Post Type: Insights

Aug 5th

Ensuring a Smooth and Successful Transition of the Family Business

Five key questions to ask your advisor if you're mulling an exit.

In my role at Whittier Trust, I've seen firsthand how critical it is for ultra-high-net-worth individuals (UHNWIs) to have a well-thought-out exit strategy for their family businesses. Despite the intensive planning that typically goes into wealth management, recent research from the Exit Planning Institute suggests that a staggering 80% of business owners lack solid exit strategies, leaving their wealth in limbo and risking economic continuity for future generations.

The planning process of an exit strategy can often be fraught with uncertainty and potential pitfalls, making it a critical issue for business owners nearing retirement or a transfer of ownership or leadership. Here are the five key questions UHNWIs should ask their advisors to ensure a smooth and successful transition.

1. How many different exit strategies are available to me?

Understanding the various ways you can exit is fundamental to choosing the right path for your business. Each exit strategy has unique implications and suitability depending on your business's circumstances and your personal objectives. Here's a breakdown:

Generational Family Transfer

When multiple generations of a family are actively involved in the business, an owner might prioritize business legacy and family engagement over the sale price. If the objective is to keep the business in the family, the exit plan might involve transferring company stock, often at a discount, to direct heirs over many years. While keeping a majority stake in the company and control over operations, the owner can transfer assets to the next generation while still mentoring and training the next leader.

A generational family transfer can play out in a variety of ways: The owner may ultimately sell stock in the company to family, retire holding minority ownership or gift all stock to heirs. A successful transfer will take at least three to five years to accomplish and will position the business for success, meet the owner's liquidity and financial needs after the transfer, and leave the new owner(s) financially stable after the transaction.

Management Buyout

An owner who wants to sell all or part of the company to existing management might favor a management buyout. This type of ownership transition involves structuring a deal in which management uses the assets of the business to finance a significant portion of the purchase price. This can work for an owner who believes in the management team and thinks it will be able to keep the business thriving when he/she exits. However, if the management team lacks adequate liquidity, the seller may have to accept a lower price or unattractive deal terms, including heavy seller financing.

Sell to Partners

When the owner has partners and a quality buy-sell agreement, a sale to partners may be the only selling option. A buy-sell agreement generally articulates a controlled process for transferring ownership. Since the buyers fully understand the business and it's a planned process, selling to partners generally isn't too expensive. Common challenges in selling a business to partners include a lower sale price, slow transfer of proceeds and potential disagreements among partners.

Sell to Employees (ESOP)

When an owner wants to sell the company to its employees, an employee stock ownership plan (ESOP) might be the answer. In this type of sale, the company uses borrowed funds to acquire shares from the owner and contributes the shares to a trust on behalf of the employees. ESOPs require a securities registration exemption and are classified as an employee benefit, so it's an involved process. An ESOP sale takes many years to complete and is generally more expensive and complicated than other options. However, it can be a way to reward valued employees with company ownership. The tax savings to the seller can be substantial as well.

Sell to a Third Party

When the business is healthy and the owner wants to cash out, selling to a third party could be a good option. Whether the interested party is a strategic buyer, a financial buyer or a private equity group, the owner should expect to pay some big up-front costs to engage experienced professionals to guide the owner and company through the selling process. Having the right partners attending to the owner's interests, negotiating with the buyer and structuring deal terms are crucial to achieving the best outcomes.

Although the payoff can be attractive, third-party sales are not for the faint of heart. The process takes at least nine to 12 months and can be intense and emotional for the seller. Often, the seller retains some obligation to the business beyond the sale but has to be ready to give up control entirely. A third-party sale is ideal for an owner who is open to having the buyer bring new energy, ideas and change to the business.

Recapitalization

An owner who is open to having outside investors fund the company's balance sheet might consider bringing in a lender or equity investor to act as a partner in the business. By selling a minority or majority position, the owner can partially exit, monetize a portion of the business and reduce ownership risk in the company. New growth capital can bring more earnings to the original owner. When ready to exit the company completely, the original owner might sell the remaining shares through further recapitalization or another exit option.

Selling any portion of the company to an outsider can precipitate a loss of control and a cultural shift within the company. An owner who is not ready to be accountable to partners should consider this before opting to recapitalize.

2. How long before retirement should I begin thinking about my exit?

Ideally, business owners should start thinking about their exit strategy at least five to 10 years before their intended retirement. This period allows for comprehensive planning that can influence key outcomes of the eventual sale. Value-building initiatives need time to succeed and show results before they can impact sale proceeds (valuation optimization). Identifying and grooming a successor — whether a family member, a key employee or an external buyer — is generally most effective over an extended period (succession planning).  Structuring the business and the sale to maximize tax efficiency and comply with legal requirements is an involved process (legal and tax planning). Finally, strengthening the business's operations and financial health can make it more attractive to potential buyers (operational improvements).

3. What steps should I take to optimize valuation and transition?

Optimizing your business's valuation and ensuring a smooth transition involves several strategic steps. First, conduct regular financial audits to present clear and accurate financial statements; transparency is key to attracting serious buyers and securing a favorable sale price. Next, take a look at opportunities to enhance operational efficiency to demonstrate the business's profitability and growth potential. This might involve adopting new technologies, improving processes or cutting unnecessary costs. Another crucial step is to develop a strong management team that can operate independently, as a business that doesn't rely solely on the owner is more attractive to buyers. Solidifying relationships with key customers and suppliers is also important, since long-term contracts and stable relationships add value and stability to the business. Finally, ensure the business complies with all legal and regulatory requirements. Any outstanding legal issues can deter buyers or lower the sale price.

4. What if a big part of my exit is going to be a sale or a partial sale?

If you are leaning toward a sale, either partial or complete, several considerations come into play. Engaging professionals is one of the first and most crucial steps. Working with experienced legal, financial and business advisors helps owners navigate the complexities of the sale process. Those professionals can also help with due diligence. Buyers will conduct thorough examinations of every facet of your business, including financial records, legal documents and operational data. Being prepared with detailed and organized documentation can facilitate a smoother due diligence process and instill confidence in potential buyers. This preparation not only expedites the sale process but also helps in presenting your business as a well-managed and transparent entity, which can lead to a more favorable sale price.

Identifying potential buyers is also a strategic consideration that can greatly influence the sale’s success. Depending on your business's nature and industry, potential buyers could be competitors, private equity firms or even international investors. Identifying and approaching the right buyers ensures that you attract parties who see the most value in your business.

