NRI Estimates Market Size as Classified by Net Financial Assets Held
The affluent market consists of 813,000 households with ¥167 trillion in 2005
September 5, 2006
Nomura Research Institute, Ltd
Nomura Research Institute, Ltd. (NRI: Tokyo, Japan; Akihisa Fujinuma, President, CEO & COO) has estimated the size of each market segment separated by the amount of financial assets held in 2005. Based on the amount of net financial assets owned (debts are deducted) such as deposits, investment trusts, bonds, single-premium life insurance, annuities, etc., the overall market was classified into five segments of high net worth individual (HNWI), affluent, mass affluent, upper mass retail, and mass retail customers. These projections revealed that the market of affluent customers holding financial assets worth ¥100 million or more but less than ¥500 million consisted of 813,000 households and totaled ¥167 trillion as of 2005 (Figure 1).
The questionnaire survey (targeting 300 people on a panel based on a list of the highest income tax payers living in Tokyo, Chiba, Saitama and Kanagawa Prefectures; valid response rate of 55.3%) conducted by NRI in March 2006 revealed that the asset portfolios of members of the affluent segment are characterized by a high ratio of risk assets such as equities and investment trusts. If risk assets are defined as those other than deposits, risk assets account for 67% of the financial assets held by those in the affluent segment. If viewed according to the five segments classified by amount of assets, the greater the assets, the higher the ratio of risk assets (Reference: Figure 1).
If viewed according to age, the ratio of risk assets was 61% for respondents in the "new-generation affluent" (aged 59 or younger as of 2006) after the baby-boomer generation, and a higher ratio (70%) was seen for respondents in the "old-generation affluent" (aged 60 or older as of 2006). A comparison of the specific products of risk assets indicates that members of the new-generation affluent opt for relatively new products as seen in the higher ratio of alternative products such as hedge funds, commodity funds and structured bonds (Reference: Figure 2).
These findings suggest that the new generation of affluent individuals is divided into two types: one "centered on deposits" and the other "centered on investment diversification into risk assets." NRI believes there are ample possibilities that people now falling under the type "centered on deposits" will shift to the type that is "centered on investment diversification into risk assets" in the future when they retire and have more time to think about asset management.
Starting in 2007, more and more baby boomers will reach retirement age, and the number of cases of property inheritance will increase against a background of fewer children and an aging society. Under these circumstances, NRI estimates that for some time in the future, the affluent market will gradually expand as baby boomers play an increasingly important role. Because of such trends, financial institutions will find it necessary to develop services to meet the needs of the "new-generation affluent" that will follow the baby boomers. The key to this development is to correctly understand the sense of value that the new-generation affluent have regarding asset management.
Based on these projections and the results of surveys of and interviews with affluent people, NRI plans to publish analyses and proposals concerning the affluent market as a book entitled Shin-sedai fuyuso no "kenkyu" (Research on the New-Generation Affluent) on October 6 by Toyo Keizai Inc. In the future, NRI will continue to analyze trends in the financial markets and propose appropriate courses of action for financial institutions.
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Yukako Seto / Ai Ohara
Corporate Communications Department
Nomura Research Institute, Ltd.
Figure 1: Asset Portfolios by Asset Segment
Figure 2: Asset Portfolios of the Affluent by Age
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