Northern Trust: Data delivery and how rich am I online capability for $75million clients and above

Date: 17 Nov 2006


If information in the general wealth world is to be believed 99% of those in the developed world aspire to be a millionaire (you and me) whilst 1% want to be a trillionaire.

The trillionaire goal seekers are those with several billion in assets like jets, yachts and oil businesses who snap up mansions in London at the drop of a hat and jet the world to spa in Monaco, sunbathe in Necker Island and shop in Paris.

But being rich is not all splashing cash and playboy mansion parties. Its not whizzing around in blacked out windowed cars and dripping with bling.

Having wealth is a difficult business, as many a lottery winner will tell you. Most spend winnings in five years and are back to scrabbling around to find a pound or dollar to try again and many who launch businesses do well at the start but can easily lose their footing and end up with nothing. Then you have booms which are very good at dwindling the fortunes of the super rich to a half or a third in a bat of a market eyelid.

Northern Trust first started their institutional business in Europe. The Barings acquisition prove a catalyst to kick start their wealth management capability in Europe although it wasn’t acquired for that reason

On top of this, you have the

transfer of wealth. Even Hugh Heffner will be advised to carefully manage the hand over of wealth to children or relatives in a drip drip way to avoid gold diggers and hangers on (well perhaps not Hugh Heffner).

There is much information in the market which says “rich kids” must attend financial training camps to learn how to handle extreme wealth and that some family offices who typically manage the wealth of just one super rich multi billionaire family are a bit crap.

Much of everything I have written so far is urban myth or based on just a few ideas that the public and the wealth industry latch onto.

The reality is that although we all want to be rich, when you get there it means hiring an army of managers and advisers, making global business decisions, handling thousands of charitable enquiries, running large philanthropy entities, living in countries for only exact amounts of time to save heavy tax bills (not tax avoidance but

being taxed sensibly), managing the risk of your assets like art, jets, boats and keeping a track on where your children live for inheritance reasons.

You have to consider cultural issues. If you are a wealthy Arab and want to live in London. You have to make a will or your own laws will be superceded by another countries. If you want to get divorced, you have to file first to get a favourable court to listen to your case or risk cutting your fortune in half even on a short marriage.

Life is basically waiting to take your money away from you. Being rich is not simple, you need professional, hand holding and some strong headache pills.

Interviewing the head of Wealth Management Services at Northern Trust we agree that information is scant for the wealthy. There is a lot of brochure style information, there are organizations like FOX (family office exchange) but then its really word of

mouth after that. Wealth is growing, and by all accounts there is more wealth than wealth managers to handle it and little or no freely available advice to assist.

But its not all doom n’ gloom. Wealth means investment in the best educations. Privately owned business must compete to make profit and many do so very successfully. Wealth brings with it a global knowledge base that allows some ultra-ultra high net worths to be at the forefront of sophistication and corporate governance.

Technology and web use is also growing and some organizations are positioning themselves to harness this sophisticated, technologically brilliant, multi billionaire who may have trillionaire status in her or her sights.

Northern Trust is one of these organizations and is a Chicago HQ’d operation that

arrived on European shores about five years ago. A heavyweight in custody and private wealth in the USA, they’ve been developing some of their own products; hired and acquired and are putting in infrastructure now to attract an ultra-ultra high net worth or very-ultra high net worth client.

The are pitching their services at those with $75million and above but Nick Ring, the Head of Wealth Management Services EMEA says “our clients usually have around half a billion or more.”

Northern Trust was started in the 1880’s by the Smith family who needed to handle their own wealth. The company was soon managing the money of super rich cattle barons and has not looked back since.

Nick has been with Northern Trust (NT) for seven years and took up his important new role in January this year. His remit is to drive strategy and product

innovation whilst supporting the sales function and business development. A lawyer by education (Reading Uni’) his experience has spanned Gartmore, KPMG and Prudential. His particular expertise in the past focused on post acquisition integration which NT felt was important to have in this role. Companies like Barings trust and the Deutsche quant’ business have since been acquired and blended into the NT business.

