Firms using the Internet to cut costs

Business Asia, July 5, 1999

Japanese financial firms are waking up to the Internet as a tool to cut costs and save time.

Mr Timothy McCarthy, founder and chief executive of Advisortech, a Web-based provider of back-office systems, said interest from financial institutions was stronger than expected.

"The mix (of potential clients) is very interesting. Six months ago I would have said it would be much more independents but now we have several financial institutions that are very interested in reinventing themselves," he said.

Mr McCarthy, former chief operating officer of US discount brokerage Charles Schwab Corp, said it was too early to predict Advisortech's client base in Japan but said established financial institutions could eventually account for half.

San Francisco-based Advisortech provides independent financial planning start-ups with back-office infrastructure, including information on about 50 asset management funds, portfolio planning models and account maintenance.

Advisortech, like the many firms forming on-line brokerages, is hoping to ride an expected explosion of interest in on-line investment among Japanese individuals fed up with the country's ultra-low interest rates.

Increasing familiarity with the Internet and government deregulation of financial markets are expected to stoke demand for financial planning services. Stock broking commisssions, for example, will be fully liberalised in October.

Mr McCarthy declined to give specific revenue forecasts, but said he expected substantial long-term growth.

He said the number of independent Japanese investment advisers had risen to 40,000 from less than 5000 in 1995, adding that very little of Japan's 1200 trillion yen (US$983 billion) in personal savings was invested in long-term financial instruments.