Profile of the Northern Trust Private Bank

Posted in: Private Banking- Aug 11, 2010 No Comments

Northern Trust is a private bank that has served the richest and most powerful men and women in America since 1889. In fact, the Northern Trust private bank, which is headquartered in Chicago, is known for preparing the tax returns of many United States Presidents as well as administering the first family’s assets through blind trusts to avoid conflicts-of-interest.

Northern Trust services an estimated 20% of the richest families in the United States, as measured by the Forbes 400 list, making it a premier private bank with global access.

Today, Northern Trust has grown into much more than a highly respected local private bank.  It is a financial powerhouse that services an estimated 20% of the richest families in the United States as measured by the Forbes 400 list.  Business lines include personal banking, business banking, global custody, fund administration services, tax preparation, family office servicing, brokerage, hedge fund, lending, underwriting, estate planning and trust services.  The general concept is: If you are rich, and you want to find a private bank to help you solve a problem, Northern Trust can probably do it for you.

Private Bankers to the Rich - Northern TrustIn fact, the bank is known for its unique and innovative approach to wealth management.  It is organized around “solutions” including “who you are”.  This includes a service group for professional athletes, musicians, business owners, entrepreneurs, and more.  In the past year, Northern Trust launched an additional service group for Gays and Lesbian clients designed to help them structure their family’s finances in such a way that disapproving relatives couldn’t come in and contest wills or property due to the lack of marriage recognition in many states.

Minimum Opening Balance for Northern Trust Accounts

Typical clients of Northern Trust private bank are multi-millionaires.  The minimum opening balance depends upon the total assets you bring to the bank.  To open a plain vanilla checking account requires an initial deposit of at least $15,000.

Examples of Northern Trust Private Bank Services

Here are some examples from Northern Trust literature on how working with the private bank has helped wealthy clients create tailor-made solutions to their financial needs.

Northern Trust Client Services Private Bank Solutions

Northern Trust at a Glance

  • Today, the company has private bank branches in Northern Trust’s global locations include: Abu Dhabi, Amsterdam, Bangalore, Beijing, Dublin, Guernsey, Hong Kong, Isle of Man, Jersey, Limerick, London, Melbourne, Singapore, Stockholm, India, Tokyo and Toronto. Within the United States, locations include Illinois, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New York, Ohio, Texas, Washington and Wisconsin.
  • The bank strives to donate 1.5% of pre-tax profits each year to give back to the community.
  • Assets under custody exceed $3.7 trillion and assets under management are roughly $650 billion.  Banking assets at the private bank itself exceed $76 billion.
  • The bank employs more than 10,000 people.
  • Global reach means that private banking clients can have accounts denominated in virtually any currency, as well as trade securities on almost any stock market in the world.  You can even arrange for loans in other currencies to monetize illiquid assets such as timber land, art collections, and more.

History of the Northern Trust Private Bank

In 1889, well-heeled private banker Byron Laflin Smith founded Northern Trust in a small one-room office on the Chicago Loop. He designed the bank’s business plan to service the needs of financially successful business owners, heirs, professionals, lawyers, doctors, and investors.

To get the private bank off the ground, Byron Smith contributed $400,000 of his own money, which was 40% of the bank’s original $1,000,000 capitalization. He raised the remaining $600,000 from a group of 27 shareholders including world-famous retailer Marshall Field, as well as Philip D. Armour and Martin Ryerson. What make the bank unique was that each of these rich men were given the ability to personally inspect the bank’s assets and earnings at the end of each fiscal year so they wouldn’t need to worry about solvency. (Remember, this was a time before the FDIC existed so if a bank failed, the depositors lost their money.)

The backing of such prominent and successful civic leaders caused people to be comfortable with Northern Trust and made it easier for the firm to gather deposits. After all, “if Marshall Field thinks it is good enough to bank there, there shouldn’t be anything about which to be concerned,” was probably the thinking of many new clients.

Northern Trust Revolutionized Private Banking By Becoming the First to Advertise

Bryon L. Smith used the bank’s profits to advertise Northern Trust services in newspapers, directories and through direct mail campaigns. He hired an advertising agency that was devoted to spreading the message that Northern Trust was the world’s most conservative, and safest, bank. The approach was a huge success and the bank prospered.

The bank was passed on to Bryon’s son when he died and quickly rose in prominence, in part due to World War I. The government deposited enemy assets in a special trust fund created by the Alien Property Custodian Act, giving Northern Trust more than $500 million in additional assets under management that had been seized during the war. The private bank also earned fees by helping the United States government issue war bonds.

The Great Depression Helped Northern Trust Gain Client Assets and Cemented Its Reputation as the Most Conservative Private Bank

When the stock market crashed in 1929, depositors ran to banks to withdraw money to cover margin losses. As financial institutions across the nation shuttered and went bust, a line formed outside of Northern Trust in Chicago. The difference between Northern Trust and other private banks was that the people waiting in line were there to deposit money not withdraw it! Knowing that Northern Trust was backed by the richest and most successful men in the city, and that it had a reputation for protecting assets before all else, the bank served as a fortress to concerned wealthy who wanted to sleep at night.

By the early 1940’s, this reputation for conservatism had become so widespread that roughly half of the bank’s depositors and clients were from outside of Chicago. Byron’s son, Solomon, continued to run the institution until his death in 1963, when he died. The bank was then passed on to his son (and Byron’s grandson), Edward Byron Smith. Edward ran the bank until his retirement in 1979. This marked the last of the original founder’s bloodline to run the private bank, with management coming from the rank-and-file thereafter.

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