Deregulation to stoke fight for rich Japanese

TOKYO (Reuters) - Once Japan's banks get the green light to sell separately managed accounts to the country's wealthy, they will go all out to grab the business from brokerages, a local partner at consulting firm Accenture Ltd. (ACN.N) said on Tuesday.

Currently, brokerages and trust banks are allowed to market these so-called "wrap" accounts, which target the rich and typically wrap management, administrative and transaction costs for a customer's portfolio into one asset-based fee.

"If the restriction on banks is lifted, naturally they will compete with brokerages just like they did in investment trusts," Accenture Japan partner Toshihiro Miyake said at the Reuters Wealth Management Summit in Tokyo.

Indeed, lifting that restriction could lead to a shift in the industry similar to one in the investment trust market after a rule allowing banks to offer them was enacted in 1998, he said.

Using their nationwide network of branches, banks have steadily increased their share of the investment trust market and now account for roughly half of all sales.

The Nihon Keizai Shimbun reported last month that the Financial Services Agency was considering allowing banks and insurers to sell the accounts as early as 2007, aiming to help accelerate the flow of savings into investments.

Separately managed accounts have gained in popularity since a regulatory change in 2004 enabled brokerages to make a full-fledged entry into the market, and assets in such accounts totaled about 384 billion yen ($3.26 billion) as of June.

Daiwa Securities Group Inc. (8601.T) is the leader in that market with about 180 billion yen in assets.

Asset management is expanding in Japan as the economy rebounds and deregulation allows financial institutions to sell a broader mix of investment products. A looming wave of retirements by Japanese baby boomers, expected to begin next year, has bankers jockeying to manage their nest eggs.

According to Nomura Research Institute, about 865,000 Japanese households have at least 100 million yen available to invest. Financial assets held by this group totaled 213 trillion yen as of March, up 30 percent since 2003 thanks to Japan's stock market rebound.

Miyake said there was a need for more deregulation to help Japan's wealth management market develop and pave the way for more advanced services seen in Europe and the United States.

"The business environment is not the same as in Europe and the U.S.," he said. "But it is moving in that direction."