When Nick was hired all those years ago, NT in Europe had $1billion dollars under management, about seven staff and offices in Devonshire Square by Liverpool Street in London. He enjoyed working in the asset management space and was excited by the challenge to get-in-early as NT expanded its financial might onto Euro shores. With just two products on their books an offshore AAA rated cash fund and manager of manager fund, it was his job

to build the business.

By 2005 NT Europe had grown from ten to fifty people; assets have grown from $1b to $20b with a full service operation offering quant, equity, fixed income and enhanced indexation products. I marvelled at his energy and Nick agrees “it takes a lot of commitment.”

Pensions custody was what NT established in Europe first and this triggered a hunt for a purchase to service the increasing demand for clients wanting hedge fund and private equity fund administration. As funds grew, keeping admin separately and safe became ever important to NT clients. It became obvious that this expertise was needed and the acquisition of Barings to buy their well established hedge fund and Private Equity admin business was made.

On analysis of the Barings business, Nick says they realized that they also had a London, Guernsey and Isle of Man trust business and a bank in Guernsey.

It didn’t take long for the cogs to start turning. Barings unwittingly prove to be the catalyst for the full launch of Wealth Management Services in Europe.

On to the sticky question of redundancies.

Nick says categorically that there have been no redundancies at all except for in the Guernsey administration operation because of duplication.

The wealth side has had natural departures but NT are not culling.

And assets leaving?

Nick acknowledges that some assets have been courted and won from their trust business but says pragmatically “that is the nature of the beast, when people leave we have to expect some drift.” He adds “most competitors want the investment management work; we plan a more holistic less bundled approach which we are preparing to bring to market now.”

Data and technology are

going to be two of the tools used to attract multi million and billionaire clients who feel they are on a money management treadmill. With a sophisticated online offering, ultra-ultra high net worth clients or those worth $75 million and above can now see how rich they are in real-time.

NT will have all assets lodged on an online service with full valuations of things like jets, cars, art, property and yachts along with usual financial investment products so that at any time, a client can say “this is my net worth, right now.” Where this is good for the wealth market is for those who provide valuations. NT works with whomever their client recommends and just brings the report in house and online. Market fluctuations are discussed with clients and portfolios adjusted at regular intervals to allow for ups and downs.

Nick says “NT’s ability to capture data and to aggregate and provide risk analysis is a main drive.”

He adds “we support family offices aswell. Most of our clients have a family office structure and that’s a key proposition for us. We can make handling twenty or more investment managers a simpler job. We know from our success in this area that this will continue to do very well. Reports indicate that the US family office phenomenon is coming to Europe.” Other trends identified are “continuing momentum in private equity, property and hedge funds.”

I wonder if it all isn’t a bit expensive for the smaller clients, Northern Trust have one of those mega office buildings in Canary Wharf which must cost a bit to maintain. In addition most intermediaries don’t recommend that super high net worths with less than ¬£250 million set up a family office structure because of the fees. Nick says “we’ve worked out scalability without dumbing down. Every family is individually assessed and

we don’t use a one model fits all approach. We charge individual transaction fees and then a percent on assets but its significantly less cost than investment management. At the end of the day we already have a platform that supports $2 trillion in assets to utilize.”

He comments further “Many clients get overwhelmed when their assets grow and at $2 billion it just makes sense to gravitate to our services.”

He adds “We ask intermediaries in the market to look to us for our admin platform which provides a single repository for the management of wealth. With our data and online tools, clients get real time knowledge that helps them simply manage risk and tells them ‚Äòyou are worth this.’ “

He ends “A client can be sitting on the beach and click into our web portal and work out how rich they are.”

Northern Trust

+44 (0)20 7982 3360

General info

Northern Trust was set up the Smith family in Chicago to support cattle barons in the 1880’s. They also own the Illinois tool works company.

If you are inLondon’s Mayfair usethe Janet Ginnings hair and beauty salon and join the likes of Caprice, Sadie Frost and your very own Citywealth Editor, Karen Jones atthe salon.

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