Nomura Holdings Inc. is embarking on a fresh drive to convince individuals to pay fees for managing their money rather than commissions based on trading — a move that may prove challenging as it seeks to revive its retail business.
The nation’s biggest brokerage recently created a Chief Investment Office to bolster advice for individual clients as it prepares to introduce new discretionary portfolio management services in the retail division. Such services typically charge a fixed fee.
"We will be working to further improve performance” for investors, said Chie Toriumi, a senior managing director who oversees the office of 10 people, in an interview.
The plan is part of new Chief Executive Officer Kentaro Okuda’s strategy to generate more recurring revenue from retail customers’ assets, which totaled ¥104 trillion ($970 billion) in March. Less than 3 percent of that money is currently in existing discretionary investments.
In a country where investors are used to paying commissions, Toriumi signaled she is under no illusions about the task ahead.
"A lot of people say we could face resistance in Japan because many may prefer transaction-based payment,” she said. "You’d be charged fees even in a month in which you did nothing. Some may not like that.”
The CIO will employ models used for professional investors such as pension funds to provide advice on how individuals should allocate their portfolios, Toriumi said.
Nomura has been working to increase fee income at the retail division since at least 2012 to reduce reliance on more volatile transaction-based commissions, with mixed success. Commissions are also under pressure from intensifying price competition at online brokerages.
Annual recurring revenue, including from existing discretionary investment services, rose about 40 percent over the past five years to ¥88.7 billion in the year ended March, filings show. That’s below a ¥150 billion target the firm once pursued under Okuda’s predecessor.
Commissions from stock brokerage and sales of mutual funds, among other things, fell 32 percent during the same period to ¥308.8 billion.
The new fixed-fee services will be similar to those available at firms in the U.S. and Europe, according to Toriumi. Nomura hasn’t yet decided how much to charge but may use the 1 percent prevailing rate in those markets as a guide, she said.