The Principal Financial Group, owner of BT Funds Management, and ING, parent company to Mercantile Mutual have formed a joint venture in Japan to take advantage of a burgeoning superannuation and pension market.
The Principal Financial Group, owner of BT Funds Management, and ING, parent company to Mercantile Mutual have formed a joint venture in Japan to take advantage of a burgeoning superannuation and pension market.
The new partnership is banking on anticipated legislative changes later this year which will lead to the creation of defined contribution pension schemes.
ING has already been working within the Japanese market promoting life insurance, funds management and banking products through its own distribution channels.
The channels will be used by Principal to offer retirement products and technology enhancements, particularly to small and medium sized businesses when the company begins operations in Tokyo in the first quarter of 2001.
Principal president and chief executive officer J. Barry Griswell says the scope of the market is substantial due to the strong savings culture in Japan. Japanese households save US$13 trillion each year.
“The potential for this segment of the market is very large where small and medium sized businesses comprise over 180,000 businesses, employing over 16 million people and with an asset accumulation growth estimated at US$25 to 30 billion of contributions per annum,” Griswell says.
Japanese pension scheme company DLIBJ Asset Management senior relationship manager Toshikazu Nishimura concurs, saying the potential worth of the pension market is enormous given the savings culture.
“Most of the trillions in savings are tied up in low yielding accounts but the younger generation are interested in moving into other investment vehicles. If only one per cent of Japanese savings moved in this way, the impact would still be huge,” Nishimura says.
Currently pension schemes are outside a regulatory scheme says Nishimura with unfunded pension liabilities over the US$550 billion mark.
World View
US regulators have approved online brokerage ETrade Group Inc’s acquisition of Telebanc Financial Corp, which will create the first purely Internet-based financial services company.
The Office of Thrift Supervision, which has regulatory authority over Telebanc, announced its approval today.
Once the merger is complete, ETrade customers will be able to trade stocks, apply for mortgages and pay bills, among other transactions, all on the same website. The company, based in Palo Alto, California, says it has some 1.5 million investment customers.
The thrift agency’s approval came a day after Internet titan America Online and traditional media company Time Warner announced a $US162 billion ($A247.06 billion) takeover deal.
It followed by several weeks the enactment of sweeping legislation removing Depression-era legal barriers and allowing banks, securities firms and insurance companies to get into each other’s businesses.
Though most brokers in the mushrooming online trading business offer some limited banking services, few companies other than ETrade have tried to combine large-scale Internet banking and brokerage.
Telebanc, based in Arlington, Virginia, operates a no-branches savings and loan named Telebank that began operating in 1989 as a low-cost marketer nationwide of consumer banking services through the Internet, a toll-free telephone centre and automated teller machines. Telebank doesn’t make its own loans but buys home mortgages from other financial institutions.
Banks without branches say they are able to operate less expensively and thus pay higher deposit rates and charge lower fees than traditional banks.
Under terms of the stock-swap acquisition announced last June, ETrade will acquire Telebanc for stock worth about $US1.8 billion ($A2.75 billion). The combined company will carry the name ETrade.
ETrade made its name as an online stock brokerage but has been trying to diversify. The company already sells mutual funds and has a venture with online mortgage provider E-Loan Inc that allows ETrade’s customers to apply for home mortgages on the Internet.
Established “brick-and-mortar” banks and brokerages still control most of the financial services market. As those firms start to add Internet services, millions of new customers could be lured by cheaper prices, industry officials say.
