By Kensuke Nakazawa / Yomiuri Shimbun Staff Writer As the Japanese population ages, asset management is on many people’s minds. How will the largest securities firm in Japan respond to the needs of its customers? For this installment of “The Leaders” column, which highlights corporate management and senior executives, The Yomiuri Shimbun spoke with Koji Nagai, president and group chief executive officer of Nomura Holdings, Inc.
As the average life expectancy increases, it is becoming important to prepare for “the time of a 100-year life.”
People may or may not live to 100 after they retire at the age of 60, but most will live to be 90. This means that putting their money in a bank account with a near-zero interest rate wouldn’t work well. If people want to enjoy affluence in retirement, they have to put their money to work. Securities firms like ours need to figure out in a serious manner how to make this happen.
Japanese households hold over ¥1.8 quadrillion in financial assets, half of which is cash and deposits. Stocks and mutual funds, including indirect investments via insurance and the like, make up only 19 percent of households’ financial assets, which is low compared to 46 percent in the United States.
There are two reasons why investment by individuals has not taken root easily in Japan. One is that the period of deflation in Japan has gone on for so long that people have difficulty extracting themselves from a deflationary mind-set. It has nothing to do with our national character.
In times of deflation, cash is the most lucrative investment product you can hold. Securities [such as stocks] require the effort of selecting issues that continuously increase in value.
Japanese people’s investment behavior isn’t irrational. During the period of inflation after the end of World War II, even when the market was not fully developed, securities made up about a third of all financial assets held by individuals.
If you believe that inflation will be moderate, you will end up losing out if you deposit your money in a bank account, so you move your money elsewhere.
Another reason why individuals do not invest much in Japan is that they have no personal experience with successful investing. Since reaching its peak of 38,915 in 1989, the 225-issue Nikkei stock average has been down. Although it has gone up recently, it is still at only about half of the peak.
Instead of hitting it big once, I want people to focus on financial assets that accumulate value over time, like the Tsumitate NISA (Nippon Individual Savings Account). I want young people to have positive experiences with this kind of product so that they will realize it is better than depositing money in a bank account. If people start at a young age and have this experience, they will be more likely to invest their retirement money when they turn 50 or 60 years old.
Our company helps clients build up assets for the long term, and we also earn revenues as a result. I think that is the most important task of a securities company, and also our social mission.
I have been advancing various reforms since I became company president, but I want to focus on changing our business model in retail to really implement customer-first principles in our operations.
Since I became president, I have spent every morning reading reports about individual customers who came to our customer help desks the previous day.
These customers talk about all sorts of things, and while some of them complain based on some misunderstanding or other, some portion of what I read makes me think, “This customer is right, and the way we do things is wrong.” Back when I first became president, we didn’t listen to customers as much. We focused on pushing the products we wanted to sell onto customers.
By this time, I had been away from retail sales for about 20 years. When I finally had the chance to visit one of our sales branches again, I realized they were still working exactly like in the old days. I was amazed. Were we really still taking this dated approach?
People behave according to certain principles that are slow to change. Their minds are fixed — [if you want them to change,] you have no choice but to tell them so many times.
Shortly after he became group CEO of Nomura Holdings, Inc., Nagai banned salespeople from encouraging customers aged 80 or older to buy risky products such as shares.
I made that decision because many complaints we got were about our interactions with elderly customers. I felt that our salespeople did not correctly recognize what our elderly customers needed.
Then some people from the retail division came knocking on my door and accused me of being ignorant because I had not done sales work for so many years. They said, “We’ll end up in the red if we get less business from people aged 80 or older!”
If so, I thought that it was better to go into the red. If we really want to avoid going into the red, we could just lower our salaries. We have gotten stuck in doing business for the sake of our own profits, and we have to change that completely. Of course I want us to earn a profit, but we cannot continue to chase only short-term profits.
If our customers are satisfied, the division will be satisfied. The company’s performance will improve accordingly, and our shareholders will also be satisfied. My job is to make these three groups of people even more satisfied.
Breaking the status quo culture
When I became president, I thought there was too much bureaucracy in the company. That’s why I’ve been working to rebuild the company from the ground up.
Everyone just focuses on not rocking the boat, and nobody wants to take responsibility for anything. They just follow precedent. For example, if there is an event that we organize every year, people will just change the date on the proposal and bring it to me. The world is changing. If thorough consideration leads you to decide that your existing approach is the best way to do something, then that’s fine. But that is not what people are doing.
The easiest way to do things is not to make any decisions yourself, but just do what your superiors tell you. Then everyone’s excuse is, “I did it that way because you told me to do so.”
I often have to push back against that kind of thinking. For example, an executive asks me, “Shall we do Plan A or Plan B?” When I get that sort of question, I say: “Think for yourself. If you want me to pick one, I’ll just do a coin toss. But if you make me do that and we fail, you get fired.” You can probably imagine that people suddenly become capable of some real thinking of their own when I talk to them like that.
Sometimes I look at something from a whole-company perspective and ask people to hold off on what they are doing, but when it comes to individual divisions, the relevant executives and other people in charge have a better grasp on the situation. I am just the one who takes final responsibility for everything.
Finding specific strategies for dealing with a life span of 100 years is also an issue.
From a corporate compliance perspective, many financial institutions, ours included, do not aggressively push services at people aged 80 or older. However, if we carry on like this, we will end up turning these people into what might be called financial refugees.
That is why we are working with Keio University’s School of Medicine and Faculty of Economics to study “gerontology” in the context of finance. For example, one thing we are currently experimenting with is whether we can determine a person’s cognitive abilities by looking at their gaze, their movements or their way of speaking, and use that information in a database. We want to explore what kind of financial services the elderly need.
Japan is the first developed nation to face the unavoidable challenges that come after a country matures, including a declining birthrate and aging population. Regardless of whether or not we have found unequivocal solutions to those problems, Japan has the most experience tackling them. I think this gives the country a great advantage in being able to penetrate [the markets in] other Asian countries and compete with developed countries in the West for the next 10 or 20 years.
In other words, I am not pessimistic at all about the future of the Japanese economy.
■ Koji Nagai / President and Group CEO of Nomura Holdings, Inc.
Nagai was born in 1959 and grew up in Tokyo. He graduated from Chuo University’s Faculty of Law in 1981 and joined Nomura Securities. After working as an executive managing director and branch manager in Osaka, among other positions, he became president of Nomura Securities in April 2012. He also began serving as the group CEO of Nomura Holdings, Inc. in August of that same year. Since April 2017, he has been president and group CEO of Nomura Holdings and chairman of Nomura Securities.
■ Key Numbers: ¥150 tril.
Nomura aims to increase its customer assets from ¥107.7 trillion at the end of March 2017 to ¥150 trillion by 2020. The company plans to shift operations from a brokerage style business model to a consulting approach. It has about 30,000 executives and employees in over 30 countries around the world. It recorded a profit of ¥239.6 billion in the business year that ended in March 2017.