All Roads Lead to Rome: The Pictet Family's Secret of Succession Across Two Centuries

When we speak of family succession and family governance, what rises to mind is always those great houses — vastly wealthy, luxuriantly branching, commanding the age — who solved the riddle of succession with a structure and a governance plan as neat as a perfect formula.

Yet in the actual work of serving families, we have found that far more of them need to achieve succession within the frame of a small household or a small family, rather than at the scale of the great house with its dozens or even hundreds of members.

The heart of family succession lies in the continuity of human capital. For a family of smaller scale, the greatest challenge is how to cope with the scarcity of human resources in the course of passing things on.

How is this riddle to be solved? Carrying this question, we came upon the Pictet family of Switzerland, and our interest was stirred. “All roads lead to Rome”: in family succession there is never a single best answer, only the method that fits best. I believe the “key” of the Pictet case may open the door of confusion for many families like them.

Two Hundred and Nineteen Years of Storms and Glory at Pictet

Pictet, the Swiss bank, springs from the commercial vision of two young Geneva bankers of 1805, Jacob-Michel-François de Candolle and Jacques-Henri Mallet. In Geneva they founded the house of de Candolle, Mallet & Cie, laying the ground for the birth of Pictet. This bank has kept a family tradition alive for more than two centuries, holding fast to its core conviction — “closely held, never to go public” — and concentrating on the wealth management of the world’s ultra-high-net-worth individuals and their families.

On July 23, 1805, Jacob-Michel-François de Candolle and Jacques-Henri Mallet, two young men not yet thirty, signed a partnership agreement.

At the start of the nineteenth century the bank’s business was focused on commodity trading, but it soon turned toward the more specialized work of currency trading and wealth management. After Napoleon’s defeat, Geneva was absorbed into the newly founded Swiss Confederation, which brought fresh opportunity for banking and other industries. In this period Pictet began to shape its early image as a money-changer and a manager of wealth.

In the 1850s, under de Candolle’s successor Edouard Pictet-Prevost, the family name was formally woven into the bank’s own name. From then on the bank shifted gradually from individual management toward family management. In the second half of the nineteenth century, under the guidance of Ernest Pictet, the bank began to attend to more diversified investment opportunities, such as railways and shipping; these investments not only broadened the bank’s scope but laid the ground for its later strategy of internationalization.

At the start of the twentieth century Guillaume Pictet became the bank’s central figure. He understood well the importance of going international, and he built a powerful social network between Europe and the Americas. Under his impetus, Pictet began to enter the North American market and, in an innovative turn, shifted part of its investment focus toward the electric-power and industrial enterprises.

In the mid-twentieth century Pictet expanded further, becoming a comprehensive financial-services institution spanning wealth management, asset management and asset services. These three pillars support one another, helping the bank withstand economic swings while meeting the needs of every kind of client. By the end of the twentieth century Pictet was already an international financial power, its business reaching across many of the world’s important financial centers.

At the start of the twenty-first century, as the global financial environment shifted, Pictet went on strengthening its position in asset management and asset services. Its business kept expanding, its assets under management reaching into the hundreds of billions of Swiss francs, and its clients came to include pension funds, insurance companies, public funds and many other institutional investors.

Today Pictet is not only a financial leader within Switzerland but has won respect and recognition on the international stage. As one of the world’s oldest family banks, it shows how, through ceaseless strategic adjustment and business innovation, a house can keep a lasting competitiveness within the global field of finance.

After more than two hundred years of development, Pictet is at present one of the fifteen largest private banks in the world, with thirty offices around the globe and 5,379 employees, owned and managed jointly by eight managing partners and fifty equity partners, who together oversaw assets of CHF 638 billion (as of June 2023).

The Transformation of the (Family) Private Bank

The history of private banking reaches back to the Florence of the early Renaissance, when Italy, on the strength of its rapid growth in trade and commerce, gave birth to Europe’s earliest trading companies. These companies chiefly provided trade financing and wealth-management services to the Papacy and the nobility, investing in long-term commitments such as government bonds and corporate debt. This original model of the private bank was widely embraced across Europe from the thirteenth to the seventeenth century.

