you would with riskier, lower quality equities,” explains Silsby. “Whittier’s research team analyzes the history, management, and financials of these companies. When we refer to a stock as high-quality, it means the company has a clean balance sheet, strong management team, lasting competitive advantage, and strong returns on capital deployed.”

Minding the Bear

Correlation is a statistical tool for portfolio managers that indicates the degree to which securities move in relation to one another. Whittier Trust believes that in bear markets, correlations move to one (a perfect positive correlation), and the dollar tends to strengthen. “We are also mindful of currency impacts that often catch unwitting investors by surprise during bear markets,” says Silsby.

Whittier Trust has managed money through multiple market cycles and has seen the commonalities of bear markets. We employ thoughtful portfolio construction that anticipates a risk-off environment where risk assets will tend to move in synchrony. We set up portfolios with the anticipated market shifts in mind, which allows us to plan for the unexpected. During the 2022 bear market, the Whittier investment team anticipated the Federal Reserve’s aggressive interest rate hikes in response to inflation and maintained a constructive outlook despite widespread concerns and panic about a deep recession. Our disciplined approach emphasized a balanced perspective, suggesting that fears of stubborn inflation and severe economic downturns might be overstated. In 2023, amidst significant challenges such as regional bank collapses, Whittier Trust assessed the broader financial system’s resilience, predicting these crises would be “bumps in the road” rather than catastrophic events. This perspective proved revelatory, as markets rebounded, with the S&P 500 delivering a 26.3 percent total return for 2023. By aligning their investment strategies with key economic indicators and maintaining a steady hand, we have reinforced our reputation as a reliable partner in wealth management during challenging market cycles.

Playing the Long Game

Whittier’s formula for managing risk is focused on long-term investments. The market generates returns much more often than it doesn’t, making long-term investments one of the best ways to grow wealth. Silsby advises: “If you can be a long-term, patient investor who avoids being a forced seller, then the true risk to manage around is permanent loss of capital. Such losses most commonly arise through forced selling, uncontrolled equity dilution, or too much leverage.” Forward-thinking investors can ride out market volatility and take advantage of compounding returns, dividend growth, and capital appreciation.

As the oldest multifamily office headquartered on the West Coast, Whittier Trust Company has refined our approach to managing both short- and long-term risks over nearly four decades. As in everything we do, our guiding purpose as fiduciaries is to understand and meet clients’ overall goals and best interests, while working to ensure the resilience of their portfolios. With the long-term in mind, we can help protect clients, their families, and their legacies through uncertain economic trends and market fluctuations with tailored investment plans and our exceptional commitment to personal service.

To learn more about how Whittier Trust has approached portfolio management and managing risk for over thirty years as a multi-family office, start a conversation with a Whittier Trust advisor today by visiting our website.

To learn more about how Whittier Trust's calculated approach to risk can make a difference for your investment portfolio, start a conversation with a Whittier Trust advisor today by visiting our contact page.

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

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Feb 14th

More than Wealth Management: The Whittier Difference

A fresh perspective from a recent addition to the team:

Sharon Perlin joined Whittier Trust Company in January 2023. With nearly 20 years of experience providing legal counsel, she frequently remarks on the distinctive qualities that set Whittier apart from other companies in the wealth management field. “Although there are countless ways in which Whittier stands out,” Sharon explains, “I’d like to share two key points where my clients and colleagues agree that Whittier offers a truly exceptional experience.”

Personal Attention

Perlin works with about 24 families in her role as Senior Client Advisor at Whittier. The norm in the industry is closer to what she experienced at her prior employer, where she was responsible for 180 accounts (some of which included up to nine trusts). There was no time to be proactive in her advising, she recalls, or to build meaningful relationships with her clients.

“At Whittier Trust, I speak with most of my clients on a weekly basis,” she says, “or sometimes even multiple times a week. This is so different from my time before, as a practicing attorney, when I would bill clients in six-minute increments. It’s hard to get to know someone when a client is aware that with every story they share, the bill increases. 

“At Whittier, I take the time to understand the history, values and dynamics of the families with whom I work. I know about the upcoming wedding, the new grandbaby and the son struggling with addiction. This knowledge is helpful when advising on estate and gift matters, too. At the same time, I stay current on legislative proposals and changes that might impact my clients’ estate and gift plans.”

Perlin gives an example of a client who recently sold a business in Illinois, with two phases to the sale. The first phase was recently completed, and phase 2 will be in two years. Because the client lives in California, she paid several million dollars in state taxes on the first phase of the sale. Over lunch one day, she shared with Perlin that she had just bought a house in Washington to spend more time with her grandchild. Perlin asked how long she typically planned to stay in Washington, and the response was, “At least half the year.” 

“I was aware that Washington has no state income tax,” Perlin recalls, “so I suggested the client become a Washington resident. I ran a domicile tax analysis and confirmed that the decision would be very favorable for her.”

Thanks to Perlin’s recommendation, the client will save millions in taxes on Phase 2 of the sale of her business. “She’s delighted,” Perlin comments, “and this never would have happened if we hadn’t taken the time to talk over lunch.”

Being part of the Whittier extended family also opens the door to relationships with other ultra-high-net-worth individuals with shared interests.  The company hosts special events throughout the year where clients can enjoy the camaraderie and elevated experience of our network of colleagues, clients and friends.

“Last month, I joined clients for a beautiful day at the Santa Barbara Polo and Racquet Club for a polo match hosted by Whittier,” Perlin says. “There was an open bar and delicious food and more than 100 attendees at this private event. A month later, one of the clients told me that she and her partner had now gotten together with two other couples they met at the match. That was the Whittier difference in a nutshell.”

Responsiveness

Whittier’s focus on clients’ needs is what drives the company’s internal processes as well. This means that advisors are empowered to be proactive in their guidance on investments, estate planning, philanthropy, taxes, real estate and other matters and that clients can always expect thoughtful and timely follow-ups to requests.

Perlin gives an example: “At my prior firm, if a client had a trust where the firm served as trustee, and they requested a discretionary distribution from the trust, it was an arduous process. They had to provide extensive supporting documentation, and then the request went to an out-of-office committee that met only twice a month. No one with decision-making authority had ever spoken to the client, and even as their advisor, I had no ability to weigh in on the request. Clients were frustrated and felt like the system was set up against them, rather than in partnership.” 