5. How should I structure sale deals?

Structuring a sale deal requires careful planning and negotiation to balance your needs with the buyer's. This involves key elements like payment terms, which can be a one-time lump sum or installments. You might even consider seller financing, which can make the deal more attractive but comes with the risk of the buyer defaulting. Another option is to structure earn-out payments tied to the business’s future performance, which can bridge valuation gaps but require clear metrics and timelines. Noncompete agreements are often requested by buyers to prevent owners from starting a competing business post-sale, so ensure the terms are reasonable and don’t unduly restrict future options.

The structure of the deal can also significantly impact your tax liabilities. Understanding the tax implications of different payment structures is crucial, as installment payments may help spread the tax liability over several years. Work with wealth management advisors to explore strategies that could mitigate your tax burden. Experienced legal counsel can help you draft and review all agreements, focusing on representations and warranties to minimize future liabilities and ensuring provisions for indemnification to protect against potential future claims or disputes.

You will also have to decide whether you'll stay involved in the business after the sale, in either a consulting capacity or a more formal role. This can ease the transition and provide additional income, but it might also limit your ability to fully step away. Don't forget to consider how the sale aligns with your personal and family goals. Reflect on how the sale proceeds will be integrated into your overall estate plan, ensuring the structure supports your legacy and philanthropic goals. Also assess how the sale structure impacts your lifestyle and plans, whether it involves retirement, new business ventures or other personal endeavors.

The transition of a family business is a complex process that requires careful planning and execution. By asking your advisors the right questions, you can ensure a smooth and successful exit that secures your legacy and financial future.

Written by Elizabeth M Anderson, Vice President, Business Development at Whittier Trust. Featured in Family Business Magazine. For more information, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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Aug 2nd

Guardians of Wealth: Navigating the Cybersecurity Landscape in Family Offices

In an era where digital threats are a constant worry, cybersecurity has emerged as a critical concern for family offices entrusted with managing substantial wealth on behalf of affluent clients. Despite the financial stakes and heightened awareness of cyber threats, a concerning gap persists between the recognition of risks and the implementation of robust defense mechanisms. As family offices like Whittier Trust navigate this complex landscape, their commitment to security and strategic focus on overcoming evolving challenges remain paramount.

The Escalating Threat Landscape

Family offices, by managing significant assets and sensitive personal information, are lucrative targets for cybercriminals. The nature of these entities—often small, privately managed, and lacking the extensive security infrastructure of large financial institutions—makes them particularly vulnerable. Cyber-attacks have been steadily climbing for four consecutive years, with a notable surge in targeting smaller businesses, reaching as high as 36%. Cybersecurity threats range from phishing attacks and ransomware to more sophisticated tactics such as insider threats and spear-phishing (a malicious email that specifically targets an individual or organization). The risk is compounded by the interconnected nature of digital systems, where a single breach can cascade into widespread damage.

Despite growing awareness of these risks, many offices struggle with the actual readiness to confront them. Limited internal resources, both in terms of technology and specialized personnel, hinder the ability to implement comprehensive cybersecurity measures. This gap between perceived risk and actual preparedness is a significant vulnerability that needs urgent attention.

Proactive Cybersecurity Measures

To safeguard sensitive financial data and uphold fiduciary responsibilities, family offices must adopt proactive cybersecurity measures. Here are several best practices that can bolster their defenses:

  1. Develop Comprehensive Information Security Policies: Establishing and enforcing robust information security policies is foundational. These policies should cover data encryption, secure communication protocols, regular audits, and employee training programs. A well-defined policy framework helps ensure that everyone in the organization understands their role in maintaining security.
  2. Invest in Advanced Cybersecurity Technology: Leveraging cutting-edge technology can significantly enhance a family office's security posture. This includes deploying firewalls, intrusion detection systems, and advanced endpoint protection. Regular updates and patches are essential to keep these systems effective against emerging threats.
  3. Conduct Regular Security Audits and Penetration Testing: Periodic security audits and penetration testing can identify vulnerabilities before cybercriminals exploit them. These assessments should be conducted by third-party experts to provide an unbiased evaluation of the family office's security infrastructure.
  4. Enhance Employee Training and Awareness: Employees are often the weakest link in cybersecurity. Regular training sessions on recognizing phishing attempts, handling sensitive information, and following security protocols can significantly reduce the risk of human error. Creating a culture of security awareness is crucial.
  5. Implement Multi-Factor Authentication (MFA): Multi-factor authentication adds an extra layer of security by requiring users to provide two or more verification factors to gain access to systems. This makes it much harder for attackers to compromise accounts, even if they have obtained passwords.
  6. Engage Cybersecurity Experts: Hiring dedicated cybersecurity professionals or engaging reputable cybersecurity firms can provide the expertise needed to stay ahead of threats. These experts can help develop strategies, respond to incidents, and ensure compliance with relevant regulations.

Overcoming Resource Constraints

Implementing cybersecurity measures is crucial for family offices, but these efforts often encounter challenges due to limited resources. Family offices, typically smaller in scale than larger organizations, must navigate these constraints while still ensuring the security of their assets and data. To effectively address these obstacles, family offices can employ several strategies.

One key strategy is prioritizing critical assets and data. Not all data and systems hold the same level of importance, so by identifying and focusing on the most valuable assets, family offices can allocate their resources more efficiently. This targeted approach helps protect what matters most without overextending their capabilities. Additionally, adopting a risk-based approach tailored to the specific threats and vulnerabilities unique to the family office can further streamline resource allocation. This method ensures that efforts are concentrated on areas with the highest potential impact, maximizing the effectiveness of their cybersecurity measures.

Another effective tactic is leveraging cost-effective solutions that do not compromise on protection. Collaboration and knowledge sharing with other family offices can be incredibly beneficial. Engaging in industry forums and collective bargaining can lead to better cybersecurity solutions and services, while also fostering a community of shared best practices and insights.

Commitment to Security

Whittier Trust, recognizing the importance of cybersecurity, has recently hired a new Chief Information Officer to bolster its security efforts. This strategic move underscores a commitment to staying ahead of cyber threats and ensuring that the families they serve can trust in the security of their assets and information.

