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.”