Northern Trust sets sights on Europe and Middle East

Until April 2018, Belinda Aspinall was happy running the fiduciary operations of US wealth manager Northern Trust in Guernsey. The once sleepy Channel Island was increasing its traction with wealthy families and business was steady, if not stellar.

But her life suddenly changed, after the Chicago-based bank parachuted her into its London hub in Canary Wharf to run its Global Family and Private Investment Office for Europe, the Middle East and Africa.

Ms Aspinall, dressed in conservative blue suit augmented by a jaunty necklace, has been thrust into a lively milieu where she must negotiate the effects of Brexit, a regulatory maelstrom and spearhead Northern Trust’s push into Europe.

This marks the turning of a new page for the wealth and asset manager. The overwhelming share of Northern’s business was previously US-based, with just a smattering of US-connected clients in Asia and Europe.

But in 2011, the firm decided Europe could prove a new target for family and ultra high net worth businesses. “We are constantly discovering more wealthy families,” she says, with the Middle East a particularly lucrative source of new business.  

While much of the new business in the US comes from tech start-ups in Silicon Valley and other regional hubs, investment houses in the UK and Europe are proving to be an important source of new entrepreneurial wealth.

“We are talking to fund managers in the UK who have sold out of asset management,” before embarking on the next leg of their business journey, she reveals. “They have realised there is a tipping point, from being very wealthy to setting up a family office to manage their family wealth, while they can continue to concentrate on their business.”

A growing cohort of family firms in both Europe and the Middle East are approaching the size where they are moving into the family office bracket, she believes. “They are looking to do something different than their parents’ generation.” 

This new direction for the previously US-focused wealth manager relies on referrals from advisers and existing clients in London, Switzerland, the Middle East and Monaco, rather than US-sourced contacts, she says. “We need to articulate our offerings to these people and show them how we differ from traditional private banks.” 

Swiss giants such as UBS and Credit Suisse, she acknowledges, devise their family office offering from an investment banking standpoint, identifying families as a new distribution channel for structured products, M&A and capital markets expertise.

“We do not have an investment banking arm...so we design our offering based on family needs,” she ventures. “We ask them what their headaches are and what they are trying to achieve rather than being product-led.”

New way of thinking

Younger clients, she finds, are more likely to question old school models.

“The younger, next generation of private clients is trying to understand the fees being charged by their banks and looking to a different model,” she says. “What they want today is usually about social impact, ESG investing and doing work in the community.”

This notion of contributing to social and environmental impact as well as achieving investment returns is crucial to her vision of expanding the Northern footprint in Europe and the Middle East. 

Clients in the US typically use both goals-based investment technology and ESG investment screens for their portfolios. Her aim is to make these tools indispensable in Europe. “Part of our discussions with clients going forward are about using the Northern ESG screen and to show them how they can be better at screening stocks through this high-quality product.”

The channel of communication demanded by the new clientele is also very specific with “voice” being a key part of the reporting and information exchange process. This means more videos, podcasts and live events, all backed by analysis and concrete numbers, rather than reams of paper sent through the post or lengthy emails.

“This trend forms our thinking in the tech space,” she ventures. “For us, and our clients, data is still the Holy Grail.”

Younger clients are keener on diversity of managers and investment ideas from different sources and it is Northern Trust’s role to accommodate strategies within a broader portfolio. “This presents a major challenge for our Global Family Office operation,” says Ms Aspinall intensely. “We need to keep not only all the individual family members happy, but also their advisers.”

For many families, this can be done by creating an over-arching fund such as a Luxembourg-registered RAIF [Reserved Alternative Investment Fund], allowing clients to pool a diverse traditional and alternative investments portfolio into a single structure.

“Families have different investment managers and advisers. We can be a shadow bank of record for a family office, in that we can bring it all together.”

The role for the US firm is not about replacing existing relationships but accommodating them. “Families are very loyal and we don’t want to upset them or their banks. We want them to keep their relationships, but help aggregate their data.”

This means being able to perform immediate calculations and breakdowns for families about their portfolio’s value, its performance and composition of various tranches, no matter how many banks assets are held with.

“The Next Gen is very interested in performance and risk,” she says. “They want to be able to track and benchmark manager performance.”

Ms Aspinall’s department does not yet get involved in manager selection for European clients, in the same way her colleagues in Chicago and New York do, but this could be on the cards as she looks to add more value than competitors.

“Our outsourced chief investment officer concept is very well established in the US and we are looking to where we will place this in Europe,” she admits.

London or Luxembourg?

The current “Brexit discussion” will play a key role on whether new investment staff are housed in London’s Canary Wharf or in Luxembourg, where the bank is increasing headcount, as are most European wealth managers keen to boost market access in the EU.

“One way or another, there will be more resources…and a much greater presence in Luxembourg,” she says, adding that Northern Trust has already earmarked the Grand Duchy for expansion, following its acquisition of the UBS fund administration franchise.

London will still be Northern Trust’s head office for Europe, but Luxembourg will also be key to the expansion. “Brexit means we will need to look at what the consequences will be in terms of licencing of products to sell from the UK into Europe,” she adds.

Guernsey, where Ms Aspinall spent two and a half years, is also a favoured jurisdiction from which Northern Trust will continue to expand its family footprint. “The island has grown up over a period of time,” she says. “There has been a move to a well-regulated jurisdiction with strong governance. It has substance and expertise compared to other jurisdictions,” with the English-based trust and company laws helping clients to feel particularly comfortable.

Most customers, she says, have family members based in a variety of jurisdictions. She speaks about one key client who spends time between Switzerland and Italy, whose family are based in the Middle East, but preferring to have their family office situated in the US and trusts domiciled in Guernsey. She has just returned from Northern’s Hong Kong office, where she met with a newly-recruited local Chinese family with its main operations in Hong Kong, but keen on establishing a Swiss family office, with trust assets controlled out of the Cayman Islands. “We were looking at how they will continue to manage that,” she says, smiling.

The firm’s investments will span the advisory space, relationship managers and fiduciary expertise. “Relationships are the key to managing family offices,” she says. 

Currently she has 26 staff in London and Guernsey and does not object too heavily to suggestions that she aims to double this. After all, the key tenet of her bank’s plan is for her to centralise relationships in London, to boost the Emea business. “I would like to think we will be serving more and more clients from London,” she agrees. “We are looking to grow our book of business based here. We are talking to a number of new offices who want to be based in London. For families from the Middle East or Europe, London remains a popular destination.”