Front Office Solutions: A One-Stop Solution to Simplify Investment Management
A Chicago-based financial services firm with more than 20 international locations and 18,000 employees, Northern Trust has a customer-centered culture. The Northern Lab, a 20-person group of human-centered designers and researchers, represents part of the company's commitment to innovating the customer, or client, and employee, or partner, experiences. Since its launch in 2015, Northern Lab has worked on over 25 projects to bring differentiated digital and service experiences to clients and employees using design-thinking methods.
In 2017, Northern Lab teamed with an internal group focused on an $18 trillion market that includes endowments, foundations and pensions. The project, called Front Office Solutions, represented a new direction for the 130-year-old firm: innovation by internal incubation. The approach was crucial to being able to tackle a problem that would ultimately innovate on the core service model used for these clients—a service model that had been in use, unchanged, across the financial services industry for over 50 years.
Led by Melanie Pickett—herself the former COO of Emory Investment Management, which operates Emory University's $7 billion endowment—Front Office Solutions had a clear business vision and a defined client base. The goal was to pair an online platform with a service experience that would meet the complex data needs of these organizations, or to be, as one nonprofit client said in research, the "new Excel, which currently gets about 100 percent of my time." By building within a large-scale institution, the team was able to draw on the organization's resources and scale to develop a full service model that encompassed digital, data and organization: an in-depth digital experience; a customizable, integrated data platform; and a support model with specialized employee roles.
Over the next six months, Northern Lab interviewed 42 clients across a range of locations, positions and organizations, using research stimulus to bring the value proposition to life through clear written, visual and digital communication. The team refined the offer's scope and clarified its value proposition; built digital wireframes that allowed users to easily view, manipulate and act on data from multiple sources; and defined partner roles and workflows that would underpin the client service experience. This service model was then taken by developers and others to build the initial digital experience. Today, Front Office Solutions has launched with its first clients, who are using this three prong service model of digital, data and service organizational roles to better manage their portfolio data.
IMAGE 1. As investment offices increasingly invested in alternative vehicles, their service needs grew more complex.
IMAGE 2. The traditional service model left endowments, foundations and more compiling, tracking and analyzing data on their own.
IMAGE 3. Investment office personnel included in Northern Lab's research came from a variety of roles, locations and organizations.
IMAGE 4. Detailed service scenarios took personnel through key service moments, from individual analysis work to co-creation and collaboration with a Northern Trust service team.
IMAGE 5. Following research, Northern Lab created an intranet site to communicate the offer, research findings and design principles to internal partners and stakeholders.
IMAGE 6. Large-scale posters brought the design needs behind "unifying the investment office" to life.
IMAGE 7. The service team model went through multiple iterations, as the team explored ways to seamlessly integrate dedicated consultants and team members with the overall service experience.
IMAGE 8. Early sketches explored ways to organize data and allow for client integration and customization across data elements from disparate sources.
IMAGE 9. Client journeys were used to map out all touchpoints across a range of service scenarios.
Founded in 1889, Northern Trust provides trust and banking services to individual, corporate and institutional clients across more than 20 countries. The Asset Servicing business unit serves corporate and institutional clients—including for-profit corporations, not-for-profit organizations, fund managers and pension and retirement funds—totaling more than $10 trillion in assets under custody and administration. In 2017, Northern Trust's commitment to evolving the client experience led it to bring on Melanie Pickett as the head of an internal business incubation team focused on innovating on the service, technology and data offer for one subset of Asset Servicing clients: investment offices that invest across multiple asset classes, from cash and bonds to equity and alternative investments. The team, called Front Office Solutions, centered its offer on solutions for the investment teams of the large endowments, foundations, pension funds, insurance companies and family offices that make up this segment. These personnel are the owners' "front office" staff, or the individuals who represent and support an investment office's strategy.
THE BUSINESS OPPORTUNITY
Pickett had a clear view of the business opportunity that stemmed from her own experience as COO and managing director of Emory Investment Management—the group responsible for the management of a portfolio that includes Emory University's endowment, ranked in the top 20 largest endowments nationally. In particular, three key market factors lay the foundation for the nascent business offer:
1. Increasingly complex investment portfolios
Thirty years ago, these endowments and foundations held the majority of their assets in cash, fixed income and marketable equities. Today, these same offices' portfolios are majority alternative investments, or assets that include venture capital, natural resources and private real estate. For example, in 1985, Yale University allocated a small percentage of its portfolio to alternative investments (image 1). By 2015, the percentage of traditional assets dropped to under 30%, with a large portion of assets in a diversified set of alternative assets. This trend toward diversification holds true across all of this segment's organizations, which nearly doubled allocations to alternative investments from 2002 to 2018. As a result, these endowments, foundations and nonprofits are in need of a more robust, yet tailored view of their portfolios than has historically been provided.
2. Underserved data needs
This sudden increase in the number and complexity of assets meant investment offices now faced information on more than 150 streams of data—of which only seven were offered as a part of a traditional service platform (image 2). The widening gap between the data managed by financial services institutions and the data organizations have access to left investment offices tracking the data themselves or using a multitude of providers. Both were a costly use of resources that left organizations little time to analyze and optimize their portfolios.
