Nomura is seeking global acquisitions to expand its wealth management unit

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Nomura’s CEO is on the hunt for global acquisitions that will enable him to expand the wealth management business of Japan’s largest brokerage and investment bank.

Kentaro Okuda told the Financial Times that the bank was making a strategic shift towards wealth management and adopting a “bias” towards advisory services.

As part of its expansion into private equity and private credit, Okuda wants Nomura to expand its global asset management capabilities in preparation for a generational shift in Japanese investment habits.

“One of the M&A targets is asset managers outside Japan who have a very strong position in alternative assets,” Okuda said at the bank’s headquarters in Tokyo. “The second goal is consulting activities, also outside Japan.”

After taking over as the bank’s CEO in 2020, Okuda said his mission was to cut costs and reduce Nomura’s reliance on volatile investment banking revenue streams.

But his early tenure was spent dealing with the fallout from the implosion of Bill Hwang’s Archegos Capital in 2021. Nomura reported a $2.9 billion loss from the collapse.

The bank and the brokerage are preparing to seize the opportunity arising from the expected transfer of wealth among Japanese households from cash and deposits to higher-yielding investments.

Given that the current percentage of assets that Japanese investors allocate to private equity and private debt is close to zero, Okuda says he expects household and institutional investment in such alternative assets to increase.

According to the Bank of Japan, Japanese households now hold about half of their total financial assets of 2.2 quadrillion yen ($13 trillion) in cash and deposits.

But banks and analysts expect the central bank’s normalizing monetary policy and the return of persistent inflation will prompt people to reconsider their savings strategies. The wave of inheritance expected to be passed down by the baby boom generation born after World War II is also likely to shake up investing habits.

Major global private equity firms including Blackstone and Carlyle have stepped up campaigns to attract Japanese people to their funds, and are also preparing for large financial institutions such as the Japanese Government Pension Investment Fund to allocate a larger share of their asset portfolio to 226 trillion yen worth of alternative investments.

In May, Morgan Stanley MUFG analysts published a note in which they predicted a “momentous change” in Japan’s wealth and asset management industry and multibillion-dollar revenue opportunities for Japanese banks and competitors competing for the business of affluent and “upper-net-worth” clients.

Nomura has renamed its once-aggressive retail brokerage business to its “Wealth Management” division, underscoring a shift toward offering higher-value services, including investment advice.

Okuda said the bank wanted to change the mindset of its aggressive brokers. “The mindset is changing from broker to consultant,” he said.

To expand the bank’s reach to high-net-worth clients, Nomura will build on a series of alliances with regional Japanese banks formed in 2019 that broke a long tradition of going it alone, he added.

Okuda acknowledged that Nomura will face increasing competition in wealth management from Japanese megabanks MUFG, SMBC Group and Mizuho, as well as foreign groups such as UBS.

“It would be better if we had no one to compete with in this market,” Okuda said, but added that “competitors will naturally come into the market from overseas, and also (Japanese) megabanks and others. I think they are already here and competing.”