WEALTH MANAGEMENT - Conjuring Up the Magic Number

Northern Trust enables the well-heeled to answer an elusive question: What am I worth?

A 118-year-old trust bank might seem like an unlikely source of technology innovation at the top end of the wealth management market. But Chicago-based Northern Trust Corp., whose wealth management group serves 379 families with an average account size of $438 million, has been winning business with a powerful new application. Last June the group began promoting an upgraded version of its Web-based custody and reporting platform called Wealth Passport, which enables families and their advisers to obtain a real-time, consolidated statement of net worth that takes into account both liquid and illiquid assets, including art works, hedge fund investments or privately held businesses.

“Our clients asked us to do something seemingly very simple but breathtakingly complex -- tell them what they’re worth on a daily basis,” says Douglas Regan, who runs Northern Trust’s wealth management group. “This platform is a huge differentiator for Northern.”

It’s not the only game in town, however. Bank of America offers a similar data aggregation capability. Rockefeller & Co.'s integrated wealth services unit provides an account aggregation service to other family offices, using technology it developed for its own use. And Mellon Financial Corp. is planning to roll out its own offering soon. A number of technology companies also offer solutions.

Nonetheless, Wealth Passport combined with Northern’s custody and asset management services puts it “ahead of the pack,” says Lehman Brothers senior research analyst Jason Goldberg, who covers bank stocks.

Wealth Passport uses technology developed for Northern’s institutional clients and can replace, or work with, systems that a client might already use to track assets spread across time zones, currencies and ownership structures. Northern doesn’t charge for it; instead, the bank includes Wealth Passport in its custody offering, which is priced according to the number of wealth management services a client uses. (Northern charges separate fees for asset management and other services.)

A big draw for clients is being able to use Wealth Passport to bring illiquid assets into their financial picture. With an art or wine collection, for instance, a third-party appraiser typically performs the valuation. With other investments -- a hedge fund, say -- clients can manually update the data as the fund reports returns, or they can tap Northern’s Alternative Asset Servicing Group to do it automatically on their behalf.

Wealth Passport also simplifes accounting and cash management for family offices, which make up 41 percent of client relationships in the wealth management group. Lisa Sims, a CPA with ELD Associates, a family office in Chattanooga, Tennessee, uses the platform, instead of requests by fax, to transfer money. She also taps Wealth Passport for its general ledger functionality. Rather than entering transactions into a computer manually, she can download the data into the platform.

“It makes doing business easier and faster,” says Sims.

The wealth management group is one of three segments in Northern’s Personal Financial Services division. Launched in the mid-'80s, it grew steadily over the next two decades and got a boost in 2003 when Northern opened an office in New York City. The bank has also grown assets by opening a Boston office and adding a wealth management presence to its London outpost. Today the wealth management group has $160 billion in assets under administration, up from $61 billion in 2000. Assets under management have doubled, to $28 billion.

Wealth Passport provides a distinct competitive advantage because Northern’s relationship managers can view clients’ total holdings -- even those held at other firms.

“If you can’t successfully use that information to figure out what other things clients might need, you’ve got the wrong business plan,” says John Duncan, founder of Duncan Associates Attorneys and Counselors, a Chicago law firm. Three of the firm’s clients -- each with $1 billion or more in assets -- have recently become Northern clients, attracted by the platform.

Recent mergers in the wealth management sector also appear to have strengthened Northern’s hand. According to equity analyst David Long of William Blair & Co., the wealth management group’s custodial assets jumped 34 percent and assets under management have grown 20 percent in the two quarters since Bank of America announced it would buy rival U.S. Trust. Uncertainty creates opportunity, especially when you can promise clients something as elusive as an accurate picture of what they are worth.

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