Northern trust aims to put families first

While universal banking groups battle for market share of private client business in Europe, generally based on investment product offerings, US bank Northern Trust is trying to carve a niche for itself by promoting a family-oriented financial services culture. One of the latest initiatives from the group, originating in the US city of Chicago, is the Global Wealth Alliance, which brings together the bank’s clients and gets them talking about investment, succession and family strategy issues. The feedback from these meetings, generally hosting around 20 executives from family offices, plus “ultra, ultra high net worth clients,” is that families want to take more responsibility for their finances, rather than bow down to the wishes of private bankers. Northern Trust is therefore happy to provide clients with the core custody and trading platform, while family members can enjoy a much greater say in how they run their assets. “The little old family office can in fact be more adventurous than the institutional pension fund,” confirms Aïda Molineux, Northern Trust’s head of wealth management for the Emea region, who spends many hours each week listening to the concerns of her wealthiest clients. “They can make a decision quicker, with less delay due to a governance process or asset liability matching study, and can go into alternatives quicker in terms of asset allocation.” Family offices have been able to get out of dangerous allocations more nimbly than some institutions, which need to wait for and organise trustee meetings, she adds. Currently, Ms Molineux sees a growing interest in investing in real assets. “Over the last 18 months or so, everybody’s world got jolted and people want to go back to basics,” she says. This may mean investing in businesses directly, not necessarily through the private equity route and necessitates effective due diligence, with clients keen to “get closer to where the money is going”. This trend of assuming greater personal control over investments was also influenced by the Madoff-led events, where clients were never actually sure about the location of their money. “We hear about families flying off to China to do their own due diligence in those markets,” says Ms Molineux. “There is one particular family we work with, whose members are very conscientious about where their assets are going. Not every member of the family is involved, but somebody will always go to make sure they are happy with a direct investment in real estate or that they meet personally with the manager of a fund.” There is no doubt that Northern Trust is committed to managing the assets of wealthy families, and in Ms Molineux they have somebody who has genuine empathy with clients and their needs. But it is also convenient for the US firm to leverage its US institutional business in Europe, with a slightly different focus. Northern Trust is custodian to approximately $200bn (€147bn) of family money worldwide, and asset manager to $32bn invested by 400 families. Because families typically have international interests, the group is reluctant to split this down any further regionally, but PWM estimates that Ms Molineux looks after invested assets of between $10bn and $15bn in the Emea region, with the Middle East providing a strong component. “Families in the Middle East typically want to manage the money themselves, and we are seeing a number of financial family offices setting up in the region,” she says. “When they are managing family assets, they generally don’t have the back office platform which a bank like us might have. We can do the investment operations and custody for them. They will focus on the investing and we will focus on trades, post-execution and the rest of the plumbing.” This combination of institutional and personal services was dreamt up four years ago, when the bank decided it had a strong technology based reporting system used for US pension plans, which was not running to full capacity. “We looked at the institutional platform, talked to family office clients and showed them what we had,” says Ms Molineux, whose team then installed the re-modelled system in clients’ offices for a short testing period. “We ended up with a front-facing version of the technology for family offices.” Her experience has been that families have become empowered by their newly gained financial knowledge, backed by support from the bank’s investment teams when needed. She is particularly inspired by some of the family ‘offsite’ meetings her clients hold. “It might sound like an excuse for a party, but it serves a great purpose. The family sits down and looks at what they are doing to preserve their wealth. This is a perfect forum for them to communicate.”

Aïda Molineux, Northern Trust