Listen to this article
Alex Scott, founder of Sandaire Investment Office, which manages his own funds and those of a handful of other families, smiles wistfully as he thinks about his home in north-west England’s Lake District.
“Of course I would rather be in Kendal,” says Scott, the fourth generation to head his family business at its Cumbrian headquarters. Sandaire has its roots in the 19th-century cotton industry, before it moved into insurance and financial services in Manchester at the turn of the 20th century.
“But you have to have access to the vibe, the ideas, the dynamism and the talent,” Scott says. That has meant basing the investment operation in London’s West End, tucked behind Selfridges department store on Oxford Street.
Sandaire, which manages assets of more than £3bn, is looking further afield. The group merged with fellow wealth manager Lord North Street last year and is keen to expand in Singapore.
“We are anticipating a need for these entities to gain scale, as they are facing a variety of legal and compliance costs,” says Stefan Jaecklin, head of the Emea wealth and asset management practice at consultancy Oliver Wyman. “In these areas, scale really matters.”
Family offices are often preferred by wealthy investors because they can provide unbiased advice and independent access to specialised services, unlike costlier alternatives from banks, believes Jaecklin.
Traditional private banking centres such as Geneva and Zurich, Scott says, have been discredited because their institutions failed to put clients first, charged excessive fees and sold inappropriate products. “Swiss institutions always had a significant advantage in attracting clients, which was banking secrecy,” he says. “Now that has been dramatically eroded, giving other places a step-up.”
The tight-knit private client culture that put Switzerland on the map has also contributed to its downfall, he believes. “Switzerland has always been dominated by private banks. But in London, we live alongside asset managers who can provide both performance and authority. We are measured against that and have to compete against those standards.”
But the “pendulum of global opportunity is swinging east”, adds Scott, explaining the firm’s interest in Singapore, where Sandaire established an office three years ago.
The long term is critical, he says. The group is not aiming its services at families who want to sign a form and have immediate access to investments.
“My own family is always working to a 30-year time horizon,” Scott says. “All the clients we are working with are thinking several decades ahead.”
The main problem families have with banks is trust, he adds. “The banks have collectively paid £160bn in fines and settlements, but the power of their brands means they are able to endure these penalties. That is the environment in which we must compete.”
But an eventual rejection of banks’ investment offers by millionaire families is coming closer, he says. “I am an entrepreneur and optimist. We are early on in terms of consumer acceptance of what an independent provider can do, but we have proved there is a commercial case for this. People who come to us have decided they want a different solution, and what is out there does not answer their needs.”
Developing technology is one way to meet those needs, although Sandaire has to be more judicious in its spending than its wealthier banking competitors.
“We will never have the budget of the big firms for tech spend, but we can be more nimble than they are, outsourcing modules to different tech companies and plugging them together,” says Alexandra Altinger, Sandaire’s German-Italian chief executive.
Serving just 45 wealthy families, Sandaire does not employ technology in the same way as mass-market operators. “A lot of players recognise this need to be part of a community, but they see it as a purely digital play,” says Altinger.
“That is not a community — it is a digital platform. There is an intimacy necessary to host a community. We realise there are experiences our clients go through where they can help each other. That is the definition of a community — a two-way thing.
“Some of our clients are keen to invest together. Even though these are people with deep knowledge, they can’t do everything alone. It is the reason we joined forces with Lord North Street.”
The Sandaire transaction reflects a wider trend among multifamily offices to increase their size, also demonstrated in a recent merger between Stonehage and Fleming Family & Partners, creating a powerhouse of 500 staff serving more than 250 families across the Emea region.
“As these firms enter the next phase, they will need to focus more on the strengths of their brand, process and client relationship, while still maintaining the sense of a family-owned experience,” says Sebastian Dovey, managing partner of wealth think-tank Scorpio Partnership.
While he feels the sector gets disproportionate attention compared to its relatively small size, there is a window of opportunity to be exploited, with those offices that are currently expanding “better placed to face the increasing competitive challenges for business in the next five years.”
Banks are very aware of this threat to their customer base, but family offices need to better position themselves to win market share, believes Dovey. “The MFOs need to think harder about how to respond,” he says. “The old approach of simply stating ‘we are not a bank with all the inherent issues that come with this,’ is not cutting it any more.”