Financial service is the next boom in Australia and Japan Post Bank plans venture with Sumitomo Mitsui Trust and Nomura in Japan. Can Japan and Australia collaborate to provide the financial service in Asia?
Japan Post Bank plans venture with Sumitomo Mitsui Trust and Nomura in Japan
According to The Nikkei Asian Review today, Japan Post Bank, Sumitomo Mitsui Trust Bank and Nomura Holdings plan to form an asset management company that would develop low-risk personal finance products for sale at post offices.
The three have reached a broad agreement on the joint venture -- the first between the government-owned Japan Post group and major private-sector financial institutions -- and may announce their plans this month.
The alliance is in part aimed at helping bridge the divide between the postal group and private-sector banks, which have long accused it of crowding them out, ahead of this fall's initial public offering of shares in Japan Post Holdings and its banking and insurance units.
Japan Post Bank likely would put up half of their new company's several hundred million yen in initial capital, with Sumitomo Mitsui Trust and the Nomura group contributing roughly 30% and 20%, respectively. The three have informed financial regulators of their plans, which call for launching the company next year.
Japanese post offices already sell various mutual funds and other investment products. The joint venture would seek to cater to an underserved segment of customers preferring safe, deposit-like vehicles for their money. It also would offer personal defined-contribution retirement savings plans and wrap accounts, which let investors delegate the management of their portfolios. Sales of these products would begin at select locations and eventually expand nationwide.
Japan Post Bank sees the venture as a launchpad for an asset management business with access to a network of 24,000 post offices. It hopes to ride a shift in personal finance from savings to investment being promoted by the government and seized on by private-sector financial institutions. The bank is trying to show investors that its strategy for post-IPO growth points in this direction.
Nomura Holdings, the parent of Nomura Securities, hopes the venture will broaden its own retail customer base by creating new investors. It can contribute know-how on explaining financial products to beginners. For the past few years, its sales efforts have emphasized building assets over the medium to long term rather than earning sales commissions, and its assets under management have grown.
Sumitomo Mitsui Trust sees joining forces with the postal group as a way to level the playing field with Japan's three megabanks, which boast far bigger branch networks. It brings strength in product development that draws on years of experience managing corporate pensions.
Financial service is the next boom in Australia
According to The Australian Financial review today, the export and trade of Australia's global expertise in financial services, and particularly in funds management, is an opportunity whose time has come.
While Australia's financial services sector is large – at $2.5 trillion, the world's fourth-largest pool of funds under management – less than 5 per cent of these funds are sourced from overseas investors. And while this has been growing and delivering significant benefits to the economy, there is the potential for an exponential increase in foreign-sourced funds if the right policy settings are implemented.
The Johnson Report of 2009 identified Australia's comparative advantage in funds management: our proximity to Asia; a highly skilled funds management workforce and our first-mover advantage in establishing superannuation. Mark Johnson also noted we have arguably the most sophisticated and advanced financial sector in the region.
On current trends, Asia is forecast to become the leading region for consuming goods and services and to be home to the majority of the world's middle class. But with 60 per cent of the world's population, Asia still has only 12 per cent of global funds under management.
An ageing population in Asia, and particularly in Japan, also creates new opportunities for Australia's financial services sector. Currently, our exports of insurance and pension products to Asia are estimated at approximately $174 million, or around 2 per cent of total exports.
While we no longer pick winners and seek subsidies to favour particular industries, we do need governments to remove trade barriers and build links.
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