Terrie's Take 584 -- Where Have All the Financial Advisers Gone? e-biz news from Japan

Sun Oct 3 23:56:51 JST 2010

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, October 03 2010, Issue No. 584

+++ INDEX

- What's New
- Short Takes
- News
- Candidate Roundup/Vacancies
- Upcoming Events
- Corrections/Feedback
- News Credits

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+++ WHAT'S NEW

One of the draw backs about being a foreign business
person in Japan is getting bombarded with direct sales
phone calls from financial advisers. If you've been unlucky
enough to make it on their lists, you can wind up getting
multiple calls a day from salespeople trying to solicit
interest in investments in one fund or another. We always
tell them that we have no spare cash -- which is true, but
this just seems to cause our contact details to be moved
down the line to the next newest sales person.

Actually, you have to feel sorry for these callers. It's a
tough job, and while we try to let them down kindly, it can
be difficult to try to be nice to someone after they have
used "phone tricks" to get past the administration people,
or are asking the same irritating questions their predecessors
have. Why don't those guys use their database and save
themselves a phone call by reading in the comments column
"Has no money"?

It's no surprise that these financial advisory firms are so
persistent. Not just the foreigners, all of Japan is a rich
hunting ground. While the investment levels are off 25%
from 2007, none-the-less, the Nikkei says that Japanese
household investment in securities amounted to JPY111trn
(US$1.3trn approx.) as of June 30th, or around 7.7% of
overall household financial assets.

But come to think of it, we haven't been getting anywhere
near as many calls these days as we used to. A friend and
reader reckons that one major reason might be because
the Financial Services Agency (FSA) is bearing down on
the call callers, and driving them off shore.

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[...Article continues]

If you go to the FSA's website, there is a link to a page
called Alerts, and the current alert is about financial
adviser cold calling. The FSA says in no uncertain terms
that ''Cold Calling is a fraudulent practice... whereby an
entity disguises itself as a brokerage firm or an asset
management firm and approaches potential investors via non
face-to-face channels, such as by phone, fax, and emails,
in order to solicit investment in securities or financial
products."

The FSA seems to be concerned with several different types
of cold callers: those companies operating in Japan and who
are misusing a limited financial advisory license , and
those which are based off-shore and are no better than
Nigerian scammers cajoling money out of prospects then
disappearing with the cash. Or as a variation of this, they
will fulfill a couple of orders for securities, then work
the "mark" (that's you) for a big deal and after the money
is paid, disappear.

Actually about a year ago, we received an email from an
investor in South Africa who had apparently placed several
million yen into a fund sold by a company here in Tokyo.
The company listed a respectable address just down the
road from us, and had built up a relationship with the
client before stinging him the final time. The writer asked
us if the company really existed, so for the hell of it we
went down to the Omote Sando address and checked it out. It
turned out to be an old apartment building opposite the
Nezu Art Museum. So the building really did exist, but
going up to the 10th floor it was obviously not a suitable
location for a securities firm. It looks like our new South
African friend had been taken for a ride.

Delving into the topic of foreign advisory firms is an article
<http://www.bnai.com/JapaneseSESCSanction/default.aspx>
written by Chris Wells, who is a partner over at White &
Case. It discusses the FSA's recent punitive action against
a Tokyo-based financial advisory firm called Meyer Asset
Management Limited and how the action "shocked" the
financial advisory market since this is one of the few
aggressive actions taken by the FSA against players in this
sector.

Our understanding is that Meyer had been around for years
with no license and was never challenged for doing so,
until now that is. They were well known for working the
expat market and no doubt called us up a number of times.
According to the report there is speculation that after
being nabbed Meyer may have squealed on the rest of the
industry and that is possibly how the FSA developed their
black list.

Since their operations in Japan are being squeezed, an
industry observer told us that cold callers are now most
frequently operating out of HK, Dubai, and other far-flung
locations. Because they're not physically located in
Japan, apparently it's getting harder for them to get
membership lists for business organizations, so hopefully
this will slow them down a bit.

The FSA's Alert on cold calling gives a pretty clear
warning for consumers to not buy securities from an
unlicensed reseller. They then proceed to publish that long
list of names of companies that are suspected cold callers
and who are thereby breaching Japanese law. Perhaps more
surprising, they also list phone numbers and websites for
companies that from all appearances look like and represent
themselves as being the real McCoy. If you don't know about
this list and you're dealing with a financial advisory
firm, you'd better check it out.

http://www.fsa.go.jp/en/refer/cold/index.html

The funny thing is that one of the firms on the FSA's black
list, Central Exchange Bureau <http://cexb.org>, itself
claims to be a watch dog for the securities industry in
Japan, and lists companies that it says are illegal. It
makes for interesting reading... Again, some of this
material is quite sophisticated, and if you didn't know
that the FSA had blacklisted them, is quite believable.

However, perhaps a giveaway is their company address, which
is Level 16, Yebisu Garden Place Tower, 4-8-3 Ebisu,
Shibuya-ku, Tokyo 150-6018 Japan. Plugging this into Google
quickly shows that it is a ServCorp office. So CEB may well
be a legit company, we haven't checked, but the FSA doesn't
think so -- and being tenanted at a serviced office does
not give an impression of credibility or permanence.

So it's the old story -- buyer beware, especially for
offshore investment funds from smaller advisory firms. But
at least now there is a list to check against.

