Over the last five years, family offices have been the fastest-growing client trajectory in Northern Trust’s wealth management unit, says Fox. The global family offices group serves about 450 families, with an average net worth of approximately $850 million, and is adding 20 to 25 new families a year. Most clients form great wealth by owning and operating their own business, he says.
Fox arrived at Northern Trust in 2012 after more than 30 years at JPMorgan Chase & Co., where he was most recently vice chairman of investment banking. As an investment banker, “You tend to ask a lot of questions and you lead with advice,” he says. The same goes with Northern Trust clients. “We don’t batter them with product,” he says.
His group, which incubates new clients before they have a big liquidity event, interviews families to determine their pain points and how to help them. “If you’ve met one family office, you’ve met one family office,” he says. “They’re like snowflakes.”
Fox’s group also refers a lot of clients for family education and governance services where family members can learn to work together to achieve their goals. “We develop all that connectivity for them so they can maintain that sustainable family office and travel through time with multi-generations,” he says.
Blowers says Northern Trust is also starting to focus more on the lower end of its target market for wealth management clients (those with $1 million to $5 million in investable assets) because the demographics are strong. Across the U.S., 6.5 million households have $1 million or more in investable assets, he says, while 218,000 households have $10 million or more in investable assets.
He also sees more opportunities for the firm’s foundations and institutional advisors group (which he says essentially acts as an outsourced CIO for small foundations with $10 million to $200 million in assets) because there are nearly 10,000 foundations of this size across the U.S.
Northern Trust seeks to deepen and broaden its relationships with existing clients, who are its best sales helpers, he says. The firm has also become much more “deliberate and aggressive,” he says, in elevating its brand. After nine years of sponsoring the Northern Trust Open in Los Angeles, it moved on this year and, replacing Barclays, signed a five-year agreement as the title sponsor of the PGA Tour’s FedExCup playoffs tournament held in the New York metro area. The tournament was first played under its new moniker, “The Northern Trust,” in August.
“New York is the greatest wealth market in the world,” says Blowers. “We’re not as well known there as we should be, as we will be and as we obviously aspire to be.” Of course, “the wealth demographics of golf are unbelievable,” he adds.
Soothing Nerves
Recently, Northern Trust’s wealth management clients have been asking a lot of questions about the future of the estate tax, anticipated income tax rates and the possibility of retroactively repealing the 3.8% net investment income tax that’s tied to the Affordable Care Act, says Shier.
“We can’t make the unknown known for them,” she says, “but we can help them consider what the implications will be” under the possible tax reform scenarios and their personal circumstances.
Last year, Northern Trust’s wealth planning group was brought in to work on dedicated projects for more than 1,000 client issues. (That figure doesn’t reflect a lot of more spontaneous interactions, she says.)
For example, one Northern Trust client called up in a panic to say her family would be losing its health insurance benefits after the sale of its business—something no one had anticipated. Shier found a health consultant to work with the family and is now giving a lot of thought to the convergence of wealth transfer and health benefits.
Another thing she and her colleagues say differentiates Northern Trust from other firms is the customized retreats they develop and conduct for families and branches of families. The retreats focus on clients’ specific challenges, such as educating the next generation to be more financially responsible or revamping philanthropic goals.
Marguerite Griffin directs Northern Trust’s philanthropic advisory services, which she launched a decade ago to help the firm’s clients think about tax-advantaged charitable entities, to think about how to incorporate charity into their overall wealth transfer planning and to think about how to engage their children.
While she has always helped manage transitions between generations, lately she’s been meeting more often with young people “who are trying to get their voices heard,” she says. “They need a translator.” Griffin, an attorney, has also been having a lot more conversations with clients about impact investing.
In any given year, her office may work with more than 100 clients “in a significant way,” she says, referring to clients who make six- or seven-figure gifts or establish a permanent giving vehicle, such as a foundation.
If a family is new to charitable giving and philanthropy, Griffin consults with them for 12 to 18 months because she likes to take them through a full cycle of grant-making before allowing them to experience and experiment on their own. The grant making cycle includes identifying and vetting charities that fit one’s mission statement, and approving and monitoring grants. She also helps clients negotiate grant agreements. Other clients may choose to have an account with Northern Trust’s donor-advised fund.
Finally, no profile on Northern Trust would be complete without mentioning the firm’s pioneering role in the goals-driven investing process. This was an outgrowth of lessons learned during the 2008 financial crisis.
Investors panicked then because they didn’t know if they’d have enough money to meet their goals or what their safety buffer was, says Katie Nixon, chief investment officer for the wealth management business at Northern Trust. “Everything became sort of this fungible bucket of assets, and when they saw it all going down at once,” she says, “many investors ran for the hills at exactly the wrong time.”
The firm’s goals-driven investing method involves technology that enables advisors to put a price tag on a client’s financial goals, such as college and a sustainable lifestyle. Clients can see it and “it has been the most amazing confidence builder,” says Nixon, who joined Northern Trust in 2004. In addition, “We are getting to know our clients in so much depth,” she says. “We are hearing about their hopes, their dreams, their grandchildren.” Spouses are also having more meaningful conversations with each other.
With the goals-driven process, every asset is placed in a client’s portfolio to very purposely fund goals that are reviewed every year. “It’s not just a 60-40 portfolio set and forget,” she says.
Nor will Northern Trust let its wealth management clients forget that “with great wealth comes great responsibility,” says Fox. That is, if they want to keep it.