By addressing cybersecurity concerns head-on, family offices can not only protect against unauthorized access and theft but also uphold the trust and confidence of the families they serve. Proactive strategies, ongoing investment in technology and expertise, and a steadfast commitment to security are essential in navigating the increasingly digitized landscape and fulfilling fiduciary responsibilities effectively.

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Protect your family's legacy with robust cybersecurity measures. Discover more about safeguarding your wealth by exploring our comprehensive resources and start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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Jul 25th

Baby Boomers Passing the Torch: Navigating the Challenges and Opportunities of Wealth Transfer

As the Baby Boomer generation ages, a significant wealth transfer is expected to occur over the next few decades. This phenomenon has prompted discussions among financial planners and investors about the best practices for transferring wealth to the next generation. Understanding the intricacies of generational wealth transfer is crucial for ultra-high-net-worth individuals (UHNWIs) to ensure their assets are preserved and efficiently passed on, minimizing tax liabilities and fulfilling their legacy objectives. 

The Importance of Protective Planning

Generational wealth transfer encompasses various strategies and considerations to establish a smooth and efficient passing of assets from one generation to the next. Proactive planning is essential in this process. By taking early and strategic steps, individuals can mitigate estate taxes, avoid probate, and provide financial security for their heirs. One of the primary tools in wealth transfer is the use of trusts, which can help manage and protect assets while confirming their distribution according to the benefactor's wishes, all without the need for probate—a process that can be both time-consuming and costly.

Utilizing Tax Advantages

Another critical aspect of proactive planning is understanding and utilizing the various tax advantages available. For instance, the annual gift tax exclusion allows individuals to give a certain amount each year to as many people as they wish without incurring gift taxes. However, it's important to stay informed about upcoming changes to the gift tax rule, which are set to take effect soon and could impact the amount that can be gifted tax-free. Additionally, establishing and funding education savings accounts or medical trusts can provide significant tax benefits while directly supporting the next generation.

Potential Challenges: Family Disputes and Complexity

However, the process is not without its challenges. One significant hurdle is the potential for family disputes. When large sums of money and valuable assets are at stake, differing opinions and expectations among heirs can lead to conflicts. Clear communication and detailed estate planning documents can help mitigate these risks. It is essential to have open discussions with family members about the benefactor's intentions and expectations, potentially facilitated by a neutral third party such as a family office.

The Intricacies of Estate Planning

The complexity of estate planning is another challenge that cannot be underestimated. Crafting a comprehensive estate plan involves more than just drafting a will. It requires a detailed understanding of various legal and financial instruments, as well as the ability to foresee and plan for potential changes in the benefactors' and beneficiaries' circumstances. This is where the need for continuous adjustments comes into play. Laws governing estate taxes, gift taxes, and trusts are subject to change, and family dynamics can evolve. Regularly reviewing and updating the estate plan is crucial to verify it remains aligned with current laws and the benefactor's wishes.

Securing Financial Stability for Future Generations

Properly managed, generational wealth transfer can secure financial stability for future generations. It can provide heirs with the resources they need to pursue education, start businesses, or support charitable causes, thereby extending the benefactor's legacy beyond their lifetime. However, the success of this process hinges on careful planning, transparent communication, and professional guidance.

The Role of Professional Guidance

Professional guidance is indispensable in navigating these complexities. Estate planning attorneys, financial advisors, and tax professionals bring expertise and experience that can make a significant difference in optimizing wealth transfer strategies. They can provide personalized advice tailored to the individual's financial situation, goals, and family dynamics. Additionally, professionals can help in identifying and addressing potential issues that the benefactor might not foresee, safeguarding a more robust and resilient estate plan.

Advanced Estate Planning Techniques for UHNWIs

For UHNWIs, the stakes are particularly high, and the opportunities for optimization are significant. By leveraging advanced estate planning techniques such as charitable remainder trusts, family-limited partnerships, and generation-skipping trusts, UHNWIs can achieve substantial tax savings while preserving their wealth for future generations. Involving heirs in the planning process and educating them about financial responsibility can help make certain that the wealth is managed wisely and lasts through multiple generations.

The generational wealth transfer expected as Baby Boomers age presents both challenges and opportunities. Proactive planning, clear communication, and professional guidance are key to navigating this complex process. By addressing potential challenges head-on and taking advantage of available strategies and tools, UHNWIs can optimize their wealth transfer, ensuring that their legacy endures and provides financial security for their heirs. The Great Wealth Transfer is not just a financial event; it is an opportunity to shape the future and make a lasting impact on the lives of loved ones and the community at large.

Safeguard your family's legacy with Whittier Trust. Discover our comprehensive resources and expert insights to learn how to protect your wealth.

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For more information, 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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Jul 18th

Market Insights – Third Quarter 2024

The Big Central Bank Dilemma

The U.S. economy and capital markets continued to surprise investors through the first half of 2024. The year began with high hopes that the rapid disinflation of 2023 would continue in an orderly and uninterrupted manner. This in turn spurred optimism that the Fed would be able to cut rates as early as in March. At that stage, the consensus expectation for monetary policy was 6 to 7 rate cuts in 2024 alone.

These hopes were dashed in the first quarter as inflation readings came in higher than expected. The economy remained unusually resilient as job growth and consumer spending exceeded expectations. In a matter of just
a few months, the timing of rate cuts has changed dramatically. In early July, the Fed’s projections called for just one rate cut in 2024; the market was pricing in two. Not surprisingly, bond yields have also remained higher; most bond market indices generated flat returns in the first half of 2024.

Under normal conditions, such a hawkish pivot in monetary policy might also have derailed stocks, especially at their loftier valuations during most of 2024. Instead, U.S. stocks performed remarkably well in the first half of 2024. The S&P 500 index rose by 15.3%, the Nasdaq 100 index surged 17.5% and the Russell 3000 index gained 13.6%.

Even as monetary policy expectations disappointed, the stock market derived its strength from stellar earnings growth. Most investors were caught flat-footed by their belief that the consensus double-digit earnings growth rates for 2024 and 2025 were simply too high. On the other hand, we had formed the minority view in our 2024 outlook that not only were these earnings levels likely to be achieved, but they could even be exceeded. Stocks handily outperformed bonds in alignment with our tactical positioning.

The resilience in economic activity and inflation at the beginning of the year gave rise to a new theory in support of higher-for-longer interest rates. By historical standards, a Fed funds rate of 5.4% should have been significantly restrictive in slowing the economy down. In fact, many had expected the 11 rate hikes in this tightening cycle to cause a recession by 2024.

