Case Study: Nikko Cordial Securities` Retail Strategy

Tokyo, Japan December 27, 2004

Case Study: Nikko Cordial Securities' Retail Strategy

After years of downturn, Japans stock markets are in recovery. Its brokerages need to turn renewed confidence in the markets into a greater share of the countrys 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 firms own revenue base.

Nikko Cordial Securities is in some ways the most dynamic of Japans 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 Cordials initiatives relating to two new business opportunities in the Japanese retail securities market. First, new deregulation is allowing corporations, independent financial advisors andas of December 1banks 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 Cordials wealth management strategy is its SMA servicethe first such offering in Japanlaunched 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 Cordials 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.