“Family businesses are great but they can also be
incredibly difficult and they’re usually difficult if
the emotional element of being in a family overruns
the rational element of being in business.”
The Scott family’s journey began over a century ago with the pioneering approach and spirited personalities of the Provincial Insurance Company.
The company was founded by Sir James Scott in 1903; the same year that the Wright brothers first took flight. After ownership passed to James’s sons, Francis and Samuel, Provincial was relocated to its spiritual home in 1918. To the Lake District – Sand Aire House in Kendal, Cumbria. The company stayed within the family for the next 75 years, bolstered by extraordinary engagements that included John Maynard Keynes, arguably the greatest economic thinker of the 20th Century. Keynes was a Director of the business for over 20 years until his death in 1946.
A path that led three generations later – following the sale of Provincial Insurance – to the formation of a family office to meet the investment needs of the Scott family. Continuing the pioneering spirit of its forebears, when Sandaire was founded in 1996, it became the UK’s first multi-family office. As its expertise widened to meet the needs of the multigenerational Scott family, so did its offer. The decision was made that Sandaire’s unique expertise should be made available to other families, resulting in today’s multi-family office structure, serving numerous exceptional families.
“It was never expected of my brother or I that we were going to
make the fortune that our greatgreat-grandfather did, but it was
instilled in us that we had the opportunity to create our own
businesses and be entrepreneurs in our own right. Having the
ability to do that has been incredibly helpful.”
It is 101 years since the doors were closed on Provincial Insurance’s Bolton office and the firm relocated to Sand Aire House under the guidance of its first generation heirs – Samuel and Francis Scott. A momentous move that had a profoundly positive impact on the two brothers, the business and its future fortunes. Sitting down with Sir Christopher Scott (fourth generation), Alex Scott (fourth generation and Founder of Sandaire) and newly-appointed Oliver Sargent (fifth generation) to discuss the Scott story, you sense a tacit thankfulness – all three regularly refer to ‘luck’ – for the opportunities those century-old decisions have bequeathed. There is also a collective sense of deep responsibility. To the legacy of their fathers, grandfathers, great-grandfathers and great-greatgrandfathers, but also to the wellbeing of the current family members and the opportunities their successful stewardship will offer to future generations. It may well be a weight to bear, but it is one that they feel an immense amount of privilege to have the opportunity to shoulder.
“Our job when we sold Provincial was to preserve, protect and ensure that the capital continues. Not to say that we wouldn’t take risks to increase that capital,” explains Alex. “When you crystallise the capital and what was previously tied up is suddenly available for the first time, you are faced with answering the question ‘what’s going to happen now?’ – this is the most difficult time because you go from being business owners to being stewards of wealth.”
The transition from Provincial boardroom to the birth of Britain’s first multi-family office was made possible in no short measure by Alex’s “energy, commitment, single-minded focus and passion.” It is a testament to his entrepreneurial aptitude that the multi-family office he founded currently places within the top 50 richest family offices globally, according to Bloomberg Markets’ annual rankings. But Alex has never lost sight of the Scott family he serves. That’s why the transition was also achieved through strong lines of communication as well as fair and inclusive decision making processes established across the family from the outset.
“It was thought by the family that we shouldn’t have the capital as being completely liquid and available at a day’s notice – as you can in some investment structures,” explains Christopher. “People were given a choice to go fully liquid or not so liquid and subsequently, two thirds of the total capitalisation of the business went with being illiquid, with most of the remaining one third being charitable trusts, which had a good reason to not go that way, as well as the 2000 employee shareholders.”
The prudence of adopting this illiquid approach is indicative of the collective compromise that lies at the heart of the Scott family success. Like the majority of successful stewards, Alex, Christopher and Oliver are the personification of understatement and humility. You’ll find no hubris here. It follows that families and individuals who are good stewards are so because of their behaviour in the context of their wealth, not in spite of it. So, how is this behaviour cultivated?
“If you’re the maker of the capital then you can do what you want with it. You can give it all away to great causes, you can spend it, it is entirely your decision,” reasons Alex. “If you are inheritors of capital then you have more of a responsibility to those who came before you and those that will come after you to act as a responsible steward.”
Herein lies the very essence of the Scott family’s outlook; ‘Qui totum vult totum perdit,’ or ‘He who wants everything loses everything.’ At its core is the concept of being values-driven custodians for the future good, that no one person is greater than the common purpose and the critical component must always be the preservation and growth of the core capital.
“Something that we did was roughly splitting the dividend so that one third went to the current owners and two thirds went to the future owners,” explains Christopher. “We aren’t paying out all of the profits and all of the return now. We set a modest rate of growth. We aren’t living like church mice, but equally we are not living off it so well that we are depleting the resources of the future generations. It’s about balance.” Part of that balance is ensuring systems and structures are put in place to provide a clear trajectory for the family and to garner much needed governance. Whether it is through their family charter, a family committee or annual family meetings a hierarchy of Scott decision making has been established. Why put in its simplest form, while crossfamily consultation on fundamental issues is critical, if the same applied to day-to-day operations, the protracted decision making process could potentially hinder the functioning of the business. And that is why aligning a family’s values is so fundamentally important – to ensure that there is a solid foundation of trust in the stewardship, whether family or non-family members. Knowing that the person in charge “is going to do the right thing, even when no-one is looking”, and acting at all times with the family’s best interests at heart.