A plausible explanation for the muted impact of higher interest rates is that the post-pandemic economy is operating at a higher speed limit. This possibility has several implications. It suggests that the neutral policy rate to keep this economy in equilibrium is also higher. If this were true, then the actual policy rate is not nearly as restrictive as what history would suggest. A higher neutral rate also suggests that eventual Fed easing won’t be as significant as expected. And finally, in this setting, all interest rates would end up higher than expected as well. We explore the possibility of a change in the neutral rate in our analysis.

Recent economic data, however, is now beginning to reverse. The last couple of months have seen renewed evidence of cooling inflation, a weaker job market and a softer economy. By the end of the second quarter, both headline and core inflation had receded to 2.6%, the unemployment rate had risen above 4% and real GDP growth in 2024 was tracking below trend at around 1.5%.

This recent decline in inflation and economic activity poses a difficult dilemma for the Fed. As long as growth was resilient, the Fed had the option to remain patient and keep rates high. Indeed, their policy so far has focused on avoiding the policy mistakes of the late 1970s. If they ease too soon, a potential surge in economic activity might rekindle inflation and send it higher.

However, as growth deteriorates and inflation heads lower, the risks of waiting too long may now outweigh the benefits of being patient. Several sectors of the economy remain vulnerable to the prolonged impact of higher interest rates. These include the highly leveraged private equity and commercial real estate businesses and the less regulated private credit markets. The balance of risks may well tilt towards growth and away from inflation. The Fed is clearly focused on this dynamic; Chairman Powell began his semi-annual July congressional testimony by observing that “reducing policy restraint too late or too little may unduly weaken economic activity and unemployment.”

As a result, the Fed finds itself at a crucial juncture in formulating future monetary policy. In addition to getting the timing of rate cuts right, it also needs to assess the proper neutral rate in this new cycle to calibrate the eventual magnitude of easing.

We focus our article on fully understanding this big central bank dilemma. We offer policy recommendations that may yet allow the Fed to thread the needle and engineer a soft landing. Finally, we juxtapose the Fed’s likely course of action with the divergent easing paths of foreign central banks.

  • Is there a new neutral rate at play? How has it changed? What are its policy implications?
  • When should the Fed make its first rate cut? How many should they do? At what speed?
  • What are the implications of divergent central bank easing policies across regions?

The Neutral Rate

We have previously written about how the U.S. economy is now less rate-sensitive than ever before. Consumers and corporations alike have locked in low fixed rates well into the future; they are more immune to rising rates than they were in the past.

However, the unexpected resilience of the U.S. economy is also starting to spur a new theory about future Fed policy. The key concept in this line of thinking is the so-called neutral interest rate. First, a quick definition. The neutral rate is the equilibrium policy rate that allows an economy to achieve its full potential growth at stable inflation. In other words, it is the steady-state policy rate that is neither restrictive nor accommodative; it is neither expansionary nor contractionary.

While it is intuitive, a major practical limitation of this framework is that the neutral rate is unobservable and, therefore, cannot be measured. It can only be estimated ex-ante; it is eventually validated ex-post by trial and error from actual realized outcomes of growth and inflation.

Many believe that the neutral rate is now permanently higher. They, therefore, contend that there are far fewer rate cuts ahead of us. The more profound implication of this assertion is that higher rates may prevail forever, not just for longer. Market expectations have clearly moved in this direction. We see this in Figure 1.

Figure 1: Market Expects A Higher Neutral Rate Than The Fed Does

Source: Bloomberg, FactSet

The navy line in Figure 1 depicts the market’s estimate of the neutral rate. It is derived from a useful, but less widely followed, measure of future expected risk-free rates. We describe this technical metric as simply as possible and explain how it becomes the market’s proxy for the neutral rate.

The Overnight Index Swap (OIS) is a useful tool to hedge interest rate risk and manage liquidity. For our purposes here, we can think of the OIS rate as the fixed rate for which one is willing to receive a floating rate in exchange. This floating rate is typically tied to an overnight benchmark index such as the Fed Funds Effective Rate. The OIS 5y5y rate shown as the navy line in Figure 1 can be interpreted as the fixed rate for a period of 5 years, starting 5 years from now, at which one would be willing to receive the overnight floating rate in exchange.

In its simplest form, it reflects the market’s projection of the average overnight or risk-free rate over a 5-year period, which begins 5 years from now. Because the OIS 5y5y rate is a proxy for the overnight rate in the longer run, it is the market’s estimate of the neutral policy rate.

The setup for defining the market neutral rate was tedious, but analyzing it is fascinating. Before we do so, here is a quick and far simpler word on the light blue line in Figure 1. It is the Fed’s projection of the long-term or neutral policy rate.

In Figure 1, we see that the market neutral rate has long been anchored by the Fed’s estimate of the neutral rate. Since 2012 in the post-GFC era, the market neutral rate (navy line) has consistently remained below the Fed’s neutral rate (light blue line).

This trend has reversed in the last two years. In recent weeks, the overnight swaps market has been pricing the neutral rate at just below 4% (e.g. it was 3.7% on July 8). On the other hand, the Fed’s long-held estimate of the neutral rate has been 2.5%; the Fed has now revised it up to 2.8% as of June 2024.

The market neutral rate burst above the Fed’s neutral rate in early 2022. We believe the initial 2022 spike in the market neutral rate was driven by expectations of higher inflation. We believe its subsequent rise in the last 12 months has been fueled by expectations of long-term economic resilience.

The Fed’s policy rate is currently at 5.4% and the true neutral rate will determine how low it can go. If the market is correct about the new neutral rate being closer to 4%, cumulative Fed easing will be a lot less than what may have happened in previous regimes of a lower neutral rate.

We offer our own view on where the new neutral rate may emerge in the coming months. We believe it is higher than the Fed’s 2.8% projection, but it is nowhere close to the market’s expectation of around 4%.

As we mentioned at the outset, the neutral rate is unobservable and hard to measure. But we do know that the nominal neutral rate is influenced by inflation. It is also affected by changes in the trend growth rate. We believe each of these factors will be higher in the next cycle and create a new neutral rate of 3.0-3.2%.

