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In the so-called “era of 100-year life spans,” it is becoming increasingly important to accumulate assets to secure funds for the post-retirement period. The business base of asset management companies must be strengthened so that people can invest their money with peace of mind.
The government plans to formulate a drastic reform plan by the end of this year to encourage asset management companies marketing investment trusts, among other financial products, to develop products that stably increase client funds.
The plan is one of the pillars of this year’s Basic Policy on Economic and Fiscal Management and Reform.
The administration of Prime Minister Fumio Kishida has touted a policy to double incomes from assets and aims to expand the scope of the Nippon Individual Savings Account (NISA) program, in which incomes from small investments are tax-exempt. Since investment trusts are the main vehicles for the program, asset management companies, which are responsible for developing and managing investment trusts, have a great deal of responsibility.
Japanese asset management companies are mainly group companies of major financial institutions such as securities firms and banks, and they are small in scale. This structure differs from the United States and European countries, where independent asset management companies manage huge sums of funds.
In Japan, investment trust products are sold by the parent companies of asset management firms, such as securities companies and banks. Ample commissions can be earned by repeatedly buying and selling investment trusts in the short term.
For this reason, it has been pointed out that the development of investment trust products has predominantly included stocks in fields that are in vogue, such as those related to artificial intelligence (AI) and robots, to facilitate trading. The asset management sector has also been viewed as placing priority on the profits of parent companies rather than the sustainable growth of client assets.
The unique structure of the asset management sector in Japan must be reformed. A client-oriented investment management system must be created.
It is desirable to increase the independence of asset management companies. One option would be to expand the scale of operations by realigning asset management companies beyond groups. Encouraging new entrants from leading companies other than securities firms and banks would also be effective.
Currently, the top executives of major asset management companies are mostly appointed from within their groups, and in many cases, they have little experience in asset management. The appointment of experienced personnel is required.
It is also essential to enhance information disclosure to make it easier for clients to compare the past performances and fee levels of various firms.
The development of reliable asset management firms is important. If this broadens the base of investment and leads to stable asset formation, it can be expected to reduce people’s anxiety about their future.
In Japan, cash and deposits at banks and other financial institutions account for more than half of household financial assets, which exceed ¥2 quadrillion. Stocks and investment trusts account for a lower percentage than in the United States and Europe. It is important to channel individual assets to corporations through investment trusts and other financial vehicles to revitalize the economy as a whole.
