In 2022, Prime Minister Kishida announced the “Doubling Asset-based Income Plan” to encourage Japanese households to shift money from cash and bank deposits to investments. Among the Plan’s seven pillars for double asset-based income is “Creating a system to encourage the provision of neutral and reliable advice to consumers”. To that end, Japan’s Financial Services Agency (FSA) is developing an advisory system from the customer's point of view. Hideki Ito, who heads the new system as Director-General of FSA’s Policy and Markets Bureau, describes its goals and the projected launch.
Following is a translation of an article originally posted August 3, 2023 on 'finaseePro', a website for financial professionals in Japan.

Q.: What does the FSA hope to achieve by setting up a neutral advice system?  Can you give us an overview of the system?

In order to achieve stable asset formation for households, it is not enough to simply wait for behavioral change to occur by providing financial and economic education to individuals.  In addition to providing financial and economic education, it is also necessary to create an environment in which individuals can easily receive high-quality advice when choosing financial services, so they can engage in asset building with peace of mind.

Currently, a wide variety of entities are listed as providing advice to customers, including those in charge of financial institutions engaged in the sale of financial products and services, investment advisors and agents, financial product intermediaries, insurance agents, financial service intermediaries, and financial planners (FPs).  Despite being widely available, investors are wary of relying on financial advisors, saying “It is difficult to know who is trustworthy” and “In some cases, advice is biased towards particular financial businesses, financial products, and services”.

In light of these and other criticisms, a draft law is currently being submitted to the Diet to establish a “Financial and Economic Education Promotion Organization” (tentative name), to develop financial and economic education from a neutral standpoint, i.e., “from the customer’s point of view”.  We are considering establishing certain requirements for advisors for neutrality and independence from financial service providers.  Other considerations could include whether an advisor engages in structuring and selling financial products, and whether an advisor receives remuneration only from clients.  The Organization will certify and publish a list of advisors who meet the requirements.

By making advisors more transparent to consumers, we hope the Financial and Economic Education Promotion Organization will create an environment in which individuals feel safe and comfortable seeking advice and can choose more appropriate financial services.

Q.: In what ways do you expect the new neutral advisor system to be used, and by which target groups in particular?

When asked in a survey conducted by the FSA whether they would be willing to buy risky financial products if they had someone who could advise them from their perspective and support them through the process, 50% of those in their 20s and 40% of those in their 30s said that they would be willing to buy such products.  The average for all generations was 25%, so we can assume there is a high need for advisors among the younger generation, the asset-building segment.

With the aging population and diversification of work styles in Japan, it is important for individuals to secure the funds they will need at various stages of life by engaging in stable asset building from a young age based on their own life plans.  We hope receiving advice from the certified advisors will encourage people, especially novice investors, to take the first step toward asset building by purchasing financial products.

Q.: What is the timetable for creating the Financial and Economic Education Promotion Organization and starting the neutral advisor system?

First of all, the legislation needs to be passed as soon as possible in the Diet.  The Doubling Asset-based Income Plan states that the Financial and Economic Education Promotion Organization is to be established by the end of 2024, so we will operate with the aim of establishing the Organization by that time.  The certification of neutral and independent advisors is one of the Organization’s designated tasks, so we will make sure that can begin immediately once the Organization becomes operational.


What would you say to financial professionals to promote their understanding of and collaboration on this plan?


As one measure to provide good quality financial advice to customers, we are preparing a system whereby the Organization publishes the names of advisors who are certified as advising from customer's point of view.  We hope financial professionals will make use of those advisors, so that more people will take the first step toward asset building, thereby expanding the base of individual investors.

We are aware that financial professionals and other financial service providers have been promoting customer-oriented business operations with their own originality and ingenuity.  We hope with our new advisory system, they will put even more effort into their initiatives so that individuals can engage in asset building with peace of mind.

Hideki Ito

Policy and Markets Bureau
Financial Services Agency

Hideki Ito joined the Ministry of Finance in 1988.  After mainly working as a budget examiner in the Ministry's Budget Bureau (in charge of Education and Science), he moved to the FSA where he has been engaged in market regulation, supervision and monitoring of financial institutions, etc.  He became a Deputy Vice-Minister for Evidence-based Policymaking in Strategy Development and Managing Bureau in 2020 and was involved in cross-cutting policy planning across the FSA.  In 2022, he was appointed to his present post.  He compiled legislation related to the Doubling Asset-based Income Plan and was instrumental in making NISA permanent.

He received a B.A. in Law from the University of Tokyo and an MBA from Georgetown University in the US.