Northern Trust Corp. has weathered a number of storms in its 128 years, including the Panic of 1907, the Great Depression, the Great Recession and the floodwaters of the Chicago River. The company’s headquarters, built in 1906, has stayed bone dry during major flooding because its foundation goes down to the bedrock. That’s also why for nearly 90 years, city engineers have used the building’s cornerstone as a benchmark to measure the height of all other buildings in Chicago.
“What we like about it is this sense of strength and stability, bedrock, core values,” says David Blowers, president of Northern Trust’s wealth management national services and a 35-year veteran of the company. “We’re still the same firm in the same businesses in which we were founded.”
The Northern Trust Company, as it was originally called, was founded as a bank in 1889 by Byron Laflin Smith. On its first day in business it opened seven accounts with $137,981 in total cash deposits (roughly $3.5 million in 2017 dollars). But wealth management was also in the bank’s DNA since its early days. For more than a century, it’s been honing its expertise in special services beyond banking that help clients take care of their families, estates, legacies and businesses.
As of June 30, Northern Trust’s wealth management unit—which now contributes about half the firm’s net income—had $266 billion of assets under management and $603 billion of assets under custody/administration. Northern Trust was named best private bank in the U.S. last year (and most of this decade) by the Financial Times Group’s annual global private banking awards.
“Wealth management is about so much more than stock picking and asset allocation,” says Steve Fradkin, a 32-year Northern Trust veteran and president of its wealth management unit. “When we think about holistic advice, it’s about integrating our clients’ needs across brokerage, banking, investment management, planning, fiduciary and other needs.”
Northern Trust’s scope of services is broader than what most wealth management firms offer. Beyond its traditional advice (such as trust and fiduciary services, estate settlement and guardianship), the firm’s specialists educate wealth creators and their families about how to manage and transition their wealth, and this includes preparing families to be successful inheritors. They also help families develop the right governance structure and philanthropic strategies to meet their goals.
Experts at the firm can also help business owners manage non-financial assets that are tied to niche industries. For example, in the oil, gas and mineral sector, Northern Trust manages 15,000 properties with the help of its in-house staff that includes former industry professionals. In agriculture, another sector that involves many family-owned businesses, Northern Trust manages nearly 2,000 properties, including 170 farms, 330,000 acres of timberland and over $2 billion worth of commercial and residential real estate.
Suzanne Shier, who co-leads Northern Trust’s wealth planning advisory services practice, was surprised by the scope of services at the company when she joined it in 2012. She’d just left behind a 26-year law career in which she’d observed Northern Trust from the outside.
Many other institutions consider these services ancillary and are “not making the same kind of investments in talent and in technology,” she says. Instead, they’re farming it out.
All Hands On Deck
Integrating this wide range of advice—in order to align clients’ business plans, family plans and wealth plans—requires a huge collaborative effort, says Blowers. So in April, he was tapped to lead national services for the wealth management unit. Blowers (who reports to Fradkin and last headed up the eastern region for Northern Trust’s wealth management unit) now oversees members of its banking, advisory and trust, sales, investment management and client support services teams.
Blowers’s national services umbrella is pulling together the firm’s existing wealth management resources “in a way that we haven’t before,” he says. “The real gestalt, the ‘one plus one equals three’ opportunity in this, is just to more effectively communicate across our own internal boundaries and areas.”
It’s already helping. When he recently assembled about 60 members of his team (his direct reports and all of their direct reports), he says, “Somebody said, ‘I learned stuff in that meeting that I didn’t even know we did.’”
There’s never been a more critical time to get all hands on deck in a highly organized fashion. Clients need even more help now with money management and estate planning, says Fradkin. “In the old days it was 60/40 or 40/60 in [stock and bond] asset allocation; today it’s more complex.”
To be sure, clients’ lives have gotten more complex. Northern Trust has observed some common themes. Millennials and the older generations need more help communicating with each other. Families and their wealth have also become highly mobile in an increasingly global world.
At a time when some firms are intentionally exiting the international space because of its complexities, says Shier, Northern Trust is getting more entrenched. The rise in the number of foreigners studying, investing and buying real estate in the U.S. has stepped up the need for advice that crosses borders, she says. For example, she notes there are special considerations in planning a wealth transfer when one spouse isn’t a U.S. citizen.
Dave Fox, who heads the firm’s global family and private investment offices practice, says the majority of Northern Trust’s family office clients are U.S.-based but many have become multi-jurisdictional. To better serve them, Fox, who ran a conference titled “Families Without Borders,” says his group has boots on the ground in London and Abu Dhabi and also services family offices out of Asia.
Fradkin adds that Northern Trust often serves family offices on an à la carte basis because ultra-high-net-worth families tend to have assets all over the globe. Typically, there is a “tipping point where people say they need to get things together,” he says, or at least get custody, reporting and other analytics centralized. It’s usually driven by some event—when somebody sells a business, gets married or has kids.
Collecting Clients
According to Fradkin, Northern Trust’s wealth management clients include about 20% of the Forbes 400. In a typical year, more than half of new Northern Trust clients have investable assets exceeding $10 million. The firm still serves many of Chicago’s large iconic families, although it won’t name names. But the majority of its clients are newly created wealth so, he says, “We get a catbird’s seat on wealth creation in America.”