Taking a long-term approach, always on the same side as clients
François Pictet holds a Master’s degree in Advanced Studies in Business Law from the University of Geneva and Lausanne. He has been a Managing Partner of the Pictet Group since 2022. He is responsible for the Technology & Operations division and also oversees PWM’s Asian and Middle East businesses. Before being named Managing Partner, François was Head of the Pictet Investment Office, the ultra-high-net-worth investment arm of Pictet Wealth Management. Prior to joining Pictet in 2015, he worked at the private equity firm AEA Investors in London. Prior to that he was in M&A advisory at Credit Suisse in Zurich and at two non-governmental organizations working in microfinance and socially responsible investing.
Pictet was founded in Geneva in 1805. More than two hundred years later, after many economic and political cycles, the Pictet family is currently the ninth generation of managing partners. Unlike many private banks, Pictet has several distinctive characteristics: being privately owned, not listed, continuing to have founding family involvement, and its partnership model. After more than two centuries, one of the world’s oldest family businesses continues to focus on investing for private and institutional investors around the world and is among the top international financial institutions in terms of assets under management.
What are the unique characteristics of Pictet after more than two centuries? How does it strike a balance between being conservative and innovative? How does it continuously reinvent its family ownership? In the post-COVID era, how does Pictet see opportunities in China? Managing Partner of Pictet Group, François Pictet, was interviewed by China Securities Journal to discuss the key to how this centuries-old enterprise has been able to continuously create value through numerous cycles.
From François Pictet’s point of view, the greatest advantage of Pictet is that it is a pure wealth management and asset management institution. Focusing on wealth and asset management and always being on the same side as its clients are at the core of Pictet’s values. On the one hand, Pictet is conservative in managing its business, and its core business model has not changed; on the other hand, it is constantly innovating in terms of its products and investment solutions. This is a group that, as Pictet stresses, is committed to taking a long-term approach. Its long-term perspective has enabled it to create a lasting legacy.
Taking a long-term approach
Pictet has over 200 years of history. What kind of advantages has it accumulated over the years?
François Pictet: A major difference between Pictet and other players is that we are a pure player, which means we only do wealth and asset management. We don’t do investment banking, we don’t do corporate banking, we don’t do retail banking. We only do wealth and asset management for private clients or institutional clients.
I think it has several advantages. First, it reduces the complexity of our focus. This is very important in a world that’s becoming more and more complex. It’s also good because we don’t have any of the conflicts of interest that can potentially arise from working in different sectors of activity. The second advantage is that we are privately owned. I believe it’s a key advantage when you want to think long term − you don't have any external shareholder pressure. And that lets you look at everything you do with the longer term in mind.
Today we have eight managing partners who manage the firm, but who are also owners of the firm. The average tenure of the partners is over 20 years. During this time they have one very simple mission, which is making sure that by the time they retire, they leave the bank in a stronger position than when they took over. So basically, we all think 20 years, 20 years plus when considering the future of the firm.
Of the key advantages that you talked about, which of them were accumulated over the years and which were developed through innovation over time?
François Pictet: The two advantages I mentioned, being a pure player and privately owned, have been ours from day one and lie at the core of our values. Every time there is a crisis, we see the value of these attributes, and that’s why we don’t change our business model.
Precisely because we are independent and think long term, we can be innovative in our product design and investment solutions. Overall stability is something that is very dear to us. It has several impacts because we want to run the Group very conservatively, but we can be innovative as well. And for that, you need to be consistent in investing in technology, in new investment solutions. So you have to be innovative when it comes to your technology and investment solutions, and conservative in the way you look after the firm.
Why didn’t Pictet follow the trends and explore commercial banking or investment banking?
François Pictet: We believe that staying focused reduces complexity. And when we look at how complex the industry is, just in wealth management and asset management, we see a constant stream of new regulations being introduced. We’re happy to be focused. I think if you reduce complexity, you will increase stability for your clients, and this is important.
When you’re an expert in what you do and you’ve racked up a lot of experience, you can avoid some of the mistakes that others still make. If we were to start going into other areas, we would run the risk of having to adopt a new culture and not really being able to see where the risks are. I think some players have run into trouble because they have rushed into new sectors of activity, very often by making acquisitions, and had to adapt to a different corporate culture and risk culture.
If you’re running investment banking or corporate banking alongside wealth management, you may run into situations where you have conflicts of interest. And for us, avoiding such conflicts is fundamental because we believe it’s important for our clients to understand that we will always sit on the same side of the table with them.