We have maintained for a couple of years now that the Fed’s 2% inflation target will likely be elusive. An aging population, along with new potential immigration barriers, will constrain the supply of labor and create a higher floor for wage inflation. We also believe that impediments to global trade in the form of tariffs and a populist mindset of de-globalization will potentially lead to higher inflation. We expect trend PCE inflation to settle at 2.3-2.4%.

We also expect a small increase in trend GDP growth. We have seen a recent rebound in productivity growth; we expect this to become a more secular trend as technology, AI, robotics and automation drive further productivity gains. We also expect the U.S. economy to be modestly more resilient and impervious to higher inflation and interest rates.

We summarize this section with the following observations.

  • We believe a new neutral rate is at play in this economic cycle.

    • It is higher than the Fed’s estimate of 2.8%, but well short of the market’s expectation of 3.7%. We peg it to be around 3.0-3.2%.

  • The market may be mistaken in expecting significantly higher trend inflation or trend GDP growth.

    • Technology remains a powerful disinflationary force.

    • Increases in trend GDP growth will inevitably be bounded by a slowing labor force and only modest productivity gains. The market may be erroneously extrapolating recent economic resilience too aggressively, too far out into the future.

Future FED Policy

Magnitude of Rate Cuts

Our discussion on the likely neutral rate going forward makes it easier to anticipate future Fed policy. The Fed funds rate is currently at 5.4%; we estimate the new neutral rate to be 3.1%. We believe this leaves room for 8 to 9 rate cuts in the next 18 to 24 months. The speed at which the Fed is able to implement these rate cuts will depend on how rapidly inflation and economic growth can cool off.

Timing and Trajectory of Rate Cuts

We preface this discussion with our most startling takeaway. We believe the timing and trajectory of rate cuts, to a large extent, will simply not matter. In many ways, we already have evidence to that effect; they haven’t mattered so far in 2024. Expectations for rate cuts this year have gone down from 6 starting in March to just 2 now by December. And yet, the stock market has been strong; the S&P 500 index was up more than 15% through June.

Our logic for this assessment is simple. As long as the market can anchor to the total magnitude of likely rate cuts based on an understanding of the neutral rate, it will likely look through the timing of the first rate cut and the subsequent speed of the next few.

We, nonetheless, believe that the following sequence of rate cuts may be optimal in balancing both inflation and growth risks.

  • We see sufficiently softer inflation and growth to implement the first rate cut in September and two more by December 2024.

  • We believe the Fed can get to a neutral rate of 3.0- 3.25% before the end of 2026.

  • We hold out the caveat that no Fed action for the next 6 months would be a policy misstep.

Global Central Bank Divergence

Global central banks have been remarkably coordinated and synchronized since the onset of the Covid-19 pandemic in 2020. All of them eased immediately and dramatically to support economic growth during the global lockdowns. Post-pandemic inflation, induced by this flood of liquidity, was also a global phenomenon, which then led to a synchronized global tightening cycle.

As inflation and growth begin to cool down across the world, there is some angst that global monetary policy will not be fully in sync during the upcoming easing cycle. We have already seen this happen. The Fed is still on the sidelines awaiting its first rate cut. In the meantime, the Swiss National Bank has already cut rates twice this year, the European Central Bank (ECB) has eased once, the Bank of England hasn’t moved yet and the Norges Bank has indicated that they won’t ease until 2025.

We believe that the more disjointed global easing cycle is actually justified from a fundamental perspective. These differential easing paths are largely being driven by different growth dynamics across the world. We see this in Figure 2.

Figure 2: 2024 Real GDP Growth Estimates Across Regions

Source: FactSet

Recent GDP growth has been higher in the U.S. than in Europe. It is no surprise, therefore, that the Fed has more flexibility to ease at a slower pace than the ECB does.

We still expect the overall trend towards easing to be consistent across central banks. We believe that the Bank of Japan will be the only major central bank that won’t cut rates by the end of 2025. Many others will begin to do so in 2024. A global easing cycle is about to begin and global short rates are expected to decline by almost 150 basis points over the next 18 months.

We believe stronger growth fundamentals will continue to favor U.S. stocks and the U.S. dollar. As a convenient and desirable byproduct, the strength in the U.S. dollar will continue to be disinflationary and bolster the case for a sustained Fed easing cycle.

Summary

We explored several nuances of the upcoming central bank dilemma. We examined the prospects of a new neutral rate for the U.S. economy, the magnitude and timing of likely Fed rate cuts and the potential for any adverse effects from divergent easing across global central banks.

We summarize our key takeaways below. We believe:

  • There is a new and higher neutral rate of 3.0-3.2% for the U.S. economy in this cycle.
  • While above the Fed’s long-held view of 2.5%, our estimate of the neutral rate is well below market expectations of around 4%.
  • The market is likely overestimating the neutral rate by extrapolating significantly higher trend inflation or trend GDP growth.
  • With the Fed currently at 5.4%, our 3.1% estimate of the neutral rate leaves room for 8 to 9 rate cuts in the near term.
  • Inflation and growth dynamics suggest that the Fed can get to the neutral rate in 18 to 24 months.
  • As long as the markets can anchor to the likelihood of 8-9 rate cuts in aggregate, the actual timing and trajectory of Fed rate cuts will not matter to a large extent.
  • We see enough weakness in inflation and economic growth to advocate the first rate cut in September and two more by December 2024.
  • No Fed action for the next 6 months will likely constitute a policy misstep.
  • Global monetary policy is likely to be less synchronized in the upcoming easing cycle, but not in a materially adverse manner.

We have been increasingly confident that high inflation and interest rates will soon subside. We also remain confident in the earnings outlook. With the tailwinds of accommodative monetary policy and strong earnings growth, we rule out a bear market scenario or even a prolonged correction for U.S. stocks.

Our sustained risk-on positioning in the last two years has worked well. We maintain a similar, but more modest, posture going forward. We continue to exercise prudence in managing client portfolios.

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 believe there is a new and higher neutral rate of 3.0-3.2% for the U.S. economy in this cycle.

 

We believe the market is grossly overestimating the neutral rate at around 4%.

 

With the Fed funds rate at 5.4%, our 3.1% estimate of the neutral rate leaves room for 8 to 9 rate cuts in the next 18 to 24 months.