By the fifteenth century, the private banks of Genoa had won the trust of the Spanish crown and become its direct lenders, while the bankers of Geneva showed their prowess in the War of the Spanish Succession, becoming at last the providers of banking services to the armies of France’s Louis XIV, and in the eighteenth century the chief foreign creditors of the French crown. Geneva’s Jacques Necker, as finance minister to Louis XVI, strongly supported the investment of Geneva capital in France.

In 1798 Geneva was annexed by the French Republic, and war and revolution brought most banking business to collapse. But with the rise of Calvinism and the gradual return of social order, Geneva’s private banking began slowly to revive. In 1815 Charles Pictet de Rochemont successfully secured Switzerland’s permanent neutrality at the Congress of Vienna, which provided an institutional guarantee for the long-term, stable development of Swiss finance.

Geneva’s private banking was able to flourish, not only because of its close dealings with the royal houses of Europe, but also because the religious persecution and social turmoil of sixteenth-century Europe drove great numbers of persecuted Protestants into Geneva, bringing enormous capital with them. In this period Geneva gradually became an international center of private banking and wealth management.

At the start of the twentieth century, as foreign capital poured in, international pressure pushed Switzerland to disclose client information, but the Swiss government held firm in protecting banking secrecy. In 1934 Switzerland passed a federal law making the disclosure of client information a criminal offense, further strengthening this system.

Entering the 1980s, with rising concentration and a trend toward integration in the banking business, the Swiss banking system underwent major reform. Credit Suisse, for example, carried out a series of acquisitions, and the merger of Union Bank of Switzerland with Swiss Bank Corporation created UBS Group, the largest bank in the world by assets. Driven by globalization and scale, the traditional family-bank model turned gradually toward the modern joint-stock and limited-liability forms.

After the financial crisis of the twenty-first century, the drastic change in the regulatory environment had a profound effect on the banking industry. The United States launched investigations into banks that helped its citizens evade taxes, leading Swiss banks to pay billions of dollars in fines. By 2012, Brazil’s Safra Group had acquired Bank Sarasin — one of the largest family banks — and merged it into its own banking operations, marking the end of an era of family banking. The stepping-down of the chairman of the board at Switzerland’s Julius Baer was one further sign of the gradual fading of the family character.

These changes show that, although the family-style private bank has its own distinctive strengths in protecting client privacy and maintaining long-term relationships, in the great tide of globalization and specialization the large-bank model, by virtue of its economies of scale and its operational efficiency, has become the mainstream of the market. Even as the number of family banks declines, a few institutions such as Pictet still keep their traditional independence and control, showing a tenacious capacity to survive and to adapt to change.

The “One” Model Behind the Flourishing of the Pictet Family

Let me first briefly explain what the “One” model is.

“What is the One” means finding the essence behind your enterprise and your family — the first principle. This essence steps outside the world of phenomena and dwells in the “One” of the noumenal world. Just as Euclid, on the foundation of five axioms, derived an entire system of geometry that has served for more than two thousand years; as Newton, on the foundation of F=MA, solved every problem of mechanics; as Darwin, with “natural selection, survival of the fittest,” explained the evolution of all species — the closer the “One” we find is to the essence, the greater its power, and the more it lets our enterprise and our family build a “moat.”

“Breaking through at a single point” means finding, within the world of phenomena, that point of breakthrough. It is a core problem, and solving it renders all the other problems beside the point. Solving it brings our family and our enterprise ever closer to that “One.”

“Iteration” and “feedback” mean building a structure that, through ceaseless refinement, forms positive feedback and a virtuous cycle, so that the whole system enters a state of healthy growth.

Let us return to analyzing the Pictet family’s “One” model.

The Pictet family’s “One” is the thinking and the values of long-termism; its “single point of breakthrough” is the partnership system; and its structure of iteration and feedback is made up of “hardware” and “software.”