Will Pictet adapt its business model to fit in with the changing trends?
François Pictet: It’s highly unlikely. We haven’t changed our business model up to now and I don’t see why we would in the future.
What are the core businesses of Pictet?
François Pictet: Globally, we focus on wealth and asset management services for individual and institutional investors. We also do asset servicing for some clients.
How does Pictet ensure that its core businesses continue to deliver value with the business model remaining unchanged?
François Pictet: I think fundamentally clients’ needs have not really changed in the sense that they are looking for a partner that they can trust, that will advise them on the investment side, that will sit on the same side of the table with them. Ultimately their needs are about protecting assets, growing assets and structuring assets.
We need to continuously invest in and enhance our range of investment products and services so we can really add value. For example, in recent years we have been enhancing our private assets solutions by launching our direct private equity real estate solution, as well as direct private equity funds and direct private debt solutions. Prior to that, we were a pioneer in thematic investing − we want to have a good range of products that we are very skilled at.
Transformation and innovation while creating an enduring legacy
One of Pictet’s distinct characteristics is its family ownership. This model is quite rare these days in the financial industry. Why has Pictet continued to adopt this model?
François Pictet: Our model puts the survival of the firm first and the family’s interest second, because the ownership of the firm doesn't flow from one generation to the next, it actually remains at the managing partner level. It’s more of a meritocracy than a family business model.
Other family businesses may not be ready to lose their privilege and accept that their children will not automatically own the family business.
Pictet emphasizes its consensus-oriented management style. Why are joint decisions important?
François Pictet: Typically how it works is that the managing partners meet three times per week. During the decision-making process, there is usually one opinion that will guide the others because that person knows more about the topic or has dealt with similar situations in the past. We'll usually be able to rally everyone around that decision. If that doesn’t happen, it’s not a problem. We can postpone the decision. But it’s very rare.
I would say that our long-term model gives us the luxury of time. Being privately owned, we aren’t forced to make any decisions. Nobody is expecting a decision other than ourselves. So if we’re not sure about complex and important decisions, we postpone that decision. Very often with the passage of time, we are able to decide because we have obtained more information or focused more specifically on that particular issue. And we usually make the right decision in the end. In our industry, a great deal hinges on making the right decision, because avoiding mistakes is already part of winning, in an industry that keeps consolidating. Surviving is winning actually.
What’s the longest time taken to reach a consensus? Can you give an example of one idea being shelved for later in order to avoid a mistake?
François Pictet: Usually we make decisions fairly quickly. But with important decisions, such as choosing a new managing partner, for example, we will start this discussion more than a year before making the decision. You don’t want to be rushed into these important decisions.
Family businesses might sometimes be considered old-fashioned, conservative and patriarchal. How has Pictet managed to evolve, diversify and innovate?
François Pictet: We need to differentiate between how the Group needs to be conservatively managed to inspire trust in our clients, and how innovative the firm has to be to survive. I would say the Group is conservatively managed, this is true. But when it comes to innovation, I think our partnership model actually helps us innovate a lot because as a partnership, the organization doesn’t function as a pure top-down machine in terms of decision making. Basically when we choose the next partner, we want someone who can work with others.
A certain level of humility at the top means that people are eager to know what the people on the ground see every day. If they want to make a decision, they will ask the people in the firm. The employees of Pictet feel that if they want, they can change the Group for the better. They launch a lot of initiatives. Many of the things we do actually come from the bottom. And that culture is enabled by our partnership model. At Pictet, employees’ voices are heard.
China’s wealth management market is promising
What do you see as the biggest opportunities and changes in China's wealth management market?
François Pictet: A trend we’re seeing in Asia is that the number of family offices is increasing very rapidly. But again, it’s an evolution, not a revolution, in the sense that clients’ needs haven’t changed. They want a partner they can trust. There is so much wealth creation and this wealth will need to be managed.
There is now a focus on deploying “philanthropic capital”. What role do you think philanthropy will play in wealth management?
François Pictet: The way I look at it is philanthropy is a great way for the family to pass on family values across generations. It’s nice for the family to regroup around a common objective that’s dear to every family member. There’s a side benefit to obviously doing good, which is great, but one of the challenges sometimes is the communication between generations − what to do with the wealth and how to invest it. There can be different views, different investment horizons, different ideas. Aligning everybody is not easy. And philanthropy can have everybody on the same page around the table and working towards something that is dear to the family.
Original interview in Chinese published in China Securities Journal, Monday 12 June 2023. Translation to English by the Pictet Group.