Case Study: Nikko Cordial Securities` Retail Strategy

by Neil Katkov, PhD, December 27, 2004

Abstract

Tokyo, Japan December 27, 2004

Case Study: Nikko Cordial Securities' Retail Strategy

After years of downturn, Japan’s stock markets are in recovery. Its brokerages need to turn renewed confidence in the markets into a greater share of the country’s retail financial assets.

A new report from Celent, Case Study: Nikko Cordial Securities’ Retail Strategy, looks at how a major Japanese brokerage is responding to this challenge through innovative initiatives, including the introduction of Japan's first separately managed accounts (SMA) service.

Despite robust growth in retail trading over the past two years, retail securities holdings are still dwarfed by savings accounts, which constitute over half of all household financial assets in Japan. Securities firms are trying to capture more of these assets by introducing a variety of new products and services, including fee-based wealth management services that have the twin aim of providing customers with stable, long-term investment options and securing the firm’s own revenue base.

Nikko Cordial Securities is in some ways the most dynamic of Japan’s Big Three brokerages. Especially after its wholesale operations were folded into a merger with Citigroup in 1999, the firm has pursued an aggressive series of strategies aimed at acquiring and retaining profitable retail clients across multiple customer segments. This case study focuses on Nikko Cordial’s initiatives relating to two new business opportunities in the Japanese retail securities market. First, new deregulation is allowing corporations, independent financial advisors and—as of December 1—banks to sell equities and other investment products as third-party distributors. The firm is actively developing this new sales channel. In fact, some 90% of the new distribution licensees (as of end September) are partnering with Nikko Cordial to offer these products.

Second, wealth management services are coming to the fore in Japan, with brokerages, banks and insurance companies all competing to attract retail investment assets and to become the trusted advisor. A central part of Nikko Cordial’s wealth management strategy is its SMA service—the first such offering in Japan—launched in April 2004 and rapidly followed by several other firms. Nikko Cordial's SMA service utilizes advanced portfolio management technology from US vendor FOLIOfn.

"Nikko Cordial Group's aggressiveness in restructuring has been matched by its inventiveness in designing new products and marketing strategies," says

Neil Katkov, Senior Analyst at Celent and author of the report. "With the recent trend to market recovery in Japan, combined with ongoing financial deregulation and the development of new products and services aimed at promoting retail participation in the capital markets, the timing for Nikko Cordial’s new SMA offering looks good."

The 28-page report contains 11 figures and five tables. A

table of contents is available online.

of Celent Communications' Retail Securities & Investments research service can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.

        

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

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Tel: +1 212 345 1366

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Table of Contents

 

  Tokyo, Japan December 27, 2004

Case Study: Nikko Cordial  Securities' Retail Strategy

Return to report Abstract

 

EXECUTIVE SUMMARY 3
BACKGROUND: THE JAPANESE RETAIL SECURITIES MARKET 4
NIKKO CORDIAL SECURITIES 7
NIKKO CORDIAL SECURITIES' RETAIL STRATEGY 8
  Organizational Strategy 9
  Employee Training 11
MULTI-CHANNEL STRATEGY 12
  Branches 12
  Call Center 13
  Online Trading 13
  Multi-Channel Strategy 14
THIRD-PARTY DISTRIBUTION COMES TO JAPAN 16
PIONEERING SEPARATELY MANAGED ACCOUNTS 18
  Distribution Channels 20
  Roll-Out 21
  Strategic Partner: FOLIOfn 23
  Implementation 24
CONCLUSION 26
OBJECTIVITY & METHODOLOGY 27
 

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