Mizuho Eyes $11 Trillion Held by Japan’s Rich Elderly

(Bloomberg) -- Mizuho Financial Group Inc.’s trust banking arm has its sights set on exactly where the wealth is in Japan: the $11 trillion held by the nation’s elderly.

The company has begun selling a type of trust that gives rich retirees more options for managing their money, and sales of the product are exceeding expectations, Chief Executive Officer Tetsuo Iimori said. “There’s no question that this is going to be a pillar of our retail trust business,” he said in an interview. “The potential here is clearly enormous.”

Japan’s biggest banks are expanding their wealth management business to make up for declining profitability from lending. With most of the population’s financial assets held by people over 60, there is a clear incentive to boost services for older clients.

Mizuho Eyes $11 Trillion Held by Japan’s Rich Elderly

The average age of customers of Mizuho Trust & Banking Co.’s new “selectable” trust product is 83.6. The bank aims to achieve an asset balance of 300 billion yen ($2.7 billion) in the next few years and ultimately make it a “trillion-yen business,” Iimori said. It’s already sold about 750 of the trusts since they started in August last year, he said.

The product provides more flexibility than other trusts offered by the Tokyo-based bank. It allows customers to pay themselves or family members a regular income and make preparations for leaving the money as an inheritance.

Clients can instruct the bank to pay for things like nursing care, renovations, security or home help. They can also restrict access to the funds to prevent fraud and even protect it from themselves in case they suffer from dementia.

Almost 70 percent of Japan’s roughly 1,800 trillion yen in household financial assets is held by people over the age of 60, the Tokyo Metropolitan Government estimated in a 2017 report.

Iimori said he also plans to push forward with the unit’s consulting business for pension funds. Under a law change introduced in April, companies managing such investments must meet additional governance and reporting requirements, which may be arduous for some smaller funds.

By March, Mizuho Trust expects to be providing the consulting service to funds that manage a combined 1 trillion yen of assets, up from about 400 billion yen a year earlier, Iimori said. The firm charges a fee of about 5 basis points for the advice based on the amount of assets the pensions manage, he said.

Funds are “starting to be questioned about their responsibility for risk management as owners of assets,” particularly in an environment where earning stable returns is difficult, said Akira Kunikyo, a client portfolio manager at JPMorgan Asset Management in Tokyo. “The level of expertise required has without doubt gotten higher” since the law changes, he said.

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