(Bloomberg) -- In the mythology of private banking, Banque Pictet & Cie SA stands apart. Over the course of more than two centuries, the Swiss institution has discreetly tended to the assets of the very rich, led by a small crop of partners who form the most exclusive men-only club anywhere outside the Vatican.In its entire history, only 43 individuals — all men, all white — have risen to the rank of Pictet managing partner, creating a bond more enduring than your typical marriage. From their Geneva perch, they oversee more than 600 billion francs ($662 billion) in assets under management and a level of profitability far beyond larger, publicly-listed peers, often rewarding each of them with more than 20 million francs a year. But in recent years, an unsettling new trend crept into Pictet, cracking the façade of corporate cohesion: key employees began leaving. Over the course of 2019, a dozen long-tenured relationship managers at the wealth unit departed. Within days in September of that year, four leading bankers from the team looking after Russian clients handed in their resignations. Bankers for Scandinavia and Israel followed, putting billions in assets under management at stake.At the heart of the exodus lies a culture clash. Longtime employees were bristling at the brash style of the flood of recent hires brought on to manage the money of the ultra rich, particularly the explosive growth of new wealth in Asia that has set off an aggressive race for assets and talent with bigger rivals like UBS Group AG and HSBC Holdings Plc.Yet for others, change wasn’t happening fast enough; some newcomers who had signed up to the promise of the rejuvenated Pictet were departing again in frustration.Interviews with a dozen people familiar with Pictet’s private-wealth arm reveal a business at a crossroads, confronted with the reality that, in order to stay ahead, Switzerland’s preeminent private bank must adapt. That means embracing more risk and changing the client relationship — away from the concierge-like approach that endured for generations toward a more transactional model.That can be tough for employees accustomed to the principle of caution and secrecy that guided Pictet through the centuries. But change has also brought opportunity to rethink old habits and expand the bank on the global stage.The people asked not to be identified discussing the bank’s inner workings. Pictet declined to comment for this story.While overall attrition at Pictet Wealth Management stands at an all-time low of 2.8%, the evacuation of longtime talent has reverberated through the corridors of the five-story modernist headquarters. The departures startled the partners, who viewed the outflow as an assault on an institution priding itself in flat fluctuation. So late in 2019, they gathered in a spartan conference room for what the partners call their salon meeting to learn more about what was behind the defections.Sitting in tiered formation at the large conference table, much in the same way they congregate several times a week to discuss the order of business, the men heard of tensions, a dispute over restraint and renewal rippling through the bank’s private wealth subsidiary. “Pictet is in between two worlds,” says Pedro Araujo, a senior researcher at the University of Fribourg, who has studied Switzerland’s elite families. “They are in the old world of Geneva private bankers, and the new world of globalized finance, where they want to be present internationally, they want to grow, they want to present themselves as modern, but not too much. Two worlds that are on a collision course.”For all its tradition, Pictet has become more attuned to change in recent years. The company transformed its legal status after the end of banking secrecy in 2014, disclosing more performance metrics as a result. One of its partners, Rémy Best, had already made his mark revamping the asset-management unit. Next, he turned his attention to the wealth division, long the beating heart of Pictet. It turned out that the operation required fresh blood. And the bank found it in Boris Collardi, who performed one of the most audacious maneuvers in Swiss banking in 2018 when he abruptly left as CEO of Zurich private-banking nemesis Julius Baer and decamped to the shores of Lake Geneva to join Pictet.On the face of it, Collardi is everything that the typical Pictet stakeholder is not. More bonvivant than ascetic financier, Collardi, 46, stands apart as the first outside partner in decades. He also brought serious star power and a dose of bonhomie to the Pictet franchise that values uniformity over individualism, down to the subdued color palette of the partners’ perfectly tailored suits.Collardi, by contrast, is known to greet close colleagues with a hug or a peck on the cheek; in meetings, he is the first to take off his suit jacket and jokingly complains about having to wear a tie. His ascent to the Pictet partnership not only made him one of the youngest people in recent history to hold that title, it also tipped the scale for the first time to a majority of members in the group who aren’t descendants of the founding families.In Collardi, the partners identified a peer who could pick up from Best, a longtime acquaintance who had introduced the new hire to the other partners. And Collardi was already well versed in Asia, where Pictet was keen to tap into an affluent class of newly minted billionaires preparing to pass on their wealth to the next generation.But Collardi also had to adjust to the new reality of no longer being the undisputed leader. Instead, he is now one voice among seven, where every decision is made in unison. The weekly meetings are presided over by senior partner Renaud de Planta, who declined to comment for this story. Given that the average tenure of an active partner is 20 years, collegial harmony is the glue that holds together the senior team. That hasn’t stopped Collardi from moving swiftly in his new role. Within a year, more than 100 of his loyalists had followed him to Pictet, including close to the complete teams for the Middle East and Latin America.Collardi also accelerated an overhaul of the investment and trading platforms, replacing some of the longest-serving portfolio managers with investment advisers half their age. By the end of 2020, Pictet's wealth bankers had swelled to 1,098 from 740 just five years earlier, an expansion not dissimilar to absorbing a full-blown acquisition. The changes echo the overhaul that Collardi enacted at Julius Baer. Over the course of a decade, he turbo-charged the storied private bank, sending it on a breakneck expansion from Sao Paulo to Singapore, doubling assets under management as a result. But despite his meteoric rise, Collardi remained, by his own account at the time of the move, “only an employee.” Pictet, by contrast, offered a once-in-a-lifetime opportunity to become an entrepreneur with extra