Such a request would typically be completed within hours at Whittier Trust. We serve as trustee on many of our clients’ trusts, and a client’s request for a trust distribution is vetted by a local committee, including the client’s advisor. In most cases, no supporting documentation is needed from the client because their advisor already knows the finer points of their financial status and understands their global balance sheet, cash flow needs, and family dynamics and circumstances. This allows us to quickly distribute funds, often on the same day.

“Whittier Trust is like no other firm I have experienced,” Perlin says. “I am thrilled to be a part of the Whittier team and to have deep personal connections with clients that are incredibly fulfilling for me. I hope if you’re reading this, you will reach out and talk to us about whether the Whittier experience would be beneficial for your family as well.”

 

To learn more about how Whittier Trust can make a difference for you, your family, and your estate, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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

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Feb 11th

Exceptional Returns With Hybrid Investing

Whittier Trust’s internal investment team selectively partners with outside managers to yield higher returns. We call it our hybrid architecture. Our clients call it the best of both worlds.

Internal + External Investing

The investments we make on behalf of our clients fall into two categories: those our internal investment team manages directly and those we allocate to outside managers. Most investment managers employ only one of these strategies, which makes our dual approach relatively uncommon—enough so that we gave it our own name: hybrid architecture. 

Equities, fixed income, and real estate are the three major asset classes directly managed by Whittier Trust’s investment team. For one other major asset class—alternatives—we allocate to external managers. The alternatives asset class includes private equity, venture capital, private debt, and hedge funds. 

“We know that this internal-external distinction can seem abstract,” says Sam Kendrick, Whittier Vice President and Portfolio Manager, “But it perfectly embodies Whittier’s unique history and client-centric approach. We’ve been in the multi-family-office business since 1989, and we’ve continuously evolved our structure to find the approach that gets the best result for our clients. We used to outsource the management of stocks and bonds—stocks to mutual funds, and bonds to brokers. But after years of analysis, we felt confident we could beat Wall Street’s returns, especially on an after-tax basis. We moved the management of stocks and bonds in-house. Since doing that, we haven’t looked back.”

Custom Solutions for UHNWI Clients

One of the primary reasons outsourcing equity management can lead to worse results is that it limits the ability to customize investment exposure around clients’ unique needs. 

The investment products that Wall Street creates don’t cater to Whittier’s particular clients, who are interested in returns after taxes. “Wall Street products pursue the highest headline return possible to gather assets while ignoring the tax consequences,” Kendrick says. “This is because only a quarter of the U.S. stock market is owned by taxable investors. Unfortunately, the result is excessive turnover and capital gains, leading to lower after-tax returns.”

What’s more, in an equity mutual fund structure, investors have no control over the timing of gains. Capital gains are realized and distributed at the whim of other investors in the fund. This is unacceptable for most Whittier clients, who tend to have vastly different taxable incomes each year due to liquidity events and private investments. By investing in individual stocks for clients, rather than equity funds, we’re able to create dispersion: A few stocks will go up many multiples of the original investment while others go down. This allows us to sell losing stocks to offset gains while winning stocks can be donated to avoid capital gains entirely, all of which leads to an increase in after-tax returns.

Whether it’s low-basis, legacy stocks, or ownership interests in private businesses, many of our clients have meaningful existing exposures in specific companies and industries. Buying an equity mutual fund or ETF will indiscriminately add to existing concentrations, needlessly increasing risk. Actively managing portfolios of individual stocks allows us to strategize exposure to best suit each client’’ specific balance sheet. 

Maximum Return on Fixed-Income Investments

The way the Whittier Trust team manages fixed income internally comes from knowing the goals of our clients and working backward. “Our clients want the maximum return from fixed income with minimal risk,” says Kendrick. “They don’t specifically want to own munis, treasuries, or preferreds.” While most funds only buy one type of bond, regardless of the relative attractiveness to other types, our team looks for bonds that deliver the best returns for each client with their specific tax situation in mind. We analyze opportunities outside municipal bonds, factoring in the added tax to make apples-to-apples comparisons, and then choose the best investments. The result is a portfolio that’s not only higher returning but also more diversified. 

Deep Experience with Real Estate

Whittier has been actively investing in real estate since our origin as a single-family office more than a century ago, and we use that expertise to buy individual buildings that our clients own directly. With ownership limited to Whittier clients, we have the control to build real estate portfolios on a deal-by-deal basis, diversifying by property type and geography according to clients’ needs. And because there is no fund structure and no outside investors, we decide when to sell based only on when is best for our clients. 

Partnering on Alternative Investments

With Whittier’s successful record managing investments internally, the obvious question is why wouldn’t we keep everything in-house? Why allocate to outside managers for alternative investments? “The reason comes from our client-focused approach,” Kendrick explains. “Throughout our history, we’ve managed alternative investments in both ways, internally and externally, and the results for our clients have been better using external managers.”

Whittier’s scale allows us to meet with hundreds of outside managers a year—spanning hedge funds, private equity, and private debt—and select the best ones for our clients. These high-quality managers, selected from the most attractive alternative investment sub-asset classes, offer an impressive array of opportunities for diversification and above-market returns. Allocating to outside managers means we can be both broad and nimble in an asset class that is evolving and expanding, rather than internally managing alternatives, thereby restricting ourselves to only a handful of strategies and sub-asset classes. And because we don’t charge additional fees on alternatives, we continue to ensure that our incentives are aligned with our clients’. 

It's the best of both worlds: With Whittier Trust’s hybrid architecture, clients get customized, direct exposure to stocks, bonds, and real estate, as well as access to the best private equity, private debt, and hedge fund managers with no extra charges. It’s a structure that has evolved organically over time to best serve our clients’ needs. “You reap higher returns because we can minimize taxes and eliminate layers of investment products and embedded costs,” Kendrick says. “Our clients get the kind of results you’d expect from the single-family office model of direct ownership, but with the scale advantages of a multi-family office. And as we continue to grow and learn about our clients, we’re always looking for new solutions that will further their goals.”

For more information about how a hybrid team of internal professionals and the right external experts can help your investment portfolio, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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

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Feb 7th

Guarding Ultrawealthy Clients and Their Networks From Identity Theft

Many ultrahigh net worth clients spend a good portion of their lifetime building their wealth. Losing that wealth due to identity theft is a nightmare scenario — one that is becoming increasingly common in today's world, as AI automation and efficiencies allow bad actors to increase the scale and impact of their attacks.