*******

Lastly, we all know that real estate prices and rents are
coming down, but every now and again an outstanding deal
comes up. We heard about one such deal just yesterday. A
company called Noguchi Co. owns a modern office in Kuramae
and wants to rent out one floor. The asking rent is just
JPY7,500/tsubo! That is not a typo. The office is 40 tsubo
in size -- good for 15-20 people, and is just 4 mins walk
from Kuramae Station. Never heard of Kuramae? Neither had
we. It turns out to be very close to Akihabara and Asakusa.
If you're interested, you can contact H. Shimizu, at
shimizu at noguchi-ss.com. He has photos he can send you.

...The information janitors/

***------------------------****-------------------------***

+++ SHORT TAKES

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+++ NEWS

- Foreign property purchases to be controlled?
- Tiffany building repossessed by banks
- Chuo Senko Advertising goes bankrupt
- Household spending up 1.7%
- Rare Earths from Mongolia

-> Foreign property purchases to be controlled?

Speaking on a TV debate, the Foreign Minister, Seiji
Maehara, said that Japan may start to regulate foreign land
purchases in Japan. The comment came in a discussion
about the increasing purchase of land by Chinese and South
Koreans. Maehara was quick to qualify his statement by
saying that since Japan has very low FDI, it should be
careful about how to implement such measures. ***Ed: This,
in our opinion, is the start of a government push towards
restricting foreigners' investments in Japan. The Japanese
are not used to having their economy overtaken by their
neighbors and are not ready to see lots of foreign
investors takeover. We subscribe the theory that foreigners
can come and buy, but they can't take it home with them, so
what's the problem? Regulate the land use by all means, but
any kind of active investment by foreigners has to be good
for land prices overall and of minimal threat to the locals
(other than it makes land more expensive -- but no one
seems to mind that).** (Source: TT commentary from
nikkei.com, Oct 3, 2010)

http://e.nikkei.com/e/ac/tnks/Nni20101003D03JF895.htm

-> Tiffany building repossessed by banks

Goldman Sachs has ceded its ownership of the Tiffany
Building in Ginza, in a tacit admission that the property
is not likely to recover in value from the 50% drop it has
suffered in the last 3 years. Goldman will lose its entire
JPY7.6bn investment in the building, walking away from the
JPY38bn purchase it made in 2007. The banks now possess the
building and are in the process of selling it. (Source: TT
commentary from ft.com, Sep 29, 2010)

http://www.ft.com/cms/s/0/18177888-cbe6-11df-bd28-00144feab49a.html

-> Chuo Senko Advertising goes bankrupt

In what we think will be the start of a trend over the next
18 months, mid-sized advertising company Chuo Senko has
filed for bankruptcy with debts of JPY7.6bn. The company's
major customer was Takefuji, which itself went bankrupt
last week. The company says that its situation has come
about from the dramatic decrease in corporate advertising
in Japan. ***Ed: Many other ad companies are in the same
boat, and as consumer spending on luxury goods continues to
stay low, other companies will follow Chuo Senko.**
(Source: TT commentary from nikkei.co.jp, Oct 1, 2010)

http://e.nikkei.com/e/fr/tnks/Nni20101001D01SS759.htm

-> Household spending up 1.7%

Although we all think the economy is terrible, according to
the Ministry of Internal Affairs and Communications,
average household spending rose 1.7% in August, over the
same period last year. The average household now spends
JPY293,361/month, while wage earner households spend
JPY323,758/month. ***Ed: Strange, you might think, why is
household spending going up when there is so much doom and
gloom? The Ministry says the spending gains were in
housing, communications, and education -- i.e., the low
mortgage rates are causing people to buy their own homes,
and the iPhone/iPad are driving an increase in
communications spending... Education, we're not sure what's
driving that.** (Source: TT commentary from rttnews.com,
Sep 30, 2010)

http://tinyurl.com/2fmaejf

-> Rare Earths from Mongolia

China may have a defacto ban against exporting rare earth
minerals to Japan, but that doesn't seem to be slowing
down the Japanese too much. Instead, they have turned to
an ally, Mongolia, to start test drilling rare earth
reserves estimated to be in the millions of tons. Japan has
said it hopes to cut its dependence on Chinese rare earths
from 90% down to 70%. ***Ed: we did a little research, and
while Japan imported 28,417 tons in 2008 from China,
apparently Mongolia has the following massive reserves of
minerals: to a depth of 200 m -- 600,000 tons of niobium
oxides, 35,000 tons of tantalum oxides, 4m tons of
zirconium oxides, 1m tons of rare earth oxides, and
100,000+ tons of yttrium oxides. Sounds like Mongolia has
a winner on its hands.** (Source: TT commentary from
businessweek.com, Oct 3, 2010)

http://tinyurl.com/2g9e83d

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

***------------------------****-------------------------***

+++ CANDIDATE ROUND UP/VACANCIES

=> BiOS, a Division of the LINC Media group, is actively
marketing the following positions for customers setting up
or expanding in Japan, as well as other employers of
bilinguals.

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Remuneration is between JPY3m and JPY6m, depending on
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***------------------------****-------------------------***

+++ UPCOMING EVENTS/ANNOUNCEMENTS

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Details: Complete event details at http://www.icajapan.jp/
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Date: Thursday, October 21, 2010
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Open to all - Venue is The Foreign Correspondents' Club of
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-----------------------------------------------------------

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors at terrie.com.

*** No comments or feedback this week.

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-----------------------------------------------------------

***********************************************************
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+++ ABOUT US

STAFF
Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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