Long-Termism

Long-termism brings stability in strategy and in operations. Against the frequent case of a bank’s chief executive holding office for only five to ten years, a Pictet partner’s average tenure exceeds twenty — and this system of long tenure ensures the coherence and consistency of strategic execution. Its partners are chosen by “selection” on the basis of ability and character, not by “inheritance” on the basis of family blood. Every decision a partner makes proceeds from the long-term interest of the group. Each generation of partners hopes to pass on to the next a better group, and a better environment in which to operate.

Long-termism is also one of Pictet’s values. An employee is not dismissed because performance dips slightly in a single quarter, and so they trust the firm, hold fast to its values, put the client’s interest first, and thereby build long-term partnerships with clients — while themselves becoming spokesmen for those values and those behaviors.

Pictet firmly believes that “when employees are happy, clients are happy.” Pictet has shared its profits since 1921, and around 70% of employees benefit from it. To cultivate still further a sense of ownership and an entrepreneurial cast of mind among its people, Pictet launched an “equity partner” program in 2006, so that executives and employees of marked contribution could hold a stake. Pictet’s long-term thinking gives it an average annual employee turnover of only 6.6%, far below that of other private banks.

Long-termism has also kept Pictet from seeking a public listing, even though this limits the speed of its growth. Because Pictet has no outside shareholders, it can share its gains with its employees rather than with outside shareholders, and be answerable to its clients rather than to outside shareholders. The closely held structure avoids the uncertainty of ownership, which brings ultra-high-net-worth clients a reliability that spans the generations. The conflict of interest among shareholders, clients and employees is, for the vast majority of private banks, a riddle without a solution — and for an industry whose ultimate goal is the passing-on of wealth across generations, the closely held structure carries a special significance.

“Hardware” and “Software”

Within the loop of iteration and feedback, the “hardware” refers to the family’s structural capital and financial capital (see the Flourishing Tree article on the family’s six forms of capital: “The Family’s Six Forms of Capital: From Owning Wealth to Attaining Happiness”), while the “software” refers to legacy capital, human capital, family-relationship capital and social capital.

Take an example to make this easy to grasp. Within the Pictet family’s “software,” what embodies legacy capital is something like the family’s earliest motto, “Do well and let them talk” (Fais bien et laisse dire). After Geneva successfully repelled the French army in the seventeenth century, the motto was changed to one that fully embodies Calvinism — “Bear and forbear” (Sustine et abstine) — a famous saying of Epictetus, one of the most renowned philosophers of ancient Rome.

And what embodies the values of human capital is something like what Nicolas Pictet told his children from the day they were born: “Do not go into banking to please your father or out of a sense of family duty; go and pursue the direction your own heart truly loves.” Nicolas asked of his children only one thing — to do what they love and to do what is right. Only so can one hold a long-term, sustainable life goal, answerable to oneself and to others.

The hardware serves the software; the building, perfecting, iterating and refining of the hardware advances the development of the software — above all the ceaseless growth and refining of human capital — so that a higher intelligence feeds back into the further refining of the hardware, forming a healthy, virtuous cycle. And this virtuous cycle keeps the values of long-termism upheld and enacted, realizing the passing-on of the family across a century.

A Singular Partnership System for a Family Business

Pictet has one distinctive feature: the coexistence of several founding families. These include the family of the Pictet-Gautier marriage, the Demole family and the de Saussure family, forming a tightly woven family network, all of them descended from a few of Geneva’s oldest families. Among the partners, some are the direct descendants of former partners, while others are linked to the rest through indirect family ties, alongside outstanding managers drawn from within and without. The partners’ committee is thus able to choose the most capable candidate from a large pool of talent — the descendants of the three founding families, together with managers from within and without.

At Pictet, the partners individually and independently hold both ownership and management rights, while the partners’ committee, as a collective, is the bank’s highest decision-making body, responsible for all the key decisions and the tasks of execution.

