We are private bankers

Interview

Pictet’s head office lies in the Acacias district of Geneva. After 26 eventful years as a member of the Partners’ Committee, Renaud de Planta has spent the last five years as Senior Partner, primus inter pares, among the Managing Partners of the private bank. Now it’s time to reflect - in near-perfect German.

Are you a banker or a private banker?

What is the difference?

A banker prioritises their own interests and then those of their bank - and not those of their clients.

Then we are private bankers at Pictet.

Recently, with the collapse of CS and the Benko debacle at Julius Baer, the image of banks has been severely tarnished. Your firm, on the other hand, remains a beacon of strength. What is it you do better?

As private bankers, our clients are our sole focus. We manage almost CHF 700 billion for them. Our sole objective is to invest their money in the best way possible. We see ourselves as entrepreneurs serving entrepreneurs - sharing the same side of the table rather than sitting across it as counterparties - as is common elsewhere. We strive to find the best products across all asset classes.

Julius Baer lost more than CHF 600 million as a result of lending to René Benko. Could that have happened to Pictet?

No.

Why not?

Lending is not part of our core business. It’s just a service we extend to existing clients. Our loan book merely totals CHF 10 billion. We only accept liquid and high-quality collateral. We attach great importance to being able to focus on our clients and their portfolios in times of crisis. If a bank gets into difficulties with lending or trading activities, it can lose sight of its clients’ interests. 

What role does the legal form play? You don’t have shareholders who demand high dividends.

It’s a decisive factor for our success. Long-term thinking is deeply woven into the fabric of our culture. The decisions I make today must stand the test of time and remain relevant five or 10 years down the line. I was a Partner for 26 years and embraced this philosophy, and the same is true of my seven fellow Partners. The oldest are 53, the youngest in their early 40s. We’re currently channelling investments into areas that are unlikely to yield profits in the next five years.

So the fact that rivals such as Julius Baer, Vontobel or EFG are listed is a disadvantage in your view?

We view our private ownership as an enormous privilege, and even more so with it under the stewardship of its Managing Partners. We shoulder the responsibility and are acutely aware of the implications of our decisions. This ensures continuity. Before joining Pictet, I spent 11 years at UBS, a listed company. There, from a personal viewpoint, the members of the Board of Directors have very little riding on the outcome of their decisions. As the saying goes, they have no skin in the game. But it’s a different story for me and my fellows Partners. We know the business well and we’re also the owner managers. Maybe that’s why we make fewer mistakes.

You bear the losses yourselves rather than passing them on to the shareholders or the company.

We have to live with all the consequences. Our model proves beneficial for our clients, the financial centre
and the country.

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Other banks in Geneva or Zurich have the same model, but Pictet is clearly number one. What is it you do better?

Today, our business is very solidly based on several mainstays: our traditional wealth management arm for private clients and our asset management arm for institutional clients, and Pictet Asset Services. Wealth management and asset management are more or less even matched in terms of resources and their contribution to profit. That is our unique strength.

Your competitors are also trying their hand at institutional asset management, but are enjoying less success.

We have been very consistent in our approach from the start. We built the right infrastructure; we made no compromises and we wanted to attract the best people right from the start. We were also pioneers. Emerging markets, total return products, thematic equity funds - these did not exist on a large scale 30 years ago. When the demand came from large institutional clients, we were ready to meet it. And we haven’t allowed ourselves to be knocked off the path we have chosen.

Are your main competitors still in Switzerland?

Nowadays, our competitors are global players. US firms are pushing strongly to make inroads into Switzerland. Among the top 10 asset managers, we are consistently ranked in the top 4 in Europe, but the other three are US firms. In private banking, too, the business has become very international, and in the growth markets we mainly cross paths with two US, two European and one major Swiss bank.

You only grow organically.

That’s right. We’ve acquired small teams, a maximum of 12 employees in Germany, for example, but never a legal entity. This approach is what sets us apart from our competitors which have grown primarily through acquisitions. Choosing the organic route has many benefits. It has allowed us to maintain a homogeneous culture and avoid problems with system integration. In times of crisis, these are often the
elements that can become vulnerabilities. When faced with a market crash or heavy cash outflows, top management is unable to fully grasp all the risks because the systems are not compatible.

This is what happened at CS; management was unable to aggregate its exposures. 

We’ve always been able to do that here at Pictet. Our approach to risk management is very rigorous, and underscored by a high degree of prudence in our risk appetite.

In December and after 11 years, you settled the tax dispute with the US, with a fine of USD 123 million. How damaging was this to Pictet’s reputation?

The settlement drew attention mainly from some media in German-speaking Switzerland; internationally it has been less of an issue.

The fact that Pictet was involved at all came as a surprise. 

I don’t want to go into the details of the case. However, like other banks, we also learnt that US citizens sometimes hold several passports without declaring them. We established a subsidiary specifically for US clients back in 2009. That was an advantage.

