Nikko Group, a Japanese brokerage firm, said it has teamed up with Foliofn, a U.S. online brokerage and back-office software provider, to offer the country’s first separately managed account service so investors can directly own a variety of Japanese stock portfolios under a single account, Securities Industry News reported this week.
The service will be provided through the Tokyo-based Nikko Cordial Advisors, a wholly owned subsidiary of Nikko Group, but Foliofn has the option to purchase an undisclosed minority stake.
The agreement, which gives Nikko perpetual rights to Foliofn’s trading and portfolio management technology, also allows the brokerage giant to sublicense it to others in Japan, according to SIN.
In addition to earning licensing fees, Foliofn will earn revenue from consulting and the customization of the software for the Japanese market, such as accommodating the Kanji alphabet system, the yen and mixed “long-short” trading models.
The agreement to create what will be known as Premier-port falls in line with Nikko’s efforts to diversify revenue from transaction-based to fee-based, first evidenced by its 1998 joint venture for a mutual fund wrap business with Smith Barney, the story said.
Foliofn, in turn, benefits from Nikko’s clout in the Japanese market, where it’s the third-largest brokerage company. For a minimum investment of JPY10 million ($940,000), the annual fee from Nikko Cordial Advisors will be less than two percent, and the new venture could break even once assets exceeded 100 billion yen, according to company officials.
Foliofn is hoping to leverage its newfound expertise in Japan to expand in the growing Asian wealth management industry, according to the story.
“The deal marks our first venture abroad and we hope it will provide us with a springboard to expand in other Asia-Pacific markets, such as South Korea, Hong Kong, Taiwan and Australia,” said Foliofn’s chief executive and founder, Steve Wallman, a former commissioner with the Securities and Exchange Commission.
Indeed, Foliofn is already in discussions with several Asian brokerages for similar agreements, according to SIN.