Customer-first strategy adopted to meet changing demand

Seiji Nakata President and CEO of Daiwa Securities Group Inc. Rebuilding network for consultation

Daiwa Securities Group Inc. has strengthened its business operations, aiming at individual customers under the “customer-first operations” policy. For this installment of Leaders, a column featuring corporate management and senior executives, President and CEO Seiji Nakata tells The Yomiuri Shimbun about his strategy for shifting individual financial assets from savings to investments.

“Customers first” has long been the fundamental and universal principle of doing business. Let me evaluate our business operations with that principle in mind. Everyone who did business with a securities company used to seek to increase their assets. However, while we have customers looking to make profits, clients’ demands have been diversifying as our society has entered an information-oriented and super-aging stage. We have people who want to safeguard their assets and pass them down to the next generation. At a certain point, I realized that we were not fully responding to these new demands.

It is difficult for a sales representative to meet the various kinds of customer needs, by taking charge both of increasing and securing assets at the same time. When it comes to dealing with such issues as inheritance or business succession, sales personnel need to understand the complicated taxation system.

We are diversifying our customer support and enhancing our expertise. Our aim is to further solidify our policy of customers first by responding to various requests from customers together with supporting our sales representatives.

A review of the company’s sales network is underway, including consolidating branches while increasing the number of sales offices.

For instance, in Tokyo, we have branches in areas such as Ikebukuro, Shinjuku and Shibuya. Mapping out the locations of these branches’ customers, we found many cases in which they overlapped. This is nothing but inefficient. So we are consolidating large branches that are close to each other. Most recently, we integrated two branches in Nagoya: the Nagoya branch and the Nagoya Ekimae branch.

In parallel, we will deploy small sales offices around our branches. As long as we can secure a space for customer services, we can operate sales offices on one floor of a multi-tenant building.

About five sales representatives will be stationed at a sales office that will be managed by a nearby branch. Such a system will give us a great deal of flexibility even though it costs much less than the conventional system. While the number of our sales offices was 43 as of the end of January, we will increase the figure to around 70 over the next few years.

The fundamental base of our business is carrying out consultations with customers. Clients visit us for consultations — that makes us different from a bank, where customers visit mainly for transactions and other procedures. We will expand and improve our sales network.

We have embarked on an across-theboard review of our approach to sales operations.

We used to assign monthly numerical targets set by the head office to every branch. The targets included the sales amount of investment trusts and the contract amount of fund wrap — discretionary asset management services.

After I became president, I changed the system and each branch has been allowed to decide their own targets. Customers’ demands for financial products vary from region to region. Therefore, the branches — operating closer to their own customers — are best suited to making such decisions. The sum of each branch’s target becomes our overall goal.

Looking back on the days more than 30 years ago, when I was in charge of sales promotion for individual customers, a to-do list for the day was set out for me in the morning. I worked as hard as I could, and soon a whole month had passed by. At the beginning of the very next month, I found again that all the things to do were already predetermined.

The situation is different today. It is the sales representatives who decide their own targets while discovering customers’ needs. Every branch has a different approach to doing business. I have heard from our employees that their motivation to work has improved considerably.

In order to have the customer-first policy take hold, consistently acting upon a field-oriented approach is crucial, as our branch staff have better knowledge of what customers are calling for.

In order to enhance business operations at the branch level, the company introduced a new system in which well-experienced financial planners — mainly in their 50s or older — take care of customers who are 75 or older.

For elderly customers, some sales personnel are as young as their grandchildren and such an age difference might cause them concern. A better atmosphere can be ensured if they talk to more experienced staff, those who are in their 50s or older. Since the new system was introduced, the amount of cash inflow among customers 75 years or older has been larger than the outflow. Among that particular age group, the outflow from their savings is usually larger.

Along with our senior customers, our employees are also aging. We had extended the retirement age to 70 for our sales positions, but we abolished the age cap in 2017. We intend to swiftly increase the number of “Anshin Planners,” experienced senior consultants for elderly customers, to more than 200, up from about 90 currently, and deploy them at all of our branches. In my view, expanding work opportunities for our senior employees will help us meet the needs of society.

I joined Daiwa Securities Co. Ltd. because a senior from a university skiing club advised me to do so. I was thinking of finding a job related to international politics and economics. After having conversations with my senior, who had earlier joined the company, I was convinced that working at Daiwa Securities would make my dream come true.

After working in a sales division for individual customers at a branch, I was transferred to the corporate clients marketing department in 1989.

In 1994, I took charge of the public offering for DDI Corp. (now KDDI Corp.). The market was sluggish, however, due to the collapse of the bubble economy. The circumstances were not ideal for a large-scale capital increase. While we were in a position to recommend increasing capital, the issuing company had the final say.

At that time, DDI’s founder Kazuo Inamori courageously said: “Let us prove something simple. Even if a situation is not good, investors buy stocks from a company that has achieved results.” I was impressed by his undaunted attitude of asking people to do the right thing.

On the other hand, I made a mistake in a separate case. My company sustained a huge loss in 2000 as a result of a plunge in the stock price of a firm. I was in charge of a large-scale sale of the firm’s stocks and some stocks remained unsold. With that loss, among major securities corporations, Daiwa alone had to declare a loss in its financial report.

Debates erupted within the company asking who should take responsibility. A friend of mine working for a foreign-affiliated firm said to me, “Are you OK? You can join my company.” I was worried about what would happen.

During this uneasy time, I received a New Year’s card from Shigeharu Suzuki, who was then an executive managing director in charge of planning and later became the president. The card read, “Just keep moving forward.” I remember finding myself close to tears because I was moved by his thoughtfulness.

Results always matter in business and it is the president and senior executives who take responsibility for any result. I would like employees in their early career to take on challenges — if the process is correct, do not be afraid to make a mistake. This is the message I want to convey, based on my experience.

While calls have been made to emphasize the necessity of shifting personal financial assets from savings to investments, we have not seen much in the way of tangible results in Japan.

If we simply regard it as moving funds from bank accounts to stocks and investment funds, the shift will not happen as we expect. During a period of deflation, people prefer to hold onto their assets in cash because it gives them an increase in their asset value. Based on the rationality of economics, during an inflationary period, even if on a small scale, the value of cash depreciates and we must see a transfer of funds. But it is not happening.

This can be attributed to various factors, such as people lacking experience of achieving success in investment or there being a deep-seated mentality of deflation. It is not effective to simply recommend asset management in stocks or investment trusts. What we have to present is a solution.

It is increasingly important that we build and manage assets to support customers for “the era of living to 100.” We expect that investment trusts, mutual fund wraps and bonds can be chosen as the means for the solution.

In the end, I believe that being fully committed to the customer-first policy is the best way to promote the shift from savings to investments.

Ryuzo Suzuki/The Yomiuri Shimbun