“You’ve got to have the demeanour to be engaged leaders and engaged followers,” explains Alex. “Otherwise the leaders will give up and go and do something else and the followers will feel disenfranchised, so there needs to be a connection. I suspect to some degree that it’s a preparedness to compromise your degrees of individual financial freedom because you believe it will benefit you and the group to a wider degree. As well as accepting leadership, because you can’t do it as an anarchic democracy.”
Get the governance right and it delivers the greatest gift of all. Time. “With the business running smoothly, family members have the time to follow their passions and do what they want to do and then bring their skill sets back into the family business if they want to. We are very fortunate to have talented entrepreneurs, but we also have amazing artists, full-time parents, doctors, physiotherapists and farmers within the family and we are very proud of that fact. ”
Working in tandem, it is the stewardship and unwavering pursuit of preservation (capital) that allows personality (human capital) the freedom to express itself and explore its interests, especially among the younger generations.
Christopher elaborates: “Our aspiration is that over time, each member of the next generation will have met with one of our trusted advisors, where they are asked about what they want to do by someone who is not a family member. I believe it is better than Alex or I doing it because we do not want them to feel pressurised. There is a strong family culture of trust in the next generation. This is implicit if you are to get capital down to the next generation within your lifetime.”
This deep-rooted belief in the next generation seems well-founded. Oliver began his medical career as a doctor in Guy’s and St Thomas’s Hospitals, before acquiring and operating two psychiatric hospitals and two specialist care homes among other entrepreneurial healthcare activities. He will be taking up a position on the board with a keen focus, among other areas, on impact and ESG investing.
“It’s an exciting time. Looking back, what was so important growing up was the absence of pressure and the culture of encouragement,” explains Oliver. “I was a doctor originally, which led to entrepreneurial activity in venture capital. I’ve been in business for 15 years or so and having recently sold my business, it just felt like the right time. It’s fantastic to be able to work to further the family business that has given me so many opportunities personally.”
As with many families of longstanding wealth, charitable giving is intertwined into the fabric of its activities. Where the Scott family have approached philanthropy from a slightly different footing is the emphasis they put on its importance to each individual family member. By clearly separating benevolence from the everyday pursuit of capital preservation and core business activities, it allows individuals the opportunity to explore what is important to them, while building on the Scott family’s rich heritage of philanthropy. A history of giving that can be traced back to Sir James Scott – one of the early Victorian philanthropists – who helped improve the social deprivation impacting Lancashire’s mill towns.
“I remember growing up being told that Sir James Scott famously said that he was ‘very proud to have made a modest fortune without hurting anyone along the way’,” Oliver remarks. “So I think that there has been an awareness of this going back even to the first generation, before social impact was as big as it is today.”
“There is also a strong tradition of setting up charitable trusts in our family. Particularly with Francis and Peter, Alex’s father and my father,” adds Christopher. “The family is littered with quite large charitable trusts. There isn’t a central family pot of money but there is a collective feeling of the importance of philanthropy.”
“As Christopher mentioned, it is quite interesting the topic of charitable giving,” Alex interjects. “While we’ve acted collectively in terms of the capital, we’ve acted individually in terms of philanthropy. I think it’s one of the ways that individual family members have been, and are still able to express themselves in a way, as it is highly individualised.”
As our session concludes, talk turns to the role external advice plays and its importance in supporting successful stewardship. It seems only apt as 2019 has seen Sandaire build upon its investment office service, launching real estate, corporate finance and private equity businesses.
A commitment to providing the broadest spectrum of advice to benefit the families under its guidance. One of the key qualities external advisers can bring to any family is an objective perspective. Family businesses can face emotionally charged situations. Having external experts who can diffuse a potential conflict and interject in a dispassionate way is vital to appropriate decision-making.
“We started our conversation around family values and are now discussing the importance of advisers. I think the two are interlinked,” explains Alex. “It is implicit that those who have been empowered to execute on your behalf are not going to do something contrary to your values. One thing we do not do is write our family values down in black and white because we believe that it is more powerful if you live them. Actions are tangible and we look for the same traits in the people we place in positions of trust.”
“It is a question of alignment,” continues Christopher. “One of the things we are able to build on and all family businesses can build on is their reputation – especially in financial services. If you want to be trusted and you want to have an enduring reputation you have to consistently act correctly, irrespective of whether the existing rules and guidelines say you have to. If you follow that path, you can build a trusted financial services firm that is true to itself and the values it embodies.” Alex concludes: “I remember clearly when we sold the Provincial business, Christopher and I met with other family members of our generation, as we had been delegated the decision of ‘what to do now’. Well, as an aside, you know when visiting beautiful National Trust houses you see the oil paintings of a family’s ancestors on the wall. The reason that you are paying to be there in the house, is that one of those ancestors messed up. We agreed that day that we were not going to be that generation.”