Strategy

Partnership Profiles: Pictet & Cie, Switzerland's icon private bank

A staff reporter, 4 October 2001

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Not only small is beautiful in the world of Swiss private banking. With some SFr141bn assets under management, approximately another SFr60bn...

Not only small is beautiful in the world of Swiss private banking. With some SFr141bn assets under management, approximately another SFr60bn in pure custody business, and a global headcount of nearly 2,000, Pictet & Cie is a giant among gnomes, the largest of Switzerland's 17 traditional partnership private banks and one of Europe's top independent asset managers. And yet the Geneva-based bank, part-owned and named after one of Switzerland's oldest, most illustrious families, still manages to provide the personalised financial services that are the hallmark of Swiss private banking.

Few private banks have succeeded in maintaining such personalised services while expanding globally and diversifying which could be why Pictet is regarded as an icon that other industry players aspire to and clients regard a bank account with Pictet as something of a privilege. Since 1974, Pictet has opened offices in Montreal, London, Tokyo, Hong Kong, Luxembourg, Nassau, Singapore, Rio de Janeiro, Frankfurt, Turin and Milan, as well as branches in the Swiss cities of Lausanne and Zurich.

Ivan Pictet, senior managing partner, told Private Client Management that the overlap between private banking, which remains the core business, and their five other lines, funds, research, global custody, pensions and family office, was crucial. The bank's strategy over the last decade has been to maintain profitability while not losing control of the operation by too much dispersion of efforts. "Even if we have six business lines which seem quite successful, they're so close that by cross-selling you can develop a strategy which is good for all of them," he noted.

Unlike rivals Bank Sarasin & Cie in Basel and Bank Julius Baer and Bank Vontobel in Zurich of a similar size but either partially or wholly listed, partnership banks like Pictet are not legally required to publish results. "These companies can't afford to make business investments without immediate return," he said, adding that one advantage of being a partnership was that it was not under constant pressure from shareholders to perform.

"We would not publish our figures unless we were required to by law, although the supervision banking authorities receive monthly accounts. This means we can make a business plan of three to five years and take medium to long-term decisions and forget about the short term," he said.

The structure also protects the bank from takeover threats. But there are also disadvantages, such as the need to be overcapitalised in case of accidents or losses that tends to put a brake on profits. "We keep three times the capital ratio. It may not be the best way to optimise return on investment but it is the best way to sleep at night," Pictet said.

But even without capturing a glimpse of the secret balance sheets there is little doubt Pictet's has enjoyed buoyant success over the last two decades. Headcount has grown six-fold roughly from 300 staff in 1980 and assets under management five-fold since they stood at SFr40bn in 1990.

Pictet's private banking business has been highly rated by agencies, such as Bankwatch. Pictet was the first Swiss private bank to offer pension services in 1967 and now the business is ranked number three in Switzerland and making inroads in the UK and Japan.

Pictet said there was no question of changing the partnership structure of the bank, which was founded as Candolle, Mallet & Cie in 1805. He and the other seven partners: Charles and Nicolas Pictet, Claude and Jean-Francois Demole as well as Jacques de Saussure, Philippe Bertherat and Renaud de Planta, believe this gives them a streamlined management structure that can react rapidly without red tape.

Stakes in the partnership are ceded to new partners and bought back at par when they retire. Young partners are awarded extra portions of the firm's profits to help them build up their share stakes. Partners meet every working morning to review problems large and small and important decisions are made by consensus.

"We bless God every day we are a partnership. We tend to agree. We sometimes have interesting discussions. Not everyone has the same idea, but the system of collegial consensus is very well adapted to running a business".

Pictet said there were no plans to launch a mass affluent strategy. The minimum investment threshold remains SFr1m and SFr100m for family office. He said this "small but very ambitious baby" aims to become Europe's leading family office unit by 2005. Analysts say it is already one of Europe’s largest family offices.

Private clients are predominantly European, but some come from the Middle East, Latin America and Asia. Pictet's staff speak some 38 languages. The bank provides gilt-edged financial services to private and institutional private banking clients, including tax advice and global financial planning. Products include more than 60 in-house funds, covering industrial sectors, regions and niche areas as well as alternative investments that constitute ten per cent of assets under management and include hedge, private equity and funds of funds as well as currency and bonds.

The bank has a manager selection services team entrusted with the vital task of selecting and monitoring outside fund managers, including long only as well as hedge funds and other alternative types of investment. Pictet funds, currently worth some SFr23bn have grown rapidly over the last five years, he said. This along with global custody has been the fastest growing of all the six business lines.

Pictet said that one problem with rapid growth, particularly at a time of low-performing markets, was keeping a grip on spiralling costs. The bank recently hired specialists to handle compliance issues and demand for asset management.

Information technology, which accounts for ten per cent of staff, is expensive not least because the bank has an ambitious online offering: Private Net, a user-friendly platform for clients to access their accounts and Business Connect, a sophisticated platform geared towards asset managers.

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