Although a recent study found that bad actors cast a wide net when it comes to targeting victims, tending not to discriminate based on wealth, UHNW families may be more susceptible to identity theft due to the large network of professionals and advisors required to manage their day-to-day lives.

It's a network that typically consists of retail and investment bankers, real estate and insurance brokers, attorneys, assistants, household employees and other concierge service providers — many of whom have their own teams supporting them. All of them have some degree of access to the family's personal and financial information. It takes only one slip-up by one person within this large network of people to open the floodgates to identify theft.

As part of a family office that serves wealthy individuals and their families, I often work in tandem with clients and their networks to prevent identity theft before it happens and to take swift action if it does.

Educate clients and their networks to prevent cyberfraud

Bad actors frequently use social engineering — techniques that leverage psychology to trick individuals into divulging sensitive information — to obtain personal and financial information. Educating clients and their networks on how to identify these attacks is a great way to safeguard against data being leaked in the first place.

For instance, wealthy families often have a diverse portfolio of business interests and investments and manage them through various legal entities to ensure privacy and mitigate risk. Maintaining separate financial and email accounts for each business and/or legal entity is a best practice for limited liability purposes, but doing so can also limit the assets and information exposed due to a compromised account.

I also recommend that clients perform background checks when introducing new persons to their network, such as executive assistants or household employees. They should also consider adopting some form of ongoing monitoring procedures.

Another simple but impactful way to protect clients' wealth is through multifactor authentication, Though not every application provides an option for MFA, applications that do will walk you through the steps to enable it via phone number, face ID, fingerprint scans or a separate application. Even if a password has been guessed or hacked, MFA means that would- be thieves can't access the account without a second or third form of authentication because it requires users to actively participate by confirming each transaction.

Mitigating damage after identity theft is detected

Sometimes, however, information is exposed due to circumstances out of the client's control, ranging from a corporate data breach to skimming devices placed on ATMs or at gas station pumps.

If this happens, it's vital that the family office team, executive assistants and other applicable service providers immediately take steps to mitigate the damage. After a client discovers their identity has been compromised, the first step is to file a police report with the local authorities. That report will be used as a supporting document to file an identity theft report with the Federal Trade Commission. Next, report the identity theft on the FTC's IdentityTheft.gov site.

If fraudulent accounts have been opened with financial institutions, it's important to file reports with those companies' fraud departments.

Another priority step is to prevent bad actors from opening accounts in a client's name. Contact the three major credit bureaus — Experian, Equifax and TransUnion — and tell them to freeze credit.

Beyond the three major credit bureaus, it's important to place security freezes with key bureaus used for opening bank accounts. These include ChexSystems, a national specialty credit reporting agency that collects and reports data on checking account applications; the National Consumer Telecom & Utility Exchange, an organization that collects information from new telecommunications and utility connection requests; and LexisNexis, a service often used by financial institutions to verify an applicant's identity when opening new credit accounts.

Note that unlike requesting a LexisNexis security freeze, "opting out" prevents the company from sharing Non-Fair Credit Reporting Act (Non-FCRA) information with companies that may request it. Non-FCRA providers are entities that utilize public records and consumer data but are not governed by the FCRA. These providers typically operate in areas unrelated to credit, such as aggregating data from public records for investigative purposes, including financial crime investigations, legal investigations and identifying or locating people. Opting out will likely require a copy of the police report, including the complaint number.

IRS, USD — and don't forget USPS

One way bad actors try to exploit data is by filing fraudulent tax returns in an attempt to direct a tax refund elsewhere. This can be prevented by the use of an IRS IPPIN, a form of multifactor authentication that prevents someone from filing a tax without entering this code. A new PIN is issued for each tax filing period and is only available from one's IRS account or via physical mail to the address associated with a person's tax returns.

We also recommend proactively creating an account with the state Unemployment Services Division to prevent a bad actor from fraudulently filing for unemployment benefits — even if the client would be unlikely to file for such benefits themselves.

While a lot of fraud takes place online, never forget the importance of physical documentation. Thieves can fraudulently set up a mail forwarding order to gain access to mail. It's important to contact the USPS to ensure that a mail forwarding order, for either a home or business, has not been placed. Once that is verified, the client should sign up for USPS Informed Delivery, which notifies a homeowner or business owner of mail that is expected to be delivered. It's possible that a thief could sign up for this to preview incoming mail.

A team approach in which the family office, professional advisors and other persons within the client's trusted network work together is invaluable when responding to or preventing and mitigating identity theft and other cybersecurity risks.

Tom Suchodolski is a Vice President and Client Advisor in Whittier Trust's Pasadena Office. 

Featured in Financial Planning Magazine. For more information about how a family office can help protect you, your family, and your estate from identity theft, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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

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Feb 5th

The Overlooked Key to Multigenerational Wealth: Proactive Estate Planning

For many ultra-high-net-worth individuals (UHNWIs), it's easy to believe there will always be time to address estate planning. The demands of running a business, managing investments and nurturing family relationships often take precedence. But estate planning isn't just about preparing for the inevitable; it's about ensuring your wealth survives — and thrives — for generations to come, even in the face of unexpected events.

At Whittier Trust, I've seen too many situations where a lack of proactive planning has created unnecessary stress, conflict and financial strain for families. The good news? With a thoughtful, early approach to estate planning, these crises can often be avoided. Here are some of the critical lessons I've learned from my years in estate planning and wealth management.

Why Early Action Matters

Waiting to address estate planning until it feels urgent is a common mistake. It's human nature to focus on immediate priorities, but this approach leaves families vulnerable to the unexpected. One of the most overlooked aspects of estate planning is ensuring that the right legal structures are in place to address unforeseen circumstances, including incapacity.

Imagine a scenario where a family patriarch or matriarch — the key decision-maker — suffers a sudden illness or accident that renders him or her unable to manage the family's financial affairs. Without a plan in place, this can lead to delays in critical decision-making, confusion over who has the authority to act, and even costly legal battles. Such crises can strain family relationships and jeopardize the wealth that generations worked hard to build.

The consequences of failing to plan for the unknown can be significant. In one case I handled, a family member serving as trustee began losing capacity — repeatedly requesting the same distribution within days, forgetting she had already done so and that it had already been fulfilled. It became clear that she could no longer reliably fulfill her responsibilities, but determining her incapacity and appointing a successor trustee created tension, confusion and delays — three things you never want in the financial world. Without a clear plan, these situations can lead to family conflicts and financial risks, all of which could have been avoided with proactive estate planning.