Another point of criticism would be the appointment of former Julius Baer CEO Boris Collardi. His short tenure does not suggest the decision was a success.

I do not wish to comment on this.

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Where does the Swiss financial centre stand today compared to when you joined Pictet 27 years ago?

Stronger in some respects, weaker in others. Technology has played a very important role. Regulation has increased tremendously. Not just in Switzerland, but worldwide, and it is uncertain whether the benefits outweigh the costs. Banking secrecy has ended, but Swiss providers have shown just how adaptable they are. In the light of all these changes, the Swiss financial centre is strong. However, the collapse of CS certainly didn’t help. Banks in other countries have also gone under, though. In the US, for example, more than 500 banks have disappeared during the same period.

Asia plays a crucial role for Swiss private banking. Is the CS fiasco an issue there?

Not so much in Japan, more so in East Asia, though. However, Swissness still has great appeal. Owing to geopolitical uncertainty, clients in other financial centres are again increasingly interested in Switzerland. If we adopt a strategic approach, we will capitalise on fantastic opportunities.

What course should Switzerland steer between the US and China?

We have to strike a balance - and embrace our neutrality.

Would it be wrong to steer a course that puts the country too close to the US?

Realpolitik is needed. Swissness is not just about geopolitics, but also about the stability our country is able to offer, our legal system and the quality of service we offer. These points are fundamental, I underestimated them myself for a long time.

Has the write-down of AT1 bonds damaged the financial centre?

It’s certainly not helpful. In my view, however, it is primarily an issue of communication.

Many major foreign investors have lost large sums of money.

Maybe they didn’t read the brochure carefully enough. If a large European bank had been in a similar situation, and that is not entirely inconceivable, the outcome is unlikely to have been any different.

Immediately after the collapse of CS, you were the only active bank representative included in the Banking Stability Expert Group set up by Karin Keller-Sutter. The Finance Minister has just published her own report. Were you surprised?

No. The four core messages of our final report still hold true: strengthen FINMA, enhance crisis management, review emergency liquidity and improve the quality of equity.

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Emergency liquidity will remain a major topic in your new position, with you joining the Bank Council of the Swiss National Bank (SNB) on 1 May. The SNB grants emergency liquidity assistance (ELA). Do adjustments need to be made here?

Although the crisis in the US was triggered by regional banks such as Silicon Valley Bank, it was still a systemic crisis and required the Fed’s intervention and broad guarantees. For Switzerland, this means ELA must be available to all banks. To suggest that they should be exclusive to only three or four large banks is a highly dangerous proposition.

The search for a successor to the outgoing Chairman Thomas Jordan is underway within the Bank Council. You have also been named as a candidate yourself. Are you standing?

No. I am no longer seeking executive office.

Vice President Martin Schlegel looks set to become the next President.

Selecting the best possible candidate is what matters most. We should be careful with exclusion criteria: internal or external, language, gender - all these factors should not play a central role. There are only three members on the Governing Board. Given the SNB’s underlying importance for the Swiss economy, it is vital that the best representatives are appointed: three strong candidates with vast expertise and who have the country’s interests at heart.

Does the SNB need to change direction?

It has a good track record in terms of monetary policy. Its efforts to combat inflation have borne fruit. But every institution has scope to improve. The emergency liquidity system will be expanded and the investment process for currency reserves can also be improved.

Together with former Vontobel CEO Zeno Staub, you once called for a sovereign wealth fund to be set up.

If certain neighbouring countries get into difficulties in the next few years, what will happen to the exchange rate? What level can the reserves reach before we start having problems of our own? This is a challenge for our country.

The SNB Bank Council is regarded as a body which rubber-stamps decisions. It cannot make decisions on monetary policy or investment strategy, for example. Do you intend to change that?

I haven’t even taken up my position yet. I will form my own opinion after the election. The main remit is price stability, which the SNB has fulfilled excellently.

The group of experts has called for improved cooperation between the Federal Department of Finance, FINMA and the SNB. So you will be able to implement that immediately.

This is something that concerns the entire crisis management set-up in Switzerland. We need to rethink it.

Was it the Federal Council’s invitation to join the SNB Bank Council that prompted your decision to leave Pictet? You could have stayed until the age of 65.

I can look back on 37 years in the financial industry. My five years as Senior Partner correspond exactly to the median tenure in the post-war period. I would rather step aside before others ask me when I’m leaving. I turned 60 last year. I’m happy and grateful. While I’ll continue to keep an eye on the Group as a non-executive board member and remain available for counsel and client events, my active involvement in day-to-day operations will soon be behind me. I also want to get involved as an investor,in smaller companies, and engage in philanthropic activities.

The Bank Council of the SNB could benefit from more expertise.

I’ve benefited greatly and want to contribute my knowledge and experience to certain committees. I’ve also established a foundation, together with other CEOs, to increase the attractiveness of Geneva. I intend to remain active, but will no longer be giving 200%, seven days a week.

Translation by Pictet Group