Northern Trust Keeps Leaning Into Family Offices’ Global Growth Story

The group at Northern Trust looks after family office clients with an average of $1 billion in net worth. Its international (non-US) business has almost tripled – from a smaller base – and its US area continues to post strong growth, a senior figure said.

Northern
Trust already has a strong and expanding family offices
business for the US, while operations outside the country are
growing particularly fast, one of its senior figures says. 

The family offices business looks after about $900 billion of
assets (June 30, 2024), giving the Chicago-headquartered firm
great purchasing power with vendors and third-party investment
managers, it says. The global family offices arm employs about
300 people.

The fact that the financial and business background around the
world has been volatile, with disruptions, is a plus for Northern
Trust because people need advice and support. “Disruption is our
friend,” David W Fox, Jr, president of global family and private
investment office services, told this publication recently. Fox
is also a member of the bank’s wealth management executive
committee. This news service met him at Northern Trust’s offices
in Canary Wharf, London.

 

Whenever there is disruption, such as with Silicon Valley Bank
and Credit Suisse last March, family offices look for
alternatives and Northern Trust gets inflows from new and
existing clients, Fox said.

This is very much a top-end business: Family office clients
tend to have on average $1 billion in net worth. Some such
clients might have satellite offices in places such as Singapore,
London or Dubai. Growth in the global family office space has
been roughly double that of the bank’s core wealth management
business.  

“The family office group unit has a “much higher profile inside
Northern Trust than any of our competitors since we have been
covering these clients as a separate segment for over 40 years,”
Fox continued. 

Northern Trust is in robust shape. In July, it
reported that net income was $896.1 million, rising more than
4x from $214.7 million in the prior quarter and rising from
$331.8 million in the same period a year earlier. Trust,
investment and other servicing fees rose 6 per cent year-on-year.

Over there

Fox was asked about how jurisdictions such as Singapore, the
United Arab Emirates and Hong Kong have sought to boost their
standing as family office hubs, and what Northern Trust’s
approach is to such centers beyond the US. Singapore, for
example, boasts about 1,200 SFOs (source: Singapore Economic
Development Board), although the pace of inflow appears to have
slowed in the face of more rigorous regulatory tests. 

Scale can be sharply different. 

“There seems to be a much lower hurdle on what they call a
‘family office’ in certain countries like Singapore that is still
relatively new to the concept,” Fox said. “Family offices can
take many forms and have different levels of scale. Most often,
we think $500 million is a strong number to indicate sufficient
assets for capitalizing a family office with a combination of
leveraging the in-house team for certain activities and
outsourcing the rest. 

“That being said, we work with many clients that have fewer than
$500 million assets. When it comes to Singapore, family offices
can be formed with as little as $50 million, and this may not
make sense from an investment management perspective, let alone
reporting, technology, fiduciary, banking or otherwise in terms
of operating and capitalizing a family office, not forgetting
managing the wealth efficiently and effectively.” 

“Our international business has nearly tripled (albeit on a
smaller base) while we continue to see strong and meaningful
growth in our US business,” Fox said. “International families
appreciate the knowledge we have gained from our US family
offices.” 

To put the overall business in perspective, Fox said that 35 per
cent of the Forbes 400 [global list] are clients of his
group. 

Experience

Fox is an experienced figure in the bank. Before holding his
current role, he was executive vice president and head of the
Americas, corporate and institutional services, with
responsibility for all of Northern Trust’s institutional
businesses in North and South America. 

 

Fox joined Northern Trust in 2012 after more than 25 years at JP
Morgan in New York and London, where he was vice chairman of
investment banking. He has experience in advising clients about
M&A and raising capital – topics that family office clients
will be very familiar with. 

 

Family offices interact with Northern Trust in different
ways.

 

“Some families look to use Northern Trust for a full continuum of
services, and others prefer to insource other functions depending
on their size and preferences,” Fox said. 

“Examples [of work involving the bank] would be vendor management
activities, including technology services like performance
reporting, money movement, and general ledger management,” he
said. “Essentially, working with Northern Trust can help reduce
the volume of vendors a family office might otherwise use,
therefore keeping the office out of the vendor management
business and allowing the staff more time to focus on other
tasks.” 

 

Avoiding conflicts of interest

Fox said the firm doesn’t engage in investment banking or
actively trade particular products, taking away the sort of
potential conflicts of interest that can arise with other
firms. 

“We find that the further away the family office’s original
formation is from the original wealth creator, the more they need
a robust family office construct. This is a function of having
more family members, pooled investments and sophisticated estate
planning, among other factors.”

The business mainly deals with single-family offices, not
multi-family offices. It also engages with private investment
offices, which are sometimes owned by single-family offices.

Structure

With many banks, such as JP Morgan, UBS, Deutsche Bank,
Citigroup, Bank of America and DBS offering family office
services, this news service wanted to know what is unique about
Northern Trust.

“From a structure standpoint, we are a part of the wealth
management business at Northern Trust, which means the business
as a whole can provide a continuum of services to our clients as
their wealth grows over time while avoiding potential conflicts
of interest,” Fox said. 

“Some firms have their wealth management groups reporting to
asset management, which can create a conflict of interest because
they are effectively viewing their family office clients as a
distribution channel for their product,” he said, without
identifying banks by name.

“We, however, do not require our clients to use our investment
products, nor do we participate in other businesses such as
investment banking or retail mortgages. Lastly, while we sit
within wealth management, our GFO business can draw resources and
capabilities from across the entire Northern Trust franchise,” he
said. 

 

This is a widely spread-out organization. Northern Trust has
teams across the US, London, Guernsey, Luxembourg, Abu Dhabi,
Singapore and Melbourne.”

 

“We have a strong and growing foundation in the US which remains
an important growth market for us. However, our international
business is seeing strong and growing engagement; in terms of our
strategy, we are devoting more investment and resources to
support this growth, both from a talent perspective as well as a
product and services perspective,” Fox said. “We have a robust
set of capabilities that we can deliver to family offices, but
the full suite isn’t available to clients in all markets which is
an area of focus for us at the moment.”