This is also where powers of attorney play a critical role. Many people assume that simply having a document in place is enough, but these agreements often lack the flexibility to optimize the estate for tax purposes. For example, most powers of attorney grant authority only to make annual exclusion gifts (currently $18,000 per recipient). However, more comprehensive provisions can allow an attorney-in-fact to gift beyond this amount, potentially reducing estate tax burdens significantly. Without this foresight, families may miss critical opportunities to minimize taxes and preserve wealth.

The Hidden Risks of Family Trustees

Another common challenge arises when families don't take the time to fully understand their options and appoint relatives as trustees. While it may seem like a natural choice to entrust a loved one with managing your estate, this can lead to unforeseen complications. Family members serving as trustees are often unprepared for the legal, financial and emotional responsibilities the role entails. Worse, they may face undue influence or capacity issues that compromise their ability to act in the best interests of the estate.

As an unfortunate example of undue influence, a patriarch serving as trustee became entirely dependent on a caregiver for his daily needs. This caregiver isolated him from his daughters, changed the locks on his home and persuaded him to create a trust for the caregiver's grandchildren. Such scenarios are heartbreaking but also preventable with the appointment of a corporate trustee.

Corporate trustees can offer an impartial, professional alternative. Unlike family members, a corporate trustee doesn't age out, lose capacity or develop emotional conflicts of interest. This neutrality preserves healthy family relationships and ensures fiduciary responsibilities are upheld.

Beyond the logistical benefits, a proactive estate plan can mitigate the emotional strain that often accompanies wealth transitions. For example, I worked with a family that inherited a strip mall in Los Angeles. Purchased by their grandparents, the property was deeply sentimental to one sibling, but financially burdensome to the others. Despite a lucrative offer to sell, the emotional attachment of the sibling serving as trustee created a rift that took years to heal.

A corporate trustee could have handled the situation differently, prioritizing the long-term financial well-being of all beneficiaries. By removing emotions from decision-making, corporate trustees can help families avoid these types of conflicts, fostering unity instead of division.

Protecting the Next Generation

One of the most meaningful aspects of estate planning is preparing the next generation to manage the wealth they inherit. This involves more than financial education; it's about instilling values and fostering stewardship. Trust provisions can be structured to encourage responsible behavior, support charitable giving and provide for future generations without creating dependency.

By engaging in open conversations about your intentions, you can help your heirs understand their roles and responsibilities. This transparency reduces the likelihood of misunderstandings and ensures your legacy is managed in a way that aligns with your vision.

A Call to Action

As UHNWIs, you have the resources and influence to shape your family's future for generations. Don't let procrastination or a false sense of security jeopardize the legacy you've worked so hard to build. Proactive estate planning is not just about protecting assets; it's about preserving relationships, minimizing stress and creating a roadmap for your family's continued success.

Whether it's revisiting your powers of attorney, appointing a corporate trustee or ensuring your trust provisions reflect your values, every step you take today can prevent potential crises tomorrow. Estate planning may not always feel urgent, but its impact on your family's future cannot be overstated. As someone who has spent decades helping families navigate these complexities, I can't emphasize enough the importance of starting early.

Sharon Perlin is a Senior Vice president and Client advisor at Whittier Trust's Seattle Office, which celebrates its 25 anniversary this year.

Featured in Family Business Magazine. For more information about proactive estate planning, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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Jan 22nd

Market Insights – First Quarter 2025

Shifting Gears In The Economic Cycle

The U.S. economy has now remained resilient to the massive post-pandemic inflation shock for well over two years. As a result, the economic outlook has changed dramatically from the inflation peak in June 2022. We trace this progression to assess where we stand now and what lies ahead.

The longest economic expansion on record from 2009 to 2020 established a new, lower trend-line real GDP growth rate of just below 2% for the U.S. economy. Against this benchmark, investor expectations have shifted sequentially through the following four phases of real GDP growth from 2022 onwards.

  • Inevitable recession - Negative growth, well below 0%
  • Soft landing - Below-trend growth, above 0% but below 2%
  • No landing - Trend growth, around 2%
  • “Launch” landing - Above-trend growth, above 2%

We describe the last scenario as a “launch” landing in our lexicon and believe the new post-pandemic economic cycle will normalize at real GDP growth above 2% in 2025 and beyond.

While this evolution of the economic outlook may have surprised many investors, it almost played out as we expected three years ago. We were firmly of the opinion that inflation would subside rapidly as pandemic-induced supply shortages resolved on their own. We believed the U.S. economy had become more insulated from interest rate increases as consumers and corporations locked in low, long-term, fixed rates for their loan obligations. We had all but ruled out a recession and believed that growth was likely to surprise to the upside.

The momentum of the economy in 2024 was strong enough to overcome the uncertainty of the U.S. elections. If anything, the unexpected GOP sweep in November raised hopes of an even stronger economy on the heels of continued fiscal stimulus and deregulation. Company profits in 2024 were almost in line with lofty forecasts and earnings growth expectations for both 2025 and 2026 are still high at 13-15%.

It is no surprise then that the U.S. stock market delivered strong performance yet again in 2024. The S&P 500 index rose by 25.0%; the Nasdaq index, which includes the Magnificent 7 group of technology leaders, gained 29.6%; and the Russell 2000 index of small companies was up 11.5%. In fact, the S&P 500 index has now delivered the rare outcome of back-to-back total returns of at least 25% in two consecutive years.

The continued strength in the U.S. economy and stock market brought a lot of cheer to investors in 2024. However, it has now led to two major concerns in 2025.

Investors got clear evidence in July 2024 that the Fed could soon start cutting interest rates when headline CPI inflation registered its first post-pandemic monthly decline. From that point on, investors aggressively priced in multiple rate cuts under the benign scenario of continued disinflation and solid Goldilocks growth which was neither too hot nor too cold.

These expectations began to unravel towards the end of 2024. As investors began to price in a Trump win and then eventually saw the GOP sweep, interest rates began to rise in anticipation of a number of knock-on effects related to the election outcome.

a. Higher economic growth from continued fiscal stimulus, a new regime of deregulation and technology-led growth in productivity

b. Higher fiscal risks from larger fiscal deficits

c. Higher inflationary pressures from both higher growth and new policies on tariffs and immigration

At the same time, prospects of higher economic growth and higher corporate profits pushed stock prices and valuations higher.

