Management Strategies

11:24 PM
Ivan Schneider
Ivan Schneider
Commentary
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Northern Trust Powers Trust Businesses

Financial institution licenses financial technology to low-overhead, start-up trust departments.

Northern Trust ($41 billion in total assets) offers a full suite of trust accounting, custody, mutual funds and investment advisory services to its own customers. The Chicago-based firm also provides other banks and start-up trust companies with the tools they need to run their own trust departments.

For example, after last year's wave of bank mergers, OMNI Bank of Louisiana (Metairie, La.; $412 million in assets) began receiving customer requests for trust-related services. "The clients in the community knocked on the door of this bank and said, 'We've been with you for years on the deposit side - we'd love to be with you for trust,'" says David Batrich, vice president and director of sales, correspondent services, for Northern Trust.

OMNI Bank turned to Northern Trust for Northern's Trust/Rite trust accounting system, which includes a flexible engine for monthly or quarterly report generation. "We have over 300 different ways of showing that information to the actual trust client," says Batrich.

Among those, one of the most popular report styles is a one-page, brokerage-style report that "gets rid of the clutter," continues Batrich. The Northern Trust system also allows trust clients to view their information online and receive statements electronically.

More With Less

On the operations side, overnight batch processing allows a small organization with limited IT resources to complete time-consuming reports in "unattended" mode. "Ten years ago, a typical administrator was very comfortable with 100 to 150 accounts," Batrich observes. "They can double that load, at no cost to the level of service, because automation, the functionality and the ability to get information has given them the opportunity to do more."

Furthermore, the system incorporates the expertise of Northern Trust's own tax experts and accountants, on issues such as qualified and non-qualified dividends or regulatory concerns. "Our own trust department faces the same types of issues," says Batrich. "It's what we're doing for our own client base, across the board."

Northern Trust has about 3,000 employees supporting its technology and operations function, out of approximately 8,500 employees enterprisewide.

Nevertheless, a start-up trust company can enter the market with a mere fraction of Northern Trust's resources. "Some of the organizations I work with have one or two people to start," says Batrich. "They can get out there and grow their business without having to worry about adding to staff, until they get to the point where they have so much new business coming in that it makes sense to put another administrator on the front line."

Northern Trust has offered trust accounting services since 1984 and has been working with Fitech (Edison, N.J.) since the late '90s to ensure that Trust/Rite remains up-to-date, on an open-architecture Microsoft (Redmond, Wash.) Windows system. Pricing is based on a fixed annual license fee for the application, rather than per-user.

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