Comparing Family Office Premiums to Northern Trust: Key Factors and Cost Analysis

When considering wealth management services, families might wonder about the differences in costs between working with a private bank like Northern Trust and a multi-family office. In this article, we will explore the typical premiums charged by multi-family offices and the complexities of fees within private banks. Additionally, we will discuss how to optimize costs and improve results by using a combination of different service providers.

Typical Premiums Charged by Multi-Family Offices

The average premium charged by multi-family offices for their wealth management packages typically ranges from 40 to 80 basis points (bps). Some offices go as low as 20 bps, offering more holistic services or full-service offerings at a rate of 1% or 1.25%, but these are often all-in services with very little to no additional fees. However, for some families, these costs might seem high.

Private Banks and Hidden Fees

Private banks such as Northern Trust are highly regarded, but they often come with various fees, layers of proprietary products, and confusing disclosures. This makes it challenging to determine the exact fees you are paying. Despite these challenges, many families opt for private banks due to their reputation and comprehensive services. However, it is not uncommon for families to mix and match services between providers to create a more tailored and cost-effective solution.

Optimizing Costs and Improving Results

While there isn't a significant difference in price for the uninformed consumer, involving multiple but differentiated and complementary organizations can significantly reduce overall costs and improve results. For instance, if you find that a private bank like Northern Trust excels in global custody and multi-currency reporting but lacks in areas such as private capital growth investments and capital markets, you can use their services for consolidated custody and reporting while outsourcing the other needs.

Strategies for Cost Reduction

One effective strategy is to work closely with the appropriate teams at low-cost financial institutions such as Wells Fargo Advisors or Bank of America Merrill Lynch. By having a couple of firms compete for your business, you can introduce competition and further lower your costs. This approach is particularly beneficial for fiduciary services, trust lending, commercial and personal lending, and asset management fees.

Transferring Assets Between Firms

For assets with a CUSIP (Committee on Uniform Securities Identification Procedures) or security ID, transferring them between firms is generally seamless. However, proprietary products, which are a specialty of private banks, can pose transfer issues. Understanding these nuances can help you make more informed decisions and optimize your wealth management strategy.

Conclusion

In conclusion, while the costs at Northern Trust and multi-family offices might seem similar on the surface, taking a strategic approach to mix and match services and working with multiple organizations can help you save money and improve your overall wealth management outcomes. Remember, the key is to have a well-rounded and tailored solution that meets your unique needs.