Across its 219 years, Pictet has had only 45 partners in all, with an average tenure of twenty years. Through the overlapping, staggered succession of its partners, the bank has ensured the continuous and orderly passing-on of its enterprising spirit, its cultural values, its expertise and its relationships.

The core of Pictet’s partnership lies in the strict selection of its partners — a process that looks not to blood but only to talent and virtue. Apart from the early founding years, when the partners were so few that son occasionally succeeded father, in the more than two centuries since, no Pictet partner has gained a stake by inheritance, which has ensured the enterprise’s independence and its power to innovate. Pictet is therefore neither a family business in the traditional sense nor a non-family business.

In selecting a partner, the candidate must display a strong entrepreneurial spirit and the ability to drive new business and create new value independently. Across the long river of its history, this practice of constantly renewing the blood has kept Pictet always alive with the vigor of a startup.

In electing a new partner, the committee chooses with great care from a broad pool of talent, and the sitting partners are especially prudent in the choice, for it bears on decades of close collaboration to come. The candidate must prove not only their business ability but also a high alignment with the partners in culture and values, and must be at a fitting stage of age — three conditions, none of which may be missing.

The Pictet family has always stressed that descendants have no inborn right, and this effectively weakens any sense of entitlement in later generations. Commonly, a family’s third generation, born into wealth, lacks the drive to strive, and this often leads to the decline of the family business.

Sébastien Eisinger, who joined Pictet in 1999 and rose to partner in 2019, holds that “the criteria of selection comprise three elements: first, business experience and ability, to drive continuous innovation; second, cultural consensus, a shared vision and values with the partners; and third, personal drive, which must accord with the firm’s goals and plans — this involves deep personal commitment and a close collaborative relationship.”

The rule of partner succession that Pictet uses is a staggered form of succession, meaning that the admission of a new partner must win the unanimous agreement of all the partners. The ages of the partners are usually spread in balance between forty and sixty-five, and a new partner is selected roughly once every five to ten years, ensuring a sound ladder across the age groups.

This staggered arrangement of ages ensures the stability and continuity of the bank’s management and avoids the leadership vacuum that would follow if several partners retired at once. This overlapping handover among the partners not only brings new perspectives and ideas but also ensures the smooth passing-on of the bank’s culture and expertise.

In this process, the partners engage in decades of close collaboration, and the younger partners gradually absorb and learn the experience and wisdom of the older ones, so as to become a new generation of leaders able to represent the Pictet spirit in full. Every partner bears the important responsibility of passing knowledge and values on to the generation that follows.

The partners’ committee also stresses diversity and complementarity in the professional backgrounds of its members. In the current partner team, some hold backgrounds in law, economics, finance and IT, and this diverse mix of skills helps achieve a more rounded perspective in decision-making and reduce error. This exchange of knowledge and skill across the generations not only fosters the bank’s stable development but strengthens its competitiveness in the market.

Pictet’s ownership arrangement notably casts the sitting partners as “agents” for the partners of the future, holding “restricted shares”: they have the right to dividends, but voting follows the principle of one person, one vote, and the right of transfer is also restricted. A new partner usually needs to borrow from the older partners to buy shares, repaying it year by year out of dividends. This ownership structure prompts a partner to repay debt in the first half of a career and only accumulate wealth in the second.

This mechanism avoids the rapid consumption of wealth and fosters the entrepreneurial spirit of the partners. Every partner is regarded as a founder, binding their property to the bank and maintaining a modest and frugal way of life. With an average tenure of twenty years, a partner on retirement usually entrusts their wealth to Pictet, ending their ownership relationship.

Pictet’s partnership allows a long time to assess and select the fitting successor, forming a kind of “succession without DNA,” offering opportunity to non-family members while simplifying the management structure and ensuring the organization’s continuity and its power to innovate.

The Pictet partners’ committee makes decisions by “one person, one vote,” requiring that all decisions pass unanimously — a reflection of its regard for consensus reached through consultation. A partner has considerable influence within their own area of expertise, while a senior partner acts as coordinator when opinions diverge, balancing the opposing views.