3. Sizable market opportunity
All told, the market in need of these increased services represents approximately $18 trillion. What is more, organizations that invest in alternative assets represent a higher-margin revenue source than the traditional core Asset Servicing clients, which still invest mainly in stocks and bonds.
In recent years, a few fintech companies had entered the market to provide some of these data services contemporary investment offices were in need of, but none addressed the offices' needs for both data aggregation/analysis and asset servicing. As a financial institution with the scale to pair white-glove service with tailored technology, Northern Trust was uniquely positioned to do both.
A Northern Lab team of service, business, visual and digital designers joined Pickett and the Front Office Solutions team to test and refine the business proposition with clients and prospects. This refined offer would then be built out into a clear service design model that would encompass all three touchpoints of the service experience: digital, data and organizational roles.
Investment offices have specialized operational and investment teams that reflect the complexity of the work they do: The offices are supported by CIOs, COOs, investment and operations analysts, and risk and allocation specialists, all of whom collaborate to put the organization's investment strategy into action. To understand how best to support each role through a digital service solution, Northern Lab interviewed 42 investment office personnel across the full range of roles (image 3).
Through two rounds of research, Northern Lab designers shared research materials that provoked clients' responses to Front Office Solutions' value proposition, digital UI, data and service model (image 4).
1. Using benefit cards and mad-lib value proposition prompts, interviewees identified key benefits of the service—from, for example, "efficient" and "mobile" to "complete" and "analytical"—and wrote out their own value proposition for a solution.
2. Moments cards and illustrated service scenarios and structures helped clients articulate their service needs and provide feedback on service models that touched each member of the investment office.
3. UI sketches focused in on data, charts and features a proposed solution could include. Interviewees identified what datasets they most frequently rely on, what analysis they'd need a digital solution to provide and what features to prioritize.
Using the value propositions and benefits described by clients in interviews, Northern Lab iterated and expanded on a value proposition to share with stakeholders and potential clients: A shared digital + service platform that streamlines operations, facilitates communication and enables smarter investment decisions (image 5).
Most acutely, research affirmed the team's original hypothesis of a large service gap: In nearly every interview, personnel confirmed the need for a digital and service model to replace today's unwieldy data platforms. As one operations leader described the current state:
"We're not on a burning platform. It's just sort of creaking."
This "creaking platform" was not only the result of insufficient digital solutions, but of a service model that resulted in investment office personnel working in different datasets, reviewing varied information and making investment decisions based on a fragmented data approach. Northern Lab realized that investment office staff would most benefit from a design that provided transparency and enabled collaboration—both within the investment office and between the investment office and the Northern Trust service team. From this, the team developed its rallying cry as they moved forward with design:
Unify the investment office.
To unify the investment office, Northern Lab recognized that they'd have to accommodate each staff member's unique work processes and needs, while facilitating communication and sharing and streamlining operational processes. The team designed a three-point service model that extended from the people providing the service to the data behind assets to a "one-stop shop" digital experience (image 6).
Using multiple iterations (image 7), Northern Lab designed an organizational model that included three key roles:
>> dedicated service consultants, who orchestrate all inquiries, represent platform capabilities and maintain underlying data quality for clients
>> technology engineers, who integrate and normalize data elements from disparate sources
>> analysts, who execute key operational tasks and ensure accuracy of data across all asset classes
Investment office personnel needed to view integrated data to make investment decisions. In research, the team also learned that the combination of data used by each office differed, meaning that the data provided to clients had to be easily customizable (image 8).
Previously, this had left investment analysts and others to collect, clean, combine and analyze data across a wide range of elements and sources—everything from past portfolio account statements to publicly available market data. Northern Lab and Asset Servicing designed a solution that would standardize, clean and merge this data to create a customizable, robust dataset previously unavailable from custodians. This data would include:
>> Portfolio data, providing an accurate and timely record of the key transactions that drive custody, performance and accounting data
>> Market data, showing information on underlying holdings, historical performance and risk factors
>> Manager research, displaying a structured archive of the individual investment office's proprietary information
The digital platform serves as the bridge between the people and data behind Front Office Solutions. The digital component's value lay in its ability to provide a flexible, multi-asset class, total portfolio that could be viewed in real time by all members of the investment office staff. Northern Lab designed wireframes and visualizations that brought the digital offer to life and included key service components:
>> Flexible valuation ensures portfolio data is editable and up-to-date, enabling investment decisions based on the latest information.
>> Classification management allows for the customization asset owners requested. Now, personnel could categorize and tag investments outside of the constraints of traditional asset class buckets.
>> Streamlined collaboration unifies the investment office with the Northern Trust service team through custom alerts, shared pipeline access and accessible document archives.
Northern Lab mapped out the service model using client journeys for a set of common service scenarios, including a morning client check-in, new investments and custom data updates. The maps showed how the client and the Northern Trust service team would interact with the data and digital to provide a full service experience (image 9).
By blending people, data and digital into a streamlined service model, Front Office Solutions provides a one-stop solution to simplify investment management for endowments, foundations and more. Now serving its first clients, the offer represents a future-looking shift in a traditional service model that has remained unchanged for over 50 years.