Northern Trust wants to duplicate its huge success in the US high net worth market in Europe and has appointed a new head of wealth manageme...

Northern Trust wants to duplicate its huge success in the US high net worth market in Europe and has appointed a new head of wealth management services for Europe to implement its vision. WealthBriefing spoke to the new head of the European wealth management group, Nick Ring, about Northern Trust’s strategy for Europe and why he believes it is the right one. The appointment of a head of wealth management services for Europe is a major strategic move for Northern Trust, building on its existing wealth management capabilities in Europe, and part of its long-term strategy to further the development of a private wealth business outside of the US. Crucial to its strategy is for the corporation to go for the ultra-high net worth market and the multi-family office business – Northern Trust has widespread experience in both wealth segments. The Chicago-based financial services firm has plenty of clout behind it. Worldwide Northern Trust’s wealth management group had assets under custody of at least US$109 billion (E €90 billion) and wealth assets under management of approximately US$21 billion (E €17 billion) as at 30 September 2005. It services 338 families worldwide and this includes around a quarter of the Forbes Top 400 wealthiest families. When it comes to private wealth management in the US, Northern Trust is one of the most recognisable brands – but its brand is much less known in Europe. The acquisition of Baring Asset Management's Financial Services Group from ING Group in early 2005 was part of the strategy to continue to build the Northern Trust brand outside of the US and into Europe and add capabilities. This acquisition gave the wealth manager critical mass in the UK and added new capabilities and expertise in the form of offshore and onshore trust, and offshore private banking services. Combined with Northern Trust’s existing capabilities and expertise, these new services form an even stronger platform from which to continue to develop the business whilst adding considerable value to wealth segment clients, according to Mr Ring. “When considering whether to enter into a new area of business, we ask ourselves ‘do we really add value in this area’? If not, we won’t get involved,” said Mr Ring. Mr Ring is well-suited to lead Northern Trust’s strategic move. He was an important figure in the building of the institutional investment management business, Northern Trust Global Investments (NTGI), outside of the US. Having joined Northern Trust six years ago he had been chief operating officer of NTGI for the past three years. During this time he has seen NTGI’s international assets under management increase from around $1.5 billion (€1.2 billion) in 1998 to approximately $37 billion ( €31 billion) as at 30 September 2005. Mr Ring will be hoping to leverage his strong relations with and understanding of the overall Northern Trust business in his new role, for example, by incorporating manager of managers investment solutions and advisory services into the wealth management offering. However, there will also be an emphasis on open architecture relations. NTGI, in addition to having in-house investment teams, offers manager of managers programmes through its sister company, Northern Trust Global Advisors Limited. Although every wealth manager talks about open architecture, Northern Trust Global Advisors claims to take this a stage further as it has a policy of not using NTGI’s own specialist investment teams in its manager of managers’ programmes at all, even if they have shown excellent performance. “Keeping the two separate keeps things clear cut and helps to avoid any perceived conflicts of interest,” said Mr Ring. One of the fundamentals of NTGA’s manager research and selection is to identify the best managers by asset class and the best combinations of managers. This appears to have worked – NTGA has approximately $33 billion (€27 billion) under management in manager of managers’ programmes worldwide. A Total Package Mr Ring believes Northern Trust’s open architecture efforts are an obvious attraction to high net worth individuals and families throughout Europe, but says that the offering needs to be holistic. Northern Trust will be offering its individual clients investment advisory expertise in both onshore and offshore markets, private banking and trust services, as well as global custody services. But how can Northern Trust grow its client base in Europe – which has often been a problem for US wealth managers in the past? Mr Ring says existing relations with ‘trusted advisers’ such as lawyers and accountants are a big source of new clients, as is word of mouth. Northern Trust hopes to build on these relations and formalise new ones in the future. He emphasises a flexible approach when building the business. “We need to be comfortable that we’re taking the business in the right direction. The Northern Trust way is very evolutionary,” he said. This strategy is an echo of the development of Northern Trust’s US Wealth Management Group, which grew rapidly in the 1980s when many of its clients became the beneficiaries of the strong market in initial public offerings, mergers & acquisitions, and other financial events. “We want Northern Trust to be front of mind at the point of wealth creation,” Ring said. One of the challenges for Northern Trust, particularly in Europe – where it is known more as a financial services firm specialising in global custody and investment management, than a pure wealth manager – is to get its brand across to this segment of the market. Its challenge is to convince the market that it is a unique business with a unique combination of capabilities and a broad product array and, importantly, that it can add value. Mr Ring feels that this is entirely possible. “I want Northern Trust to be perceived as the provider of choice and for people to talk to Northern Trust as a matter of course – to be the first port of call for families when it comes to their investment and financial needs.” But to be a Northern Trust client you will need plenty of money. “We will be focussing on the top end of the market,” said Ring. As a guide, potential clients in the US must have a cool $75 million (€62 million) or more of investible assets, although “we may be a bit more flexible in Europe,” Ring commented Northern Trust sees an opportunity to service the ultra-high net worth and family office business and commissioned a survey in 2005 suggesting the need for a much more focused approach to dealing with these client bases in Europe. “The biggest issue that came out of the research we commissioned is that family offices are challenged by back office reporting and administration requirements,” said Lucille Knapp, head of wealth management business development for Europe at Northern Trust. “But technology gets you close to your client if you use if it wisely. We work very hard at the early stages to find out exactly what the client’s needs are. We do real surveys which include getting access to the end user,” she added. Deep Pockets Northern Trust has deep pockets to develop the business in Europe. For example, the corporation’s total projected IT spend across the globe is $900 million (€ 745 million) in the next three years. The recruitment of more staff will be crucial to Northern Trust’s growth strategy. “As we grow the business we will seek to focus more resource as appropriate, for example by taking on additional relationship managers who are specialists in dealing with wealth clients,” said Mr Ring. Crucial to expansion plans is to open further offices in Europe. Currently, Northern Trust operates from a number of centres in Europe: London, Dublin, the Channel Islands and Luxembourg. “We will also be opening an office in the Netherlands early in 2006,” said Mr Ring, but was not able to give a specific date. But wealth management clients are serviced primarily from the Chicago, New York and London offices. “This reflects that whilst the market for wealth management services continues to expand, we are able to service our growing client base from these main centres,” said Ms Knapp. The first London office of Northern Trust opened in the late 1960s and was initially used as the processing centre for cross-border transactions. It developed quickly into a centre for global custody. Northern Trust has been serving wealth management clients from London since 1992. In 1998, Northern Trust began managing money from London, from which developed its asset management business – Northern Trust Global Investments – now the headquarters for the organisation’s asset management activities outside of the US and Canada. Last year’s purchase of Barings FSG saw Northern Trust acquire an onshore trust company based in London, offshore trust companies based in Guernsey and Isle of Man, and private banking capabilities based in Guernsey. “A great deal of managerial effort in 2005 went into integrating these units, and this will continue in 2006. Resources have been ring fenced specifically to integrate Baring’s FSG and Northern Trust so that clients are not adversely affected and there is a smooth transition,” said Ms Knapp. “We have now also taken over the back office functions of Insight Investment, part of HBOS,” she added. But what about further acquisitions? Neither Mr Ring, nor Ms Knapp would be drawn on this.