Private investing could be about to get a makeover in Japan

Investing is not something the average Japanese person is comfortable with. For many, the bubble still looms as a cautionary tale against anything that could be construed as a risk. By one estimate, more than US$8.6 trillion sits in private bank accounts, doing nothing. Yet as society ages and people realise that the national pension system is unlikely to sustain anything approaching a comfortable lifestyle, change could be in the air.

Dentsu thinks so. The company’s investment arm, Dentsu Ventures, recently backed a fintech startup called Folio. Founded by Shinichiro Kai, a former Goldman Sachs trader, Folio is an online security brokerage aimed at entry-level investors. Launched in beta in November 2017, it appeals to financial novices and people with little or no investment experience by offering ‘themes’ to invest in. Each theme represents a specific area of interest—for example, drones. Others on offer include casinos, industrial robots, and even hot springs.

Within the theme are 10 apparently diversified stocks selected by Folio analysts based on factors such as sales, forecast and liquidity. They operate on a unit share system, giving users access to a range of stocks for a relatively low cost of entry: a minimum of 100,000 yen (around US$940).

The approach is similar to companies like New York-based Betterment, an online investment company that offers goal-oriented themes and aims for an all-round hassle-free experience. Betterment was founded 10 years ago, but equivalent services have been slow to surface in Japan.

Line also sees potential in the model. It has a capital and business alliance with Folio and plans to open the service up to its own 71 million users. Icho Saito, a spokesperson for Line, says that fintech will be an increasing focus for the company, starting with investment services. She said Folio’s “polished UI” was something that made it stand out.

The appeal lies in imbuing the monochrome world of investing with a sense of colour and making it something people can relate to, says Folio’s founder. Wearing a sweater and jeans, Kai himself appears quite un-finance-like. He says it’s a myth that people in Japan are not interested in investing—it’s more a case of not thinking about it because they don’t know where to start. He sees a potential market of around 20 million customers.

‘Waku-waku’ investing

As a brand, Folio intends to approach this market in two phases. The first is to unlock that latent interest in finance. The second is to build understanding. It’s a case of stimulating both left and right brain, Kai says. Appealing to logic alone won’t be enough to get people fired up about investing.

“A lot of people give up on trying to understand because of the technical language and general difficulty,” he says. “What we have to do is give them a feeling of excitement. Based on that, logical thinking will follow.” Kai also hopes Folio’s principles of design and ease of use will help to sway existing investors from other institutions.

Masahito Namiki, CEO of Interbrand Japan, calls Folio “a very interesting brand”. He notes that the focus is on why the service is meaningful to the investor rather than simply on why it is better than existing services. Using the term ‘waku-waku’ (an onomatopoeia to indicate excitement, which appears in the welcome message on Folio’s homepage) sends “a clear message about the importance of the emotional aspect”, he says.

Many of Folio’s themes are Instagram-friendly—baseball, for example—which Kai says should encourage people to talk about their portfolios on social media. “We pay a lot of attention to the visuals,” he says, explaining that Folio’s own designers took the images that represent the different themes. “We are a high-level financial technology company but at the same time we want to provide entertainment. This is our brand.”

Folio is not currently advertising, but as an investor in the company, Dentsu will support marketing activities. Kotaro Sasamoto, managing partner of Dentsu Ventures, says Dentsu decided to put money behind Folio because it sees direct investment as a growing trend in Japan.

“Young people know they cannot depend on the pension system for the future so they have to increase their assets by themselves,” he says. “Technology can enable people more easily. It used to be that you had to go to a financial institution. Now you can just do it via mobile.” But he admits it will be important to reassure people that what they are doing is secure.

As well as building awareness and trust, Dentsu will provide community management, which Sasamoto says should offer “emotional value” and help people “enjoy their investments”. That means “nurturing and educating them” on investing in new assets, and creating content that relates to the themes, including live events. Kai says he envisages staging conferences dedicated to themes such as drones and IoT, where investors can meet and experience the products first hand. Sasamoto thinks this could also open up new ways for companies in specific industries to connect with potential consumers.

Opportunity to connect

Folio is not alone in offering supposedly easy-to-use investment services. Competitors can be seen as companies such as One Tap Buy, which enables investment in US or Japanese companies of as little as 1,000 yen; and Theo, a robo-advisor that trades on users’ behalf.

Yahoo Finance currently offers the most popular investment application, according to a ranking by Appliv, a domestic platform for apps. Others, such as MyTrade, Fisco and Answer by Monex, help users analyse their options, while itore offers a virtual game to help would-be investors learn the ropes.

However, marketing activity for these services appears to be scant. An investor Campaign spoke to for a consumer perspective, notes that they are not easily discoverable and in most cases all require an element of learning, which is a deterrent to people who lack time or personal interest. The observer describes Folio’s website as “fun” and a way of learning organically about different sectors. By contrast, more typical securities companies send stock performance updates too frequently and in hard-to-understand language, the source says.

Interbrand’s Namiki agrees. He says fintech startups in general see an opportunity to connect with people—especially younger audiences—as incumbents continue to lose their relevance for them. He acknowledges that the language of investment is typically dry and not conducive to “emotional mindshare”.

“Startups appear to play the game better by bringing authentic personality out in their brands, which is reflected in their products and services, not just communications,” he says. Having a specific service offering gives them the ability to speak to their audience more clearly, he says, which can translate to “a stronger and more edgy personality”.

A common thread is to talk about meaningfulness, either in a social context or a personal one. But Namiki is undecided as to whether ‘purpose branding’ is the best way to win over new customers. “It’s true that there is a rise of interest in ESG (socially responsible) investing among individual investors,” he says. “However, it is not clear if that can drive non-active individuals to be proactive in investment.”

Ryoko Tasaki contributed reporting to this article.