To generate assets from the ultra-wealthy, some banks lead with products, others with "solutions."
Northern Trust Corp. is leading with technology that it believes gives it a leg up on cross-selling to this elite group of wealthy clients.
The Chicago banking company has developed a virtual family-office platform that integrates all of a wealthy person's financial tools in a single interface giving the client a complete picture of assets managed by both Northern and other financial institutions.
Steven J. Appell, a senior vice president and, since last year, the director of sales and marketing in Northern's personal financial services group, said affluent families are very interested in having all of their financial solutions in one interface. It may sound mundane, he said, but this type of technology will help Northern "be the hub" for ultra-wealthy clients.
"We want to manage more money for clients, and to do that we have to provide quality reporting," Mr. Appell said. "This is our lead product to build a relationship. This new platform is directly relevant to how and if we grow with ultra-high-net-worth investors."
Northern Trust has averaged 22% annual growth in assets under custody for 10 years, to reach a total at Dec. 31 of $114 billion, and 18% annual growth in assets under management, to $22 billion.
In the past five years, Mr. Appell said, it has used data aggregation technology to generate business with the ultra-wealthy. The personal financial services group has 335 ultra-wealthy families as clients, he said, including 25% of the Forbes 400. All the customers using Northern's platform have more than $75 million of assets.
"This is where the business is moving," Mr. Appell said. "It used to just be about asset servicing and providing asset custody. Now customers want to start with technology and be guided to advice-driven solutions."
Northern began transferring customers to the virtual family-office platform late last year. The superseded platform, Passport for Wealth Management, had offered general ledger capabilities and data aggregation for family offices. Mr. Appell said the new platform is more sophisticated in that it aggregates information from more outside companies.
The new technology is essential, he said, in that it lets the company get a handle on all of a client's assets. Once Northern establishes itself at the hub of all of these assets, it is in the driver's seat for more cross-selling, he said.
"Once we have a relationship, we tend to be able to offer investment products and offer other ancillary products to increase wallet share," he said. "In this market, you have to be established before you can consider cross-selling."
Analysts said most competitors in this field are trying to develop strong data aggregation platforms to put themselves at the hub of relationships. For example, Bank of Montreal's Harris Bank bought myCFO Inc. in 2002 to develop a virtual family office for ultra-wealthy customers.
"There is a very limited pool of ultra-wealthy clients that everyone wants to manage money for," said Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia. "It is difficult to distinguish yourself just with technology that everyone is working to develop."
Mr. Appell said Northern Trust stands out because it aggregates information from other providers, though theoretically every competitor has some type of online offering for the ultra-wealthy.
"Other competitors, like Goldman Sachs or Mellon, do compete against us for customers, but not with technology," he said. "Others, like Fidelity, go after this market with their products or their services. They don't pay attention to the operational needs. By taking this approach, we can be the custodian and offer open architecture solutions. We handle the accounting and record keeping and offer 'best of breed.' "
"We want to be full-service and not just offer a piece," he added.
Analysts said Northern's approach is very institutional in nature, and considering Mr. Appell's background, this is not surprising. He has worked with institutional clients for the past 20 years, including Northern's institutional customers from the time he joined the company in 1995 until his appointment to the personal financial services group last year.
"We believe, whether a customer is an individual or an institution, they want to be focused around a dedicated relationship manager that is familiar with the right technology and the investment space," he said.
Mr. Appell said it is expensive for companies to offer the right level of technology to appeal to the ultra-wealthy. He said he has seen a "tremendous shakeout" in the industry in the past 10 years, leaving "only four providers managing 80% of the [ultra-wealthy's assets] in the market. ... As we move up-market, the amount of money required to invest in technology is prohibitive for some competitors."
Northern Trust has budgeted $1 billion for three years' worth of technological enhancements.
Rus Prince, the president of Prince & Associates, an investment consulting firm in Shelton, Conn., said this technology spending would help Northern generate business but only from a very small segment of ultra-wealthy customers.
"For most wealthy individuals, technology doesn't drive what they are looking for; they are looking for answers," he said. "Technology is not an answer. ... This technology may give Northern a better grasp of a person's financials, but it doesn't give them a better sense of the bigger picture."