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Jul 16th

Whittier Trust Honored as a Finalist for ‘Multi-Family Office Team of the Year’ for the Second Consecutive Year at the 2024 STEP Private Client Awards

Whittier Trust, the oldest multi-family office headquartered on the West Coast, has been named a Top 5 Finalist in the 2024 STEP (Society of Trust and Estate Practitioners) Private Client Awards in the category of

Multi-Family Office Team of the Year for the second year in a row. This recognition is a testament to Whittier Trust's commitment to prioritizing clients' needs, goals, and legacies and providing the utmost professional service in wealth advising.

"It's a true honor to be recognized by STEP for a consecutive year," said David Dahl, CEO at Whittier Trust. "Relationships are everything in family office services, and we would not serve our clients as faithfully as we do without the exceptional and tireless work of our energetic, passionate, and dedicated team of professionals. They think like true entrepreneurs, deliver exceptional service and investment results, and take the time to get to know our clients. We take pride in often being our client's second call (after their spouses) in times of both triumph and challenge, and we will continue evolving as a company to meet our clients' changing needs."

The STEP Private Client Awards celebrate firms' and professionals' achievements and outstanding performance worldwide. With a record number of entries, Whittier Trust's nomination as a finalist in the Multi-Family Office Team of the Year category for a second year further solidifies its position as a leader in delivering exceptional service to clients. It highlights the company's expertise in serving multi-generational families with complex wealth management needs.

Whittier Trust is dedicated to providing personalized and tailored wealth management services and is proud to be recognized among the Multi-Family Office Team of the Year category. The nomination serves as a testament to its culture of internal promotion, mentorship, open communication, professional growth, and dedication to clients by meeting their everyday needs.

The recognition from STEP comes on the heels of unprecedented growth from the company, having opened three new offices in the last three years, and relocating the company's headquarters to a larger office in Pasadena, CA, to better serve an expanding client base locally. Several Whittier Trust offices were also recently recognized as top places to work by the Puget Sound, Orange County, and Los Angeles Business Journals.

A panel of judges will decide upon a winner for each category. The honorees will be announced at the black-tie dinner and awards ceremony, hosted by Susie Dent, writer and broadcaster, on Sept. 19 at the London Hilton on Park Lane.

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

 

 

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Jul 12th

Estate Planning for Trusts with Real Estate Assets

Future generations can gain the full benefit of your business legacy with a seamless transition to a successor trustee. 

Investors with significant real estate portfolios often have an enterprising spirit to grow net worth through real estate, and succession planning may be difficult for this type of successful wealth builder. Many are reluctant to relinquish control to a successor, and some never do—until it’s too late. 

“You shouldn’t wait to pass down practical knowledge of real estate assets in your trust,” advises Whittier’s Chuck Adams, Executive Vice President, Real Estate. “Whether your successor is going to be a family member, corporate fiduciary, or both, everyone needs to understand your business strategy and history. Even in a business with perfectly maintained files, much of the valuable information regarding ownership and operation of properties can be lost when the family’s wealth creator dies or is incapacitated.”

Partners in Planning

Preparation is imperative to an organized and efficient transfer of family assets, particularly for real estate owners who have been actively involved in property acquisitions, development, and management. Although there’s no blueprint for passing down that kind of hands-on knowledge, working with a corporate trustee can facilitate the transition and ensure that your estate plan will be carried out as intended. This is especially helpful if family members have no interest or aptitude to learn the ins and outs of the business, or if they are overwhelmed at the prospect of inheriting a multi-property portfolio. 

“Bringing on a corporate fiduciary who understands the asset class prior to the transfer of holdings can reduce stress and confusion among family members,” says Adams. “We work with the wealth creator to gain valuable knowledge of their portfolio, along with any family dynamics or issues, then create a comprehensive plan documenting their intent for both the assets and the beneficiaries.”

Facilitating the Transfer

Assuming your heirs are likely to keep any or all the property you plan to leave them, even for a short period of time, it is important to share your business history and strategy. Here are five steps Adams recommends:

  1. Provide any successors the opportunity to earn your trust by learning about the real estate, along with your values and goals, to ensure continuity in how the portfolio is managed.

  2. Map out your portfolio's composition—locations, property types, and challenges—so successor trustees are ready to make informed decisions and can begin to assess, for example, the asset’s potential for development or sale or measures they should take to maintain value and avoid costly surprises.

  3. Introduce successors to the property management team, leasing agents, and other important partners.

  4. Minimize misunderstanding and potential disputes among beneficiaries by delivering and modeling clear communication about ownership, expectations, and long-term vision.

  5. Foster confidence in the next generation by involving them in asset management discussions and helping them understand the complexities of the unique assets, which will continue to provide family wealth.

Sharing your knowledge will empower your heirs to become responsible stewards of your legacy, and partnering with an experienced corporate fiduciary with significant real estate expertise will ease your mind through this process. The partnership can provide security for family members as the wealth creator’s role evolves, helping to ensure the family’s personal and financial prosperity in the future.  

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For more information about real estate assets within estate planning, 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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Jul 10th

Keys for Maximizing After-Tax Returns: 4 Strategic Elements for Income Generation

In a world full of financial uncertainties, tax-sensitivity is one aspect of investing that you can control. At Whittier Trust, we have been laser-focused on after-tax returns—the dollars you keep—since the early 1980s. That focus has become a key differentiator and one of the many reasons clients tend to stay with Whittier from one generation to the next. 

Most of the investment industry continues to focus on pre-tax returns, an approach that is woefully inadequate for taxable investors, especially in locations that combine state taxes with Federal tax rates to tax portfolio returns at 50% or more.  

We’ve found that there are four elements that allow investors to unlock superior after-tax returns: asset location, time horizon, structure, and a total return approach for income generation. Here’s why. 

Asset Location

The first key to consider is asset location. Not to be confused with asset allocation, asset location is the most impactful tactic in maximizing after-tax returns. Assets that are tax-inefficient, such as corporate bonds, private debt, or high turnover strategies, should be placed in tax-deferred accounts where they can generate high returns while compounding tax-free. On the other hand, assets that are tax-efficient, such as high-quality low-turnover stocks, low-dividend equities with long-term growth opportunities, and tax-favored bonds like municipal bonds or preferreds should be held in taxable investment accounts where compounding can still occur tax-efficiently. For our clients, the Whittier team is laser-focused on maintaining the optimal mix of assets and the right asset locations to maximize ROI. 

