Internet-based securities companies are tying up with independent financial advisers, or IFAs, which recommend suitable financial products.
Online securities houses, which have been growing thanks to low brokerage commissions made possible by branchless operations, hope to reinforce their customer bases through IFAs’ face-to-face tailored advice for individual investors.
“Close dialogue with customers is the best way” of doing business, Yuji Kusunoki, president of Rakuten Securities Inc., said at a meeting with some 200 IFAs and related people in Tokyo last November.
The Tokyo-based online brokerage will open space for discussions between IFAs and customers in the new head office building in Minamiaoyama, Shibuya Ward, that it will relocate to this summer, from its current location in Setagaya Ward.
Rakuten Securities began joint work with IFAs in October 2008, and client assets under management through them have continued to increase since then, to some 10 percent of total assets entrusted by customers at present.
IFAs recommend suitable financial products to meet the needs of clients and split commissions with securities companies. Unlike the salespeople of brokerages, IFAs do not have sales quotas and do not typically transfer staff to other locations, as is the norm at large Japanese companies in the latter case. They can therefore establish long-term relations of trust with their clients.
Last June, a Financial Services Agency panel said in a report that an average elderly couple would need ¥20 million on top of their public pension benefits to finance their post-retirement lives.
The report has resulted in a steep increase in requests for advice regarding asset management from people in their 30s and 40s, said Takeshi Fukuda, president of Financial Standard Co., a leading IFA service provider.
Conventional securities companies have been criticized for encouraging people to buy and sell equities and other financial products on a short-term basis, even those designed for long-term holding, in order to increase commission revenue.
Such practices, known as kaiten baibai, “escalate anxieties among clients if the market fails to move as predicted,” said Fukuda, who once worked for a brokerage house. “You can reassure your clients if you carefully listen to their life plans and explain the benefits from the long-term management of investment trusts designed to disperse risks. As a result, client assets under management will increase.”
In a related development, Fan Co., an IFA based in Toyama, has been seeking to attract clients by holding free financial seminars for individual investors across Japan since 2016 amid growing needs to secure funds for retirement.
Founded by Hirokazu Oguchi in December 2008, Fan currently gives advice to some 8,500 people mainly in their 40s and 50s through its offices in Tokyo and seven other locations.
Oguchi, a former securities company employee, said, “Our strength is that we can offer a variety of low-cost financial products that are useful for asset building in cooperation with online brokerage houses.
“We will work to further improve our staff’s capacity to give advice and their trustworthiness in order to be chosen by people who will start building assets in locations across the nation,” he added.