In the last four months (from mid-September to the time of writing), interest rates have risen by more than 1%. Market expectations of Fed rate cuts have now declined to less than two; in fact, many are now assigning a non-zero probability to rate hikes in 2025. And in the stock market, strong returns have pushed valuations higher; the forward P/E for the S&P 500 stood at 21.5 at the end of December 2024.

These data points now pose the following risks to investors.

  1. Will interest rates stay high or go even higher? Will high(er) interest rates bring down the stock market and eventually stall the economy?
  2. Even if the stock market survives the burden of high interest rates, will it buckle under the weight of its own (high) valuations?

We address these two key questions on the way to developing our 2025 economic and market outlook.

Interest Rates

The recent low in the 10-year Treasury bond yield was 3.6% on September 16, 2024. After a strong jobs report on January 10, 2025, the 10-year Treasury yield almost reached 4.8%. This 1.2% increase is significant because it is unusual for long-term rates to move higher after the onset of a Fed easing cycle.

We see this historical anomaly more clearly in Figure 1.

Figure 1: 10-Year Treasury Yield Before and After First Fed Cut

Source: FactSet; Average includes rate cuts from June 1989, September 1998, January 2001, September 2007 and July 2019; as of January 10, 2025

Long-term interest rates normally decline when the Fed starts cutting rates. The simultaneous decline in both short-term and long-term interest rates is intuitive. Fed rate hikes usually slow the economy down to the point where rate cuts become necessary to prop it up. Fed rate cuts normally coincide with economic weakness and, therefore, a decline in long-term rates.

The divergent trend in Figure 1 is another reminder about the inefficacy of monetary policy in this economic cycle. At the outset, post-pandemic inflation was more attributable to supply side disruptions and fiscal stimulus than it was to monetary stimulus. Then, Fed rate hikes and higher interest rates didn’t cause the type of demand destruction that one would have normally expected. And now, expectations of higher growth are being driven by factors other than monetary policy.

We make an argument in the following sections that we are shifting to a higher gear of growth in this economic cycle. We observe in passing that the drivers of economic growth are also shifting. We believe the baton for higher future growth has now been handed off from monetary policy to higher productivity growth, deregulation and fiscal stimulus.

The first stage of our interest rates analysis is to understand why they are going up.

Nominal interest rates are comprised of two components: 1) inflation expectations and 2) real interest rates. We look at each of these factors separately.

Inflation Expectations

Under normal conditions, the 10-year Treasury yield will generally exceed inflation expectations for the next 10 years. Longer term policies drive these inflation expectations more than shorter term trends. In the current setting, inflation fears have been elevated by prospects of higher growth, immigration policies that may reduce the supply of workers and the implementation of proposed tariffs.

We do not believe that 10-year inflation expectations have changed materially in the last few months. For a while now, we have thought the Fed’s 2% inflation target was likely to be elusive. Our fair estimate of 10-year inflation expectations is slightly higher at around 2.25%.

We believe the market is mispricing a higher level of expected long-term inflation. We support our more benign view on inflation with the following observations.

i. We know high universal tariffs can be inflationary and harmful to domestic growth. We don’t believe they will be implemented as originally proposed; they will ultimately be selective, targeted and reciprocal. We believe the threat of tariffs is likely a negotiating tactic; it is aimed more at opening up foreign markets than at sourcing revenue. The bark of expected tariffs will probably end up being a lot worse than its actual bite.

We believe that the impact of immigration policy on the economy will also be less severe than anticipated.

ii. Inflation has been trending higher in recent months. We believe there may be some unusual base effects at play in these short-term trends. CPI prices fell in the fourth quarter of 2023, then rose sharply in the first quarter of 2024 and have been fairly steady thereafter. As a result, year-over-year changes in CPI inflation may come down in the coming months.

In any case, these recent trends are unlikely to materially affect inflation over the next 10 years. Counter to growing investor concerns, expectations for 5-year inflation, starting in 5 years from now, have remained well-anchored at about 2.3% even as long rates have gyrated violently.

iii. And finally, we maintain our high conviction that technology will continue to create secular disinflation in the coming years. We are hard pressed to think of enough inflationary tailwinds to overcome this one powerful disinflationary force.

We next look at the other potential drivers of the increase in long-term interest rates.

Real Interest Rates

Real interest rates are primarily influenced by long-term changes in the level of economic activity. Increases in economic growth rates cause the real interest rate (and, therefore, the nominal rate as well) to increase and vice versa. In fact, one of the more useful heuristics in the capital markets is that long-term nominal interest rates are typically bounded by the long-term nominal GDP growth rate expectations.

For the sake of completeness in our analysis, we make a small detour here to resolve one other nuanced driver of changes in real interest rates — changes in the risk premium. If investors perceive fiscal risks to be higher, they will in turn demand a greater compensation for bearing that risk through higher interest rates.

There is a great deal of angst that the incoming administration will continue to increase government spending and the fiscal deficit. We tackled this concern about greater fiscal risks comprehensively in our 2024 Fourth Quarter Market Insights publication.

For a myriad of reasons, we concluded that fiscal risks are not as elevated as feared and unlikely to trigger higher inflation or higher interest rates. We believe that any pricing of a higher risk premium into higher nominal yields today is unwarranted.

We resume our focus on the topic of economic growth.

In a material shift in our thinking, we now see the U.S. economy shifting to a higher growth gear in the next decade. In the pre-Covid economic cycle, real GDP growth in the U.S. averaged an anemic sub-2%. We expect real GDP growth will now exceed 2.5% over the next 2-3 years and conservatively average 2.25% over the next decade.

These forecasts imply an upward shift of at least 0.5% in real GDP growth from the prior cycle. At first glance, this may seem overly optimistic because of the obvious headwind of an ageing population.

We know the natural or potential growth rate of an economy has two basic components: 1) growth in the labor force and 2) productivity gains of existing workers. We concede that unfavorable demographics and potentially adverse immigration policies will likely reduce the size of the future labor force.

This places the onus for higher GDP growth squarely on the second factor of increased productivity. In fact, with flat to negative growth in the labor force, productivity will need to increase by 0.5-1.0% to boost GDP growth rates by 0.5% or more. How feasible is this outcome and why?