Time Horizon

The second key is the time horizon. Patience is a tax saver. The longer assets are held, the greater the ability to compound returns with minimal tax friction. It is important to let time be your ally. One of the easiest time horizon tax enhancements is to factor in the difference between short-term and long-term capital gains. Over long-term time horizons, the difference between a tax-sensitive investment management style and a tax-agnostic style is stunning. Patient, long-term investors can generate significantly higher after-tax returns than impatient short-term investors without regard to taxes. Having an advisor and portfolio manager who advocates this approach can help temper knee-jerk reactions to market fluctuations and help encourage patience along the way. 

Structure

The third key is structure. Structure pertains not only to the entity the investment is formed in, but also the structure of the investment itself. A few key items to consider are whether the entity is an LLC, a Limited Partnership, or a Trust that owns the asset, or whether the asset itself is taxable as ordinary income. The investment may have tax benefits from the structure such as depreciation offsets or preferred returns rather than phantom income. The structure of the investment can be the difference maker when taxes are due. Having tax specialists and attorneys as part of our team at Whittier is key, as we’re always optimizing our clients’ structure in light of changing laws and regulations. 

Total Return Approach

Finally, using a Total Return Approach to enhance after-tax wealth. Generating income in a tax-efficient manner will allow for sustainable withdrawals of the portfolio while it continues to grow after taxes and inflation. The adage that more wealth has been lost chasing yield than at a barrel of a gun, holds even more true today than ever before. Legendary investor Warren Buffett never paid a dividend from Berkshire Hathaway, yet the compounding of the company’s stock has more than covered the lifestyle of his early investors. The market has many investments with yields that seem enticing but are not commensurate with the risk incurred. Remember that some companies pay out significant dividends because they have no better reinvestment opportunities.   

In today’s world, where every dollar retained counts, embracing a tax-conscious strategy becomes essential for building a resilient and prosperous investment portfolio.

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Written by Caleb Silsby, Executive Vice President, Chief Portfolio Manager at Whittier Trust. To learn more about maximizing after-tax returns, 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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Jun 27th

Don’t Forget Fido: How to Help Clients Include Pet Care in Estate Plans

Financial planners are charged with protecting the things that matter most to their clients — and those things often include pets.

June is National Pet Preparedness Month, a time for making sure pets are incorporated into emergency plans. It presents a perfect opportunity for advisors and planners to connect with pet-owning clients to help them plan for their beloved pets’ long-term care by incorporating their needs into estate plans.

Below are a few areas to consider and questions to ask to help your clients ensure their pets are cared for after they’re gone.

The importance of pre-planning for pets

Estate plans usually provide for family members, but, incredibly, most of them fail to mention those with fur or feathers. Everplans reports that only 9% of people with a will include provisions for their cats, dogs, horses or exotic birds.

To help a client remember their pet during estate planning, ask toward the beginning of the process: “What can we do now to ensure the best outcome for your pets after you’re gone?”

Determine a pet caregiver — and cover their future costs

Once the conversation is started, the key question is: “Who have you identified as a potential caregiver for your pet, if you were no longer able to care for them?”

For clients who already have a caregiver in mind, advise them to confirm that the caregiver has agreed to accept this responsibility. It’s a big one, and even close friends may be reluctant to take it on.

Once the client has a willing caregiver, advisors should then craft a letter with instructions to guide the caregiver. The letter should include information about the pet’s medical history and conditions, prescription medications and dosage, veterinary contact, special dietary restrictions, habits, etc.

Finally, ensure your client’s chosen caregiver will have enough financial resources to care for the pet (or pets). This can be accomplished either via an outright bequest to the caregiver for this purpose, or by arranging a pet trust. Which option to choose will often depend on the client’s tolerance for complexity and the circumstances of the chosen pet caregiver. Some clients may prefer a pet trust because it helps ensure pets are taken care of and financially secure — even if the selected caregiver falls on hard times, becomes ill, or passes before the pet does.

If the client has no designated pet caregiver, they can instead name a trusted animal shelter or other nonprofit to receive the pet, along with a monetary bequest to cover the care costs until the pet can be re-homed. Larger and/or more unusual pets may require additional legwork upfront. For example, clients with horses may need to contact a ranch or stable to ensure a willingness to accept and board them for the remainder of their life.

Pet-specific financial planning

Once it is determined who will take care of your client’s pets after the client’s death, then you can ask: “Can you estimate how much money needs to be allocated to ensure your pet’s well-being?”

This discussion is significant, as pets can be expensive.

Most pets haven’t amassed their own fortunes (apparently, Taylor Swift’s cat boasts a net worth of $97 million), and providing for their daily care falls squarely on their caretakers’ shoulders. According to the American Pet Products Association, in 2022 Americans spent $136.8 billion on their pets, up nearly 11% from 2021.

Encourage your client to catalog what they spend annually on their pet. The list should include food, grooming, vet bills, walking services, toys and medications, as well as things like dental cleanings, boarding for vacations and even plane tickets. Once you have that number, the estate plan can specify a formula for funding a pet trust or for a bequest amount: e.g., the annual expense amount multiplied by the animal’s life expectancy at the time the owner passes.

Most people who own pets consider them to be integral members of the family. Though advisors can use National Pet Preparedness Month as a reminder to clients to not to overlook pets in the estate planning process, this same reminder can be made at any time of the year. Incorporating pets into estate plans ensures their continued care and well-being and provides clients with peace of mind, knowing that their beloved animal companions will always be protected, no matter what the future holds.

Written for FinancialPlanning.com.

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Written by Pegine Grayson, JD, CAP, Senior Vice President, Director of Philanthropic Services with Whittier Trust. For more information on estate planning or to start a conversation with a Whittier Trust advisor today, visit our contact page.

 

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

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Jun 24th

Putting Your Trust in Nevada

You don't have to live in the Silver State to benefit from its trust tax advantages.

As a lifelong resident of Nevada, I've welcomed countless new neighbors from California who have discovered the many benefits of my state. Of course, I'm not just talking about fresh powder on the slopes of Lake Tahoe. The absence of state income tax in Nevada regularly brings high-net-worth individuals to our state, as do our numerous tax-friendly laws for trusts and wealth preservation. 

But you don't have to reside in Nevada to take advantage of some of these benefits. At the Whittier Trust Company of Nevada, many of our clients live in California, but we serve as their trustee—because what matters is the state in which your trust is administered.

