Where there’s a will, there’s a way. That’s what banks across Japan are counting on as they try to keep hold of the ¥50 trillion in wealth left by their customers each year when they die.

With more than a million Japanese dying annually, smaller banks are losing not only customers but also their savings, as heirs migrate to large cities where the biggest lenders hold sway. Regional banks lose about 60 percent of funds that are subject to inheritance, Fidelity Investor Education Institute estimates.

Now, in a country where about a quarter of the population is over 65, local lenders including Mie Bank Ltd. are turning to trusts to secure the next generation of clients and their deposits.

They’re selling so-called testamentary substitute trusts, an inheritance product that helps to quickly unlock funds when an estate holder dies. Setting them up enables banks to form relationships with heirs.

“When succession occurs through the death of an elderly customer, often their sons and daughters live in or around Tokyo, and it was a problem that our deposits were flowing out into the big city,” said Kazuhito Wakiuchi, a manager at Mie Bank. It plans to start selling such trusts in July in partnership with Mizuho Financial Group Inc., the nation’s third-largest banking group.

Banks began offering such trusts about a decade ago, and more than 150,000 were in effect as of December, Trust Companies Association of Japan data shows.

The products have grown in popularity because they can help heirs cover immediate expenses such as funeral costs, and estate holders can choose to leave lump sums or have their funds distributed gradually over time.

Working on inheritance is also helping banks reduce dependence on lending income, which is eroding as Japan’s rock-bottom interest rates squeeze margins, according to Fitch Ratings Ltd.

With competition for lending intensifying, the nation’s financial regulator has been urging banks to find other ways to build a sustainable business model.

“Succession business is a key area to secure the survival of regional banks,” said Kaori Nishizawa, a director for financial institutions at Fitch in Tokyo.

Demand for trust products will rise as the population ages, and banks earn fees when they sell them, she said.

Fidelity Investor Education Institute estimates that ¥50 trillion in financial assets are passed on to successors each year in Japan.

The amount is expected to grow as the number of citizens dying annually increases over the next two decades. Many of those estates are large, given that Japan has among the highest number of millionaires in the world, with cumulative assets of $7 trillion, according to Capgemini.

Still, even though succession business is enabling local banks to form ties with their customers’ heirs, it’s no guarantee that they will keep their assets. Because only about a fifth of the nation’s regional lenders are licensed to manage trusts themselves, most have to sell products of larger banks that require beneficiaries to open accounts with them.

A net ¥40 trillion in household financial assets is expected to flow out of regions other than Tokyo and Osaka as a result of succession over the next two decades, according to Sumitomo Mitsui Trust Holdings Inc. Greater Tokyo will get most of it, receiving more than ¥30 trillion on a net basis, the bank’s estimates show.

That’s why Mie Bank, based in Yokkaichi, Mie Prefecture, decided to work with Mizuho, which last year developed a trust product that enables the funds set aside for inheritance to remain under the regional bank’s control.

“With these testamentary substitute trusts, we can have the account that receives the estate,” Wakiuchi said. “We also have the point of contact with the children, giving us the opportunity to make proposals, including investment of the assets left to them.”

Tsukuba Bank Ltd. also turned to Mizuho to avoid a drop in its client base, said Hisashi Kaneda, a manager who oversees the trust product at the Ibaraki Prefecture-based lender. Sales have exceeded expectations since the bank — whose customers are mostly older than 60 — began offering the product last year, he said.

For its part, Mizuho is counting on its offering to get more trust banking business with local lenders.

“Regional banks need this product to reach the next generation of customers as the population ages and deposits flow outward,” said Mitsuhiro Morishita, an executive officer at Mizuho’s trust banking unit. It’s a “win-win.”

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