Providing solutions to generation X

Returning to his hometown of Chicago after seven years in London, Steve Potter, the new president of Northern Trust Global Investments (NTGI), the $760bn (€490bn) multi-asset manager of Northern Trust, offers mixed emotions.

“I’m proud to be going back to Chicago – renowned for innovation in financial markets and its global outlook – but it’s been a good time for London and the company since 2001,” he says.

He’s got a point. When Mr Potter took the role as head of NTGI’s Emea business at the start of the decade, assets under management out of the UK office weren’t anyway near the $90bn of today, and there were far fewer than the 1500 staff currently working at the London base. “The city has leveraged its global capability and seen the dynamic emergence of structured products, private equity, and derivatives since my time here. It’s now the doorstep to the emerging markets.”

For example, the company’s liability-driven investment (LDI) suite of products was developed out of London and has since gone on to capture significant institutional money globally, not just in Europe. He says: “I would even go on to say that NTGI’s Emea hub has the potential to manage $800bn by 2018, so equivalent to Northern’s total assets worldwide today.”

Back in Chicago, his attentions have for the moment switched to the Forbes 400 list and high net worth individuals in the US, where he believes there is enormous potential still on offer for Northern Trust’s $40bn wealth management business.

A Northern Trust survey this year of 1000 ‘Generation X’ individuals in the multi-million bracket showed an impressive knowledge, awareness, and importantly from a servicing perspective, interest in exchange traded funds (ETFs), structured products and socially responsible investments. Over half of respondents held ETFs and over 40 per cent invested in structured solutions and SRI funds.

Described by Northern Trust CEO Rick Waddell as a “breakout initiative for us”, the launch last month of six ETF products for retail distribution, which saw Mr Potter ring the opening bell at the NYSE, is a first for NTGI but unlikely to be its last. “We have registered several other ETFs to be launched in the coming months,” he says, with US wealth offices, retail and institutional investors the target audience and with exposure to indices including the Hang Seng and the FTSE 100.

Mr Potter is also excited about what he calls “our major product concept of the year” – a broad open architecture model for the wealth management group. Increasingly, as the company revealed in its Generation X survey, exotic and esoteric products are being sought by young HNWs in both the US and Europe. “We are looking to leverage on a global basis, solutions for family offices that perhaps were only suited to big institutions and money managers in the past,” he says.

Assets under management rose 9 per cent last year for the global investment business and Mr Potter is confident this rate of growth can be matched and possibly bettered in the next five years, so naturally the parameters of his wealth management objectives don’t end at the US borders.

Though Northern’s wealth management business houses a large share of US clients that have $100m or more of investable assets, including 20 per cent of the Forbes 400 in the US, family offices in Europe are starting to reap the benefit of having access to a larger distribution network of structured products.

Mr Potter has also called for the same “strong stewardship of assets, governance and ‘institutional’ style of asset allocation and manager selection” that NTGI clients receive, to be applicable to wealth houses too. “We are building and hiring alpha boutique style managers in this respect, giving clients exposure to the higher risk components of equity managers.”

Northern’s conservative business model, independence, and the perception that it is a ‘safe haven’ player mean it is well-placed to withstand ongoing dislocation in the financial markets. “We do proportionally better in down markets because of our set up. Our business model is focused on risk management and the delivery of information to clients and our investment products do what they say they do on the tin.”

Steve Potter, NTGI