Japanese investors turning to independent financial planners
TOKYO -- Time was, Japanese trying to build a nest egg would take to their local bank or stock broker for advice. While many investors still take the conventional route, more are seeking out asset management services from independent financial planners.
One 60-year-old Tokyo man is typical of this new breed. Several years ago he began using Gaia, a financial planning service. "I feel reassured because they pay attention to the whole of my assets," he said.
Hiroki Nakagiri founded Gaia in 2006. He used to work for a big brokerage house, but wanted "to give advice while standing in the client's shoes," free of ties to a particular financial institution. Gaia now has 10 financial planners managing assets totaling more than 17 billion yen ($139 million) on behalf of 550 clients.
Individual investors in the U.S. often decide where to put their money based on recommendations from independent financial advisers. These advisers are just starting to gain a foothold in Japan. There are around 3,000 of them, compared with 300,000 in the U.S.
"I never thought of losing so much on the Brazilian real," lamented an 82-year-old Tokyo man who placed a big bet on an investment trust whose assets were denominated in the Brazilian currency. He was following the advice of a financial institution's marketing representative, who stressed the instrument's high yield. But Brazil's economy has stalled, sending the real plummeting and leaving the Tokyo man with a 3 million yen loss.
As any experienced investor knows, it is quite possible to lose money in a rising stock market. More than half of Japan's personal financial assets, totaling nearly 1,700 trillion yen, are parked in bank accounts that yield next to nothing. The danger is that when people start looking for alternatives, they may opt for risky assets such as those denominated in volatile emerging-market currencies.
Spoiled for choice
In recent years, there has been an explosion of investment trusts in Japan. There were about 5,580 of them as of the end of April, an increase of 1,800 from five years earlier. The sheer number of options is bewildering for first-time investors. Yasuyuki Kamata, who has worked for Japanese and foreign trust banks, established Kamakura Investment Management seven years ago to offer investment trusts that people can, well, trust. "I hope [individual investors] will make investments after understanding our philosophy of asset management," Kamata said.
Kamakura Investment, based in the city southwest of Tokyo of the same name, has been using seminars and word of mouth to market a proprietary fund called Yui 2101 that invests in Japanese stocks. The fund now has assets of around 15 billion yen.
Independent asset management companies sell investment trusts directly to individuals. The top eight now have a combined 500 billion yen or so in assets, reflecting investors' growing interest in them. But that is only about 0.5% of the 99 trillion yen in Japanese investment trusts.
The big financial institutions are working harder to regain individual investors' trust. Their traditional way of making money -- charging commissions on trades they recommend to clients, has reached its limit. Nomura Holdings is now focused more on growing their clients' assets. "We cannot survive unless we change now," said Koji Nagai, Nomura's CEO.
The Nippon Individual Savings Account program, which offers account holders tax exemptions on capital gains and dividends of up to 1 million yen a year on stocks and investment funds, has drawn interest from people looking for somewhere to park their money. In the first year of the program, which began in 2014, 8.25 million people opened NISA accounts, a quarter of whom are first-time investors. The combined return on investment under the program totaled 350 billion yen last year.
Individuals have kept their money in savings and time-deposit accounts because most have not enjoyed the benefits of investing amid Japan's long-term deflation. If they are to make some of that money more fruitful, asset managers at financial institutions and other financial experts must help their clients meet their financial objectives and demonstrate the rewards of investing.