If we’re not doing as well from an organic perspective, we’re going to be working really hard to say what else do we do to make sure we’re doing the right thing and we get positive operating — fee operating leverage.
Operator: We’ll go next to Jim Mitchell with Seaport Global.
Michael O’Grady: Good morning, Jim.
Jim Mitchell: Hey, good morning. Maybe just follow up on that last comment, just maybe a little more detail. It seems like organic growth in 2023, it’s a tough environment, a little mixed. So it seems like you’re more optimistic across the board. So you can kind of just give us a little more thoughts, detail on the organic growth prospects this year.
Michael O’Grady: Sure, Jim, it’s Mike. I’ll start off here. You’re absolutely right. We’ve gone through, I would say, a time period where the organic growth is definitely been strained and lower than our historical levels and there’s a number of factors behind that that we’ve talked about over the proceeding earnings calls. That relate to client activity, that relate to some of the outflows that we had in the asset management business which obviously impact then wealth management and asset servicing and the reason why we’re so positive going forward here on organic growth, some of those trends as we talked about have turned around. And so we see good inflows into asset management. So that aspect of it is a lift going forward to our organic growth, but then also the strategies that we have in place to drive profitable organic growth.
Where we’ve been focused as a company is in a couple areas. There are a few areas. One is, really looking at the portfolio of our growth. So historically, asset servicing has been the majority of the organic growth. And looking forward, we’re looking to shift that more towards the more scalable parts of our business. So wealth management and asset management. That doesn’t mean that the asset servicing business will not be growing. It’s just — we’re very focused within that business to the areas that scale the most. So if you think about the nature of all the things we do for clients on that front, some of those activities are more scalable, more profitable than others. And so we’ll lean towards those areas I mentioned. The success we’ve had with asset owners in the Americas, a lot of that is custody and related services on that front.
That’s some of the more scalable services that we have. And it’s, again, not to say that we won’t be doing the business with the asset managers, so fund services, but some of those areas are more resource intensive. And so, we’re going to be really disciplined about the types of business that we take in that require hiring more people, investing more, in particular, technologies around that. And then the last thing I would say just around the organic growth and why we’re optimistic on it is, the businesses are working, I would say, much more closely together in how we go to market. So as we would call it here, one Northern Trust is our approach to the marketplace. So it’s not separate businesses, but rather to the extent that we’re going to approach a client or a prospect to work with them, it’s going to include multiple offering from across the businesses, particularly asset management with asset servicing on the front end as part of a bundle that were offering to the clients.
And then certainly with wealth management as well. You heard in some of our earlier comments here the advisory fee component of wealth management has been growing nicely through the year. We think that it can grow at a higher rate, but importantly the more that we can do on the product side with those clients as well. So as we talk about the transitioning with quantitative tightening for example and the move out of short-term treasury to the extent that we can help those clients move into fixed income funds for example. That’s a real opportunity for us. So a number of things that we’re doing to proactively try to drive that organic growth.
Jim Mitchell: That’s really great color Mike. And maybe just a quick follow-up on deposit pricing. Jason, you talked about still some pressure on overall deposit cost. Is that lags still on pricing or is that an assumption of a negative mix shift out of NIBs? What’s kind of driving further pricing pressure and deposits?
Jason Tyler: It’s lags and we actually in the end fourth quarter made some agreements on pricing that will come into play in first quarter more than they did in fourth quarter and didn’t drive deposit volumes higher in fourth quarter, but it is something that as we try to do more fine-tune predictions of what first quarter would look like, it’s something that we factored in. We think that cost could be — cost will be higher. And that’s part of the reason why even though we ended it at $501 million and I indicated that December was better than November and October, we think we’re still going to be flat to down a little bit in first quarter, largely because of that pricing element. And in general, we do — our view is that as the Fed does reduce rates, we’re going to have client conversations about it. And again, we’re not a price setter, but highly committed to making sure our clients leave their deposits here.
Operator: We’ll go next to Robert Wildhack with Autonomous Research.
Michael O’Grady: Hi, Rob.