We make the following arguments numerically and fundamentally to support the feasibility of such an outcome. We begin with a look at trends in productivity growth going back about 75 years in Figure 2.

Figure 2: Productivity Changes in the Non-Farm Business Sector

Source: U.S. Bureau of Labor Statistics; as of December 2024

The light blue bar in Figure 2 shows the average annual productivity growth rate in the last 75 years is 2.1%. However, productivity growth does fluctuate a lot around this long-term average. As a rule of thumb, it declines during recessions and periods of slow growth (1970s and the Global Financial Crisis – GFC) and rises during periods of growth and innovation (1980s and 1990s).

We can also see that big swings in productivity growth rates of +/-1% are feasible. Productivity growth rose by more than 1% during the era of Internet Innovations and fell by more than 1% post-GFC.

We believe the new post-Covid economic cycle will foster both innovation and growth for a number of reasons. Technology was deployed at a rapid pace during the pandemic with a positive impact on business operations e.g. hybrid work arrangements, automation and robotics.

Recent advances in AI have also set the stage for significant productivity gains in the coming years. Investments in AI so far have focused on the “infrastructure” phase to facilitate training, learning and inference. We are now moving into the “application” phase where AI systems and agents will monetize this infrastructure to create practical solutions and economic value across the enterprise.

Finally, stimulative deregulation policies from the new administration will also streamline business processes and unlock operational efficiencies. The trifecta of technology, AI and deregulation can easily unlock an increase in productivity growth of approximately 1%.

Our forecast for the real interest rate over the next 10 years is 2.25%, in line with our real GDP growth estimate.

We now have forecasts for both inflation expectations and the real interest rate. Coincidentally, they are both around 2.25%. Our fair estimate for the 10-year Treasury yield is simply the sum of these two components.

We expect the 10-year Treasury yield will settle in the 4.5-4.6% range by the end of 2025. We don’t expect it to go much higher than the 4.8% level of January 10; it will instead recede by a small margin.

We are clear that an increase in real rates is a bigger factor in driving interest rates higher than a change in inflation expectations. We do not believe that inflation is headed higher; it will instead move lower in a bumpy manner. Based on our inflation outlook, the Fed will have more room to cut rates in 2025.

Higher real rates signal a stronger, healthier economy. Stronger economic growth bodes well for corporate profits. We believe that our inflation forecast of 2.25% and 10-year Treasury yield forecast of 4.5% will still be supportive of stock prices.

We close out our analysis and outlook for 2025 with a look at stock market fundamentals.

Stock Market Valuations

U.S. stocks have performed well in the last two years. While their returns have been naturally rewarding, those same high returns have also created risks going into 2025.

On the heels of two consecutive years of at least 25% total returns, U.S. stocks now appear expensive. Many valuation metrics are in the highest quintile of their historical ranges. We take a closer look at a couple of these valuation measures.

At the outset, we acknowledge the topic is complicated and nuanced. Our research is always deep, thorough and rigorous. However, our insights here are curtailed by the finite scope of this article.

We are mindful that the four most dangerous words in investing are widely believed to be “this time is different.” And yet, we also know that a number of time-tested paradigms haven’t worked in the post-pandemic economy and markets. The absence of a recession so far on the heels of an inverted yield curve even after a long lag of two years is a case in point.

We do our best to straddle this balance between respecting historical norms and yet thinking creatively and fundamentally about what might indeed be different this time around.

A commonly used valuation indicator was originally identified by Warren Buffett in a 2001 Fortune magazine essay. The Buffett Indicator measures the market value of all publicly traded U.S. stocks as a percentage of U.S. GDP. When the metric is high, stocks are vulnerable to a sell-off.

The Buffett Indicator has attracted significant attention in recent weeks as it went surging past a level of 200%. In other words, the market capitalization of all U.S. stocks is now more than double the level of total U.S. GDP. The Buffett Indicator suggests that U.S. stocks are now significantly over-valued.

We respect the broad message here that U.S. stocks are not cheap. However, we believe that a couple of relevant insights provide a more balanced perspective on this valuation metric.

The Buffett Indicator is anchored only to U.S. GDP in its denominator. However, many U.S. companies compete effectively in foreign markets. Since a growing number of U.S. companies are multi-national, a material and increasing portion of S&P 500 earnings is generated overseas. Clearly, the market value of all U.S. stocks in the numerator is not bounded by just the size of the U.S. economy. This mismatch causes the Buffett Indicator to rise steadily over time.

We look at another fundamental difference over time that may more rationally explain the trend in the Buffett Indicator.

We know stock prices follow corporate profits; as go profits, so do stock prices. Much like the construct of the Buffett Indicator, we track U.S. corporate profits as a percentage of GDP in Figure 3.

Figure 3: U.S. Corporate Profits as a Percent of GDP

Source: U.S. Bureau of Economic Analysis; as of Q3 2024

U.S. companies have continued to become more and more profitable. Almost analogous to the doubling of the market value of all U.S. stocks as a percent of GDP, U.S. corporate profits as a percent of GDP have also nearly doubled from 6.0% to 11.3%.

We believe these fundamental connections between the growth of U.S. corporate profits and the rise in U.S. stock values help us better understand and interpret the Buffett Indicator.

In a similar vein, the Forward P/E (“FPE”) multiple has attracted a lot of attention in recent months. At 21.5 as of December 2024, it is also in the highest quintile of its historical range.

There are two concerns related to the FPE ratio. One, it relies on future earnings (“E”) that were already deemed lofty before the rise in interest rates. And two, even if E comes through as expected, the FPE ratio itself is at risk of compressing through a decline in prices (“P”). We address each of these risks separately.

We have already made our case for a higher gear of growth in the preceding sections. The sustainable spurt higher in real GDP growth from a revival of productivity growth should also spill over into earnings growth.

Consensus analyst forecasts call for an earnings growth rate of 14.8% in 2025 and 13.5% in 2026. We believe these growth rates can be achieved; there is still room for profit margins to expand and augment higher economic, productivity and revenue growth.

We are in general agreement with the market that the P/E ratio will decline in the coming months. We also know that higher starting valuations lead to lower future returns. We are clear that stock returns going forward will be more muted than those seen in recent years.

However, we disagree with the market on both the likely magnitude and speed of decline in the P/E ratio. Investors worry that the 2024 FPE multiple of 21.5 could slide all the way down to its long-term average of around 16. They also fear that the resulting bear market could unfold quickly over just a few months.