financial legroom but without the daily grind of running a publicly-listed company. Making Pictet partner brings a stake in a steady business whose owners share in more than 500 million francs in annual profit. Up until a few years ago, the firm was so old-fashioned that managing partners were expected to be addressed as Notre Sieur, a formal French title for sire. The challenge facing the partners is that in order to grow, they need to aggressively target Asia, the epicenter of wealth creation. But that requires the embrace of new — and potentially riskier — investment assets, chief among them structured products, which use derivatives to track the performance of an underlying asset.Collardi spent more than a year trying to win backing from the other partners to push Pictet to sell its own products in that asset class. The others weren’t convinced, priding themselves in their track record of never having endured a defaulted loan. The project was watered down in early 2020 and Pictet settled for the less-risky option of being a broker selling other bank’s structured products.Asia has nevertheless remained an important focus for Collardi’s reorganization, where he wants to break into the ranks of the top 10 private banks. For now, Pictet is willing to wait for clients to come to the bank once they are ready for a risk-averse approach to wealth management. Collardi appointed Fong Seng Tee, a banker he knew from his time at Credit Suisse Group AG, as the head for the wealth arm’s Asia division, pushing the existing leader into a more ceremonial chairmanship position. He also brought an ally over from Baer to run a new Middle East region, stripping the territory from the longtime banker who oversaw the wealth business for Greece, Turkey and the Middle East.While Pictet has steadily grown over the years, it has so far avoided the tense transitions to a modernized corporate structure embraced by other well-known former partnerships, notably Goldman Sachs Group Inc. and Lazard Ltd. Pictet may still be much smaller than publicly-listed wealth managers, but the bank packs a punch when it comes to profitability. Pictet long managed to achieve a return on equity above 40%, a number that's unheard of for any modern bank. While the figure has come down to between 16% and 21% in the past half decade, it's still a cut above UBS, Credit Suisse and Julius Baer.The transformation in 2014 into a limited partnership removed the risk of the partners bearing the full brunt of losses. As a result of the change in legal status, Pictet began publicly disclosing performance data. Suddenly, Pictet was forced to reckon with its haphazard organization that often put personal relationships before a systematic structure. Until then, it wasn’t unusual for bankers to act independently with no uniform approach to clients, for example sending out correspondence using their own fonts and letterheads. Among historic quirks, some employees didn’t have a formal work contract — joining the bank was a social compact with a benevolent patriarchy holding a protective hand over its flock. Pictet embarked on a long march into the 21st Century, guided by one of its partners. A former McKinsey executive, Rémy Best was attuned to performance metrics and organizational optimization. Fresh from turning Pictet’s asset management arm into a metric-minded profit generator, Best next set his eyes on wealth management, long a protected sanctuary at Pictet because it used to bring in the bulk of money.The bank took a hard look at which private wealth customers were bringing in the lion’s share of revenue, realizing that some were costing Pictet too much, while others still should be targeted more aggressively to buy more services.Best’s forensic approach caused a stir among employees. Pictet’s private bankers hadn’t previously been required to disclose their clients, or say how much money they were making for the bank. Personal customer relationships gave way to faceless scorecards measuring net new money, return on assets, and whether bankers met growth targets.The details were made available to an army of internal business managers poring over the numbers, often re-assigning clients by funneling them into categories based on wealth, location and level of activity with the bank. Some individual bankers lost coveted clients to new teams with regional focuses, and others bristled at what they saw as an unvarnished style of the newer hires. Still others threw up their hands and decided to leave.The tone of modern corporate efficiency can grate in a firm where former managing partner Nicolas Pictet once told his employees that retaining a client was more important than making a profit. The company has also grown past the point where partners could regularly act as rainmakers on a hard-fought deal or bringing on a big client.But as owners of a private partnership, they still stand apart from the rank-and-file. After all, a confidential calculation determines how much profit is kept for the partners and how much is distributed to the rest of the bank to support the firm’s entire equity structure. Each time a partner joins the reigning fellowship, he is required to purchase a substantial stake of the company. To finance the transaction, existing partners provide a loan to their newest member, who pays them back over time. A departing partner must start selling his share back to the bank. To support this ebb and flow of stakes, the bank aims for a minimum 20% return on equity.Maintaining that level has become harder amid mounting competition and higher compliance costs. When profitability has dropped below 20%, employees have felt the pain in their personal compensation, which contains a variable component tied to the annual results. That, in turn, has led to the perception of a growing divide between average workers and the partners, who have continued to enjoy their healthy share of profits. When employee profit participation drops, so does that of the partners, Pictet said after the article was published. During a presentation in February, a cherished Pictet ritual held online for the first time this year, de Planta laid out last year’s key numbers. The bank was buoyed like many others by the market volatility the pandemic provided — from the boom in investing revenue to a rebound in variable compensation for employees and a record number of assets under management as clients sought safety.But while the partners spoke at length about performance, charitable efforts or Pictet’s gleaming new building slowly rising on the outskirts of Geneva, one member from their group remained conspicuously absent: Collardi didn’t speak or show once during the presentation.Instead, the man most associated with Pictet’s turbulent last years had slipped into the background. (updates with company response on compensation in fourth-from-last paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.