A question that cannot pass unanimously is treated as not yet ripe and is set aside. Though this unanimity rule makes decisions slower and tends toward the conservative, it aids well-considered decision-making and smooth execution.

The partners meet often — several informal morning meetings a week, and formal meetings for matters needing long discussion — stressing the importance of face-to-face exchange. The senior partner plays a role in the committee akin to a lead director, responsible for maintaining effective functioning and coordinating opinion, and standing as the symbolic guardian of the bank’s culture and values.

The Advantages of the Pictet Partnership System

1. What makes a family business distinctive is that family members, when they take on leadership roles, usually place greater weight on the family’s reputation and on the values handed down through the generations, and so incline toward strategies that favor the enterprise’s long-term development. This family-grounded mode of governance has become a great competitive advantage for Pictet.

2. What sets Pictet apart from other century-old enterprises is the coexistence of several founding families. Besides the Pictet family itself, there are members of the other founding families, and the participation of these families brings the bank capital and talent, strengthens its influence and ensures long-term control of the bank. Of Pictet’s eight current partners, four come from the three core founding families above. The bank’s shift from dependence on a single family to reliance on several, admitting non-family members prudently through a semi-open model, has not only broadened the range from which partners are selected but also aided the passing-on of the family’s core ideas and values.

3. One of Pictet’s successes lies in opening its top leadership positions to non-family professionals. Facing the challenge of bringing in outside talent, a family business usually has to weigh the limits of a closed policy against the risk of opening too far. Through its partnership culture — stressing unity of values, and keeping humility and a striving spirit — Pictet adopts a way of drawing on one another’s strengths and has created an inclusive, open environment favorable to attracting and motivating top outside talent. In its partnership, every new partner starts from the same point, with equal rights and duties, ensuring a fairness free of family advantage, which strengthens the cohesion of the team and its dedication to the bank’s long-term development. To reinforce this culture further, Pictet has instituted an “equity partner” program, so that outstanding non-family executives and business mainstays may share in profits as “equity partners,” though they hold no decision-making power. The program selects once every two years, offering the group’s second tier of management and its front-line business mainstays the chance to become “equity partners.” At present Pictet has fifty “equity partners” in all.

In Closing

Beneath Pictet’s partnership lies a deep conviction: that the purpose of the enterprise’s existence is to do good. This bank pursues not merely profit and scale but the creation of long-term value for its clients, its employees and society.

The mission of a partner is to increase the value they create and to pass the enterprise and the wealth on to the next generation in a better state, realizing the enterprise’s perpetual operation. This is the core philosophy of the Pictet partnership.

Stephen Schwarzman, founder of the American firm Blackstone, once described Pictet as a “startup more than two hundred years old” — seeing that it has kept a very vigorous zeal for striving and for innovation.

The course of the Pictet family’s development and its singular partnership system offer valuable lessons for family businesses around the world, and for the family businesses of China in particular. Through an open partnership system, the Pictet family has kept management and wealth from being confined within the family, drawing in able professional managers from outside to take part in the enterprise’s governance. This model has effectively preserved the continuity of the family’s culture and core values while ensuring that the enterprise can, on the strength of collective wisdom, overcome all manner of outside challenges and achieve long-term, stable development.

China’s family businesses might therefore consider drawing on Pictet’s mental model and its institutional design, achieving through fitting institutional innovation the transformation from the traditional family business toward the modern enterprise, so as to meet the new challenges of global competition. This can not only help the enterprise develop over the long run but also ensure that the family’s core values are passed on and carried forward.

References:

“An Interview with Ivan Pictet, Chairman of Pictet,” Caijing

Inside Private Banking, by Lian Jianhui and Sun Huanmin

“Pictet: Partnership Succession Beyond the Family,” Global Family Business Research Center, PBC School of Finance, Tsinghua University

“Geneva’s Oldest Private Bank,” Sina Finance

“Pictet,” Wikipedia