Advantages of Irrevocable Trusts

This geographical choice has the greatest implications when it comes to the benefits incurred through an irrevocable trust. Most people are familiar with revocable, or living, trusts, which are relatively simple to set up and can be modified at any time, changing beneficiaries and managing the assets within the trust as you like. Why, then, would anyone opt for an irrevocable trust, which can't be modified without legal action? 

The answer is that an irrevocable trust offers greater protection and tax benefits. It effectively removes your taxable estate assets, freeing them from estate tax after you pass. It also shields your assets from creditors in the event you are sued. This safeguard can be particularly important for attorneys, doctors, and other professionals at high risk of lawsuits. 

Because of these significant protections, irrevocable trusts can be difficult to set up. Our Whittier team includes qualified fiduciaries and expert investment advisors to help clients weigh all options. We consider not only state taxes but also other laws, such as privacy issues in regard to public record laws for trusts in different states. We take the time needed to understand each client's lifestyle and long-term goals, applying those objectives to the purpose and implications of the trust.

Nevada 1-2-3

Once a client has decided that an irrevocable trust is the best fit, we often suggest that we administer that trust from Nevada because of the three key benefits: no state income tax, no state estate tax, and no state inheritance tax. In short, you can accumulate wealth in Nevada and pass it to future generations with minimal taxation. In California, any income from your trust could be subject to state taxes. If, for example, you have a $10 million trust in California and it generates $500,000 in annual income, you could lose upwards of $100,000 per year to taxes. 

Nevada also allows for the appointment of a trust protector, in addition to a trustee, who can modify your trust terms if your circumstances change. What's more, in Nevada, you can start planning for 25th-century relatives because 365 years is the limit of the "dynasty trusts" offered in our state.

Foreseeing Complications

Estate and trust rules differ significantly from state to state, and it quickly gets complicated. Some states require that a trustee or beneficiary be a state resident, while others tax any trust set up by a resident of that state, no matter where the trustees or beneficiaries live. 

As much as I love California, I can't help but use their far-reaching tax laws for comparison (you pay a price to live in paradise!). If you set up your trust in Nevada or some other tax-friendly state, California may try to claim taxes if you use California employees to administer the trust. If a trustee dies and the successor trustee lives in California, the trust is now at risk of getting taxed in California. The bottom line is that it is best to work with your professional advisors to eliminate the possibility of exposing your trust to the long arm of the California Franchise Tax Board. 

Tax law is ever-changing as well. For example, beginning in 2024, California was able to tax trusts called Incomplete Non-Grantor Trusts (ING trusts), even when they were managed in Nevada (NINGs), but because we anticipated this change, our team was able to help clients pivot to lessen the impact of the new legislation. 

Few trust companies have more experience negotiating the finer points, financially speaking, of the California-Nevada relationship than Whittier Trust. Whatever state you choose, or even if you choose both—living in California with your trust based in Nevada—Whittier Trust will work to safeguard your family's financial future as we have for multiple generations of clients, protecting your assets and your legacy for beneficiaries for many years to come.

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Written by Keith Fuetsch, Vice President with the Whittier Trust Company of Nevada, a CFP and CTFA, providing financial and fiduciary services for high-net-worth individuals and families. He serves on the boards of the University of Nevada College of Business Alumni Association and the Reno Connection Network. For more information on The Nevada Advantage, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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Jun 13th

Making the Puzzle Fit: Aligning Your Concerns with Your Investment Timeline

Asset allocation is widely regarded as the single most important factor driving portfolio returns. It is grounded in financial theory and historical data but also incorporates the individual circumstances and risk tolerance of each investor. In essence, it is mostly science but does incorporate some art.

Time horizon is one of the most fundamental considerations in determining appropriate asset allocation. Investors with a longer time horizon are better equipped to withstand market downturns and recover from short-term losses. This allows them to invest in asset classes that offer greater long-term returns in exchange for certain risk factors such as interest rates sensitivity, relative illiquidity, and volatility.

Many clients at Whittier, due to their multi-generational level of wealth, inherently have long-term investment horizons. Simultaneously, the Whittier investment team is a proponent of U.S.-listed public equities for their returns, inflation protection, tax efficiency, and liquidity. The combination of our clients’ circumstances and our own investment preferences means that public equities have considerable weight within our growth-oriented investment accounts.

Still, due to their volatility over shorter intervals and their unparalleled price discovery, stocks can inherently invite concern and shift an investor’s attention away from their long-term goals. When it comes to stocks, media outlets, pundits, and even our social networks produce reasons for us to madly switch between euphoria and capitulation. Stock market-driven anxiety becomes particularly acute during bear markets. The more volatile the market is, the more immediate and narrow one’s investment perspective seemingly becomes. 

Daily news and near-term market developments can be fascinating topics, but they are not particularly relevant to someone with a long-term investment horizon. Even the most seasoned investment professionals need to regularly align their concerns with their investment timeline. To do that, there are a series of helpful questions that should be asked on a regular basis:

Over the course of your investment timeline, we’ll ask:  

  • Do you think that GDP will be higher or lower than it is now?
  • Do you think that consumer prices will be higher or lower?
  • Do you think that corporate profits will be higher or lower?
  • Do you think that stocks will be higher or lower?

This list of questions could be longer but the point is obvious. If you are an investor with an intermediate to long-term time horizon then the answer to each of these questions is “higher.” Here are a few facts to prove it:

  • Over the last 100 years, there hasn’t been a single 10-year period where GDP declined.  
  • Over the last 100 years, the U.S. Consumer Price Index has been higher 10 years later 93% of the time.
  • Over the last 100 years, U.S. housing prices increased 97% of the time.
  • In all rolling 10-year periods over the last 100 years, the S&P 500 has delivered positive total returns 95% of the time. It only failed to do so following the Great Depression and the Great Financial Crisis.

Whittier’s investment team goes to great lengths to alleviate the anxiety that stock market volatility can create. We utilize our experience and your input to understand your risk tolerance. We match the duration of your portfolio and your goals. We ensure that our clients’ liquidity needs are comfortably reserved with an appropriate margin of safety. We will be there to answer your questions, address your concerns, and share our best thoughts in any market environment.  

Finally, and perhaps most importantly, we know that asset allocation isn’t static. It evolves through time. As your investment time horizon, liquidity needs, and risk tolerance change, we will adapt accordingly. 

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Written by David R. Ronco, CFA, Senior Vice President, Senior Portfolio Manager at Whittier Trust. For more information, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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