We believe that the compression of the FPE multiple will be neither so drastic nor so abrupt. U.S. companies are now more profitable than they have ever been; aggregate free cash flow margins exceed 10% and return on equity is almost 20%.

On the heels of secular innovation, growth and profitability, we believe the fair value of the S&P 500 FPE multiple is now higher at 18-19. We also believe that any decline in the FPE from 21.5 to 18-19 will be more gradual. We expect positive earnings growth to offset the more orderly compression of the FPE multiple.

We illustrate the difference in our stock market forecast and the market consensus in Figure 4.

Figure 4: S&P 500 Forward P/E Ratios and Subsequent 10-Year Returns

Source: Bloomberg; from 1988 onwards; as of December 2024

Figure 4 shows the historical association between the FPE ratio and subsequent 10-year returns from 1988 onwards. A quick visual inspection validates our intuition. Higher initial valuations do lead to lower future returns.

The historical data is heavily influenced by two mega crises that took place just a few years apart – the Bursting of the Internet Bubble (BIB) in 2000-2002 and the GFC in 2007 2009. In each instance, earnings declined significantly as did stock prices and valuations.

The empirical relationship in Figure 4 suggests that the current FPE ratio of 21.5 (shown by the grey vertical bar) may lead to stock returns as meager as 2-3% annualized over the next 10 years. A key assumption in this projection is that both earnings (E) and valuations (FPE) will fall as dramatically as they did in the BIB and the GFC.

Our fundamental analysis does not reveal significant downside in E or the FPE multiple. Our earnings outlook identifies more positive fundamentals (e.g. growth in profit margins and productivity) than negative ones (e.g. excessive leverage). We also believe that the fair value of the S&P 500 FPE ratio is now fundamentally higher than it was in prior decades.

We, therefore, expect a higher stock market return over the next 10 years in the range of 8-10% shown by the red bar in Figure 4. We believe that earnings growth of 8-10% and a dividend yield of 1-2% will offset valuation declines of 1-2% annually in the coming decade.

Our stock market outlook for 2025 is also optimistic. We believe expected earnings growth and the dividend yield will create a tailwind of almost 15%. Since interest rates have moved sharply in recent months, we realize the valuation compression in the near term may be as large as -5%. We aggregate these drivers to forecast a 10% total return for the S&P 500. We expect the S&P 500 to reach a level of 6,400 by the end of 2025.

We conclude with a summary of our outlook for the economy, inflation, interest rates and the stock market.

Summary

The economic and market outlook is becoming less dispersed and more homogenous across investors. As an example, there are virtually no proponents of a recession today. It is harder to offer too many differentiated views against such a backdrop.
We summarize the key tenets of our outlook here.

Economy

  • We expect real GDP growth of 2.5% or above in the next 2-3 years in a significantly pro-growth regime.
  • Real GDP growth will normalize at a level of around 2.25% over the next 10 years.
  • We see a clear shift in the drivers and gears of economic growth. The impetus for higher growth in this cycle will come from deregulation, fiscal stimulus and an increase in productivity growth of 0.5-1.0%.

Inflation

  • We do not see an inflection in inflation up to higher levels.
  • Inflation should subside in a bumpy path to the 2.3-2.4% level by the end of 2025.
  • We believe the fair value for inflation expectations over the next 10 years is 2.25%.
  • We believe the market is mispricing a higher level of future inflation.
    • The impact of tariffs and immigration will be more muted.
    • Meaningful base effects will pull inflation lower in the second half of 2025.
    • Technology will continue to be a powerful secular disinflationary force.

Interest Rates

  • We estimate the real interest rate to be around 2.25% over the next 10 years.
  • We believe the fair value for the 10-year Treasury yield is 4.5-4.6%.
  • The bond market is overestimating the risk premium related to a perceived increase in fiscal risks.
  • Interest rates are likely to come down from their 4.8% level.
  • Based on our inflation outlook, the Fed will have more room to cut rates. We expect 3-4 rate cuts by the Fed in 2025.
  • A Fed policy misstep in the form of rate hikes or bond yields above 5% as a result of overzealous bond vigilantes could trigger a financial accident and curtail growth.

Stock Market

  • We believe that earnings growth and valuation fears in the stock market are overblown.
  • As a result, our expected returns for stocks are higher than consensus over both the 1-year and 10-year horizons.
  • We expect valuations to come down but not as dramatically or quickly as investors fear.
  • We believe earnings growth will match or exceed expectations in the near term.
  • We expect the S&P 500 to reach 6,400 by the end of 2025 and generate a 10% total return.
    • Earnings growth and dividend yield will create a nearly 15% tailwind for stocks in 2025.
    • Multiple compression of around -5% will detract from stock returns in 2025.
  • We expect U.S. stocks will generate annual returns of 8-10% over the next 10 years.
    • We reject the view that a severe valuation overhang will limit annual U.S. stock returns to 2-3% over the next 10 years.

We respect the difficulty of forecasting during normal times, and especially so in the midst of uncertainty. We will assimilate these views into our investment decisions with appropriate caution and adequate risk control.

We believe that 2025 will finally see a normalization of the U.S. economy after the recent pandemic and inflation shocks. We look forward to the prospects of investing in more normal markets.

To learn more about our views on the market or to speak with an advisor about our services, visit our Contact Page.

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We expect real GDP growth of 2.5% or above in the next 2-3 years in a significantly pro-growth regime.

 

We believe the fair value for inflation expectations over the next 10 years is 2.25%.

 

We believe the fair value for the 10-year Treasury yield is 4.5-4.6%.

 

We expect U.S. stocks will generate annual returns of 8-10% over the next 10 years.

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

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Jan 21st

Whittier Trust Celebrates 60 Years in the Pacific Northwest

Company Proudly Marks 25th Anniversary in Seattle 

Whittier Trust, the oldest multi-family office headquartered on the West Coast, celebrates two major milestones in 2025: 60 years of service to the Pacific Northwest and the 25th anniversary of our Seattle office. Our legacy in the Pacific Northwest began in the 1960s with founder Paul Whittier's vision and passion for the region. With a rich history and an enduring commitment to clients, Whittier Trust has been a trusted partner to generations of families and local community organizations throughout Puget Sound.

