Whittier Trust Co. began life as just a family office, the family was the Whittiers.
Mainer Mericos “Max” Whittier is one of the most successful business pioneers in Southern California history, surely through the 20th century (see separate story, page 100). And as is custom still today, after making his fortune in oil, then residential development, his heirs set up a family office, the first one in Pasadena in 1935.
Based on Max’s track record, one could’ve guessed that Whittier Trust would grow to become the oldest and largest multi-family office headquartered on the West Coast, serving over 400 families and 30 foundations out of six offices, with an all-time high employee base of 175.
The newest and fastest-growing family office in Orange County started with two people in Costa Mesa in 2014, and is now moving its payroll of 17 at the end the month to an office twice the size, 10,000 square feet, in MacArthur Court in Newport Beach.
“Orange County had been on the radar for a while,” said Greg Custer, who runs the local operation after 19 years with the flagship Pasadena office.
Whittier was ready to expand. Sandip Bhagat was ready for a change.
“I wanted a change of pace, a smaller, privately held company,” Whittier’s chief investment officer said. After some 35 years on Wall Street with the likes of CitiGroup and Morgan Stanley, had he heard of Whittier?
“No. We’re the quiet company,” Bhagat said with a hearty laugh.
But he saw they were doing a national search, suggesting they had their sights set “on going higher profile.”
Bhagat arrived about the time the OC office opened. Whitter had $10 billion in assets under management (AUM), “a nice number.”
Four years later it’s got $13 billion AUM, including $2.2 billion in OC.
What’s a Family?
If you’re still not rock-solid on what services a family office provides, you’ve got company.
“People viewed us as just another asset manager for folks looking for someone to manage their wealth,” said Senior Vice President Whit Batchelor.
“People have a hard time understanding what we do.”
Investing is part of what Whittier does. It also provides some specialized or alternative investing, including oil and gas, owing to the family roots. And then there’s trustee services, philanthropy which can include establishing a foundation or charitable trust, and most notably, there’s the “family” part of family office.
“It’s all very complementary,” said Custer. “We could probably get the plumbing fixed for them…that’s far behind financial advice and tax … but that’s the anything for the family.”
Batchelor and Custer opened the OC office, and Executive Vice President Custer gives high credit and praise to Batchelor for the office’s growth. Running an 83-year-old, $13 billion trust is a blue-blood business, but that’s not exclusive to the importance of company culture.
Custer’s office ranked second on this year’s Business Journal list of Best Places to Work among midsize companies. “I’ve yet to tell an employee what time to come into the office,” Custer said. “I want employees to have enough leash and go with it.”
The executives here believe that level of respect extends to clients.
“I give Whittier so much credit,” said Batchelor. “The whole idea here is because we are in intergenerational wealth transfer—we pair the younger generation with that person on our team. It’s that level of service, the white-glove treatment.”
Nevada Divide
Custer thinks the Nevada office, second largest, is also a separator. Nevada has multiple tax advantages over most any state, especially California, such as no state income or inheritance tax among other, more esoteric benefits.
“The Nevada office is going on 25 years, full team, and the office head is a native,” Custer said. “Anyone can structure a vehicle; a local CPA can take advantage of Nevada entities. Smart clients want to work with a trust that knows that side of it.”
The Whittier Trust Co. is half owned by the family, half by employees. As a family office and a private entity, it enjoys some advantages.
“Family offices are more flexible than others; that’s why they are more in vogue,” said Caleb Silsby, chief portfolio manager.
They’re not regulated the same way as, say registered investment advisers. Good luck finding a service akin to Morningstar ranking family offices.
“Wealth preservation is what we do,” Silsby said. “Trying to grow wealth, yes, on an after-tax, after-fee basis. All of our clients are extremely high-paying taxpayers and living off their assets. Nothing we do is ‘what’s most profitable?’”
Custer points to client retention as one of Whittier’s most promotable results.
“99% lifetime client retention is client speak for how well do you do.”
Which isn’t to say there isn’t fierce competition, especially here where wealth is growing, and in many cases, ready to transfer.
“There are more single-family offices in Orange County than you know, hundreds; may not have the office in OC, but there’s a lot of touch points (members of the family living locally),” said Batchelor.
And make no mistake, a trust is heavily regulated, foremost by the California Banking Authority. There are audits, inspectors, stringent compliance, and audited financials.
Silsby touts his year-to-date return as of Aug. 31 on “core strategy investments,” as about four points, better than notable benchmarks, like Warren Buffet’s Berkshire Hathaway, and over 20 years beating the like by about 1%.
But as the old adage goes, wealthy people most want to preserve wealth. The wealth managers here are equally proud of the trust’s results in 2008, when its AUM was flat “while everyone else was sideways. We don’t chase the lastest fad. Fundamental approach,” Custer said.
OC Trending
The growth of the trust in Orange County has only begun, given the huge concentration in real estate wealth “that’s going to turn over … and it’s going to be different. There’ll be a lot more liquid wealth,” Custer said.
That, plus the increasing culture of philanthropy is expected to keep fueling the growth in Orange County, both out of a desire and a need: taxes.
“I say to clients, to the newer family generation, ‘Do you want to write a $90 million check to the IRS or to your charitable foundation or donor-advised fund?’”
You can guess the response that comes back.