“As we celebrate six decades in the Pacific Northwest and 25 years since opening our Seattle office, we are immensely proud of our rich history and enduring commitment to our clients and the region’s future,” says David Dahl, President and CEO of Whittier Trust. “We look forward to upholding our dedication to excellence and delivering tailored wealth management, family office and trust services for generations to come.”

The Whittiers were visionaries who recognized the potential of the Pacific Northwest. Their passion for the region’s natural beauty initially led them to Goudge Island in British Columbia, which they purchased in 1949, and then to the San Juan Islands, where they dedicated themselves to philanthropic endeavors. 

Today, Whittier Trust’s support of local organizations—including the Friday Harbor Airport, Seattle’s Museum of Flight, San Juan Airlines, Shuttle Express and the San Juan Community Theater—continues to leave a lasting impact on the community. The Whittier Trust team remains actively engaged in supporting these vital entities.

“Paul Whittier’s vision to expand our family office, wealth management and trust services to multi-generational families in the Puget Sound region—anchored by the values of duty, loyalty and commitment—continues to inspire us as we build on our strong foundation,” says Nickolaus Momyer, Northwest Regional Manager, Senior Vice President and Senior Portfolio Manager at Whittier Trust. “We are proud to honor the Whittier Family’s legacy by delivering innovative solutions and personalized service to our clients.”

To view a timeline commemorating the Whittier family’s legacy and Whittier Trust’s impact throughout the region, click here.

Beyond its impact in the Pacific Northwest, Whittier Trust is globally recognized by the Society of Trust and Estate Practitioners (STEP) as one of the top five multi-family offices in the world. The company has also been named one of Washington’s 100 Best Workplaces by the Puget Sound Business Journal, underscoring the company’s dedication to cultivating a positive, productive work environment that empowers its team to exceed client expectations.

Throughout this year, Whittier Trust will host several events and programs to deepen relationships with clients, their families and the local community. Follow Whittier Trust on LinkedIn to learn more about these initiatives and how the company plans to honor this commemorative year. 

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For more information about Whittier Trust's wealth management, estate planning and family office services, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

 

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

Contact Us
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Jan 17th

Strategic Wealth Planning for UHNWIs for the Second Trump Administration

The new year will present challenges and opportunities for ultra-high-net-worth individuals as they re-evaluate their portfolios and long-term financial plans in light of President-elect Donald Trump’s incoming administration. Strong partnerships between UHNW clients and their advisors will be essential during this transition and the ensuing four years. Proactive planning will be key, especially given potential shifts in tax laws, market dynamics and interest rates.

Tax Law

Before Trump’s election in November, many ultrawealthy families were scrambling to optimize their estate plans ahead of the scheduled sunset of the Tax Cut & Jobs Act to take full advantage of exemptions while they remained in place and to adjust estate plans when and if those exemptions reverted at the end of 2025.

The policy uncertainty in 2024 paved the path for families and their advisors to give more consideration to their legacy and how it will affect their extended family in the future. The impending tax law change forced conversations around important estate planning considerations such as dispositive provisions, age attainments, and wishes for the use of the hard-earned wealth for future generations. The difficult decisions around the mechanics of intergenerational wealth were front and center leading up to the election.

However, with the incoming administration, it’s likely that the TCJA will be extended or even made permanent. UHNWIs and their advisors should continue to review their estate plans and build on those important conversations despite having more time to approach their plans strategically.

This extended horizon also allows for a renewed focus on aligning investments and real estate strategies with enduring goals, emphasizing tax efficiency, diversification and legacy planning. Advisors should take this opportunity to evaluate the use of tax-advantaged structures, optimize trusts and consider philanthropic vehicles that can minimize tax burdens while fulfilling broader family objectives.

Market Dynamics

From deregulation to policy shifts on renewable energy sources to protectionist economic policies, Trump’s election will hold many implications for investors and their portfolios.

The stock market’s reaction to the election results was initially positive. The day after the election, 3 in 4 companies traded higher, with the three major indices reaching record highs. As investors digested the possible policy changes under the new administration, markets in November saw a strong post-election rally, led by small-cap stocks and supported by gains in large-cap indices. However, recent Federal Reserve interest rate cuts and signals of a cautious monetary policy approach for 2025 have sparked turbulence, with major indices like the Dow, S&P 500 and Nasdaq experiencing sharp declines in mid-December.

Projected winners are expected beneficiaries of deregulation including banks; energy-related companies (especially in the liquified natural gas space); cryptocurrencies, particularly bitcoin; technology companies facing increased anti-trust exposure; and Tesla with Elon Musk leading the newly formed Department of Government Efficiency, or DOGE, committee.

Projected losers are companies in the renewable energy space, including EVs not owned by Elon Musk and utilities invested in renewable energy sources. Other losers, given Trump’s protectionist platform, include international companies broadly, and China specifically.

It is still unclear how the markets will treat healthcare companies. Managed care organizations initially saw a bump in anticipation of a hoped-for easing in pricing scrutiny.  Since the election, MCOs have been selling off (CVS Health’s Stock has fallen 24% in December with UnitedHealth Group and Cigna Group also experiencing substantial declines), with the expectation that they may be more heavily scrutinized if Robert F. Kennedy Jr. is confirmed to head the Department of Health and Human Services. The industry-level volatility may create opportunities for investors with the ability to tolerate short-term pricing aberrations if the policies are more moderate than feared.

Seriously, Not Literally

As the markets react and overreact to policy decisions, we are reminded that the new administration should be taken "seriously" but not "literally." Advisors and clients should keep in mind that administrations rarely achieve everything they set out to do. The challenge will be to react to a broader understanding of what the administration intends to focus on rather than fearing the most radical proposal or enacted policy.

Regardless of what policy shifts come to pass, the time-honored values of successful planning remain the same: prioritizing long-term strategies, tax efficiency and high-quality companies. It’s important for the advisor to encourage clients to stay disciplined, avoid being too hasty to react, and emphasize strategic consistency within a portfolio.

Having said that, it’s also important to communicate often with clients about shifts and expected changes within market cycles, as there are opportunities to be seized within any market environment.

Caleb Silsby is the Executive Vice President, Chief Portfolio Officer at Whittier Trust, overseeing a team that collaboratively manages portfolios for high-net-worth clients, foundations, and endowments. He is credentialed as a CFA Charterholder and CFP professional.

Featured in Barron's. For more information about private market investments, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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