The Fourth Ideathon with Guest Speaker Mr. Kazuhisa Shibayama, Founder and CEO of WealthNavi Inc.
Mr. Shibayama graduated from the University of Tokyo with a Bachelor of Laws, Harvard Law School, and INSEAD. He is an attorney registered with New York State. He worked for the Japanese Ministry of Finance and the U.K. Treasury, where his work ranged from budget preparation and tax system reform to banking system stabilization and multilateral trade negotiations. After spending nine years there, he joined McKinsey, where he managed the risk and assets of a portfolio valued at 10 trillion yen for Wall Street-based financial investors for a year and a half. In April 2015, Mr. Shibayama founded WealthNavi, wishing to build a next-generation financial infrastructure.
What Motivated Mr. Shibayama to Establish the Company?
Mr. Shibayama started his career at the Ministry of Finance followed by a stint at McKinsey before diving into entrepreneurship. In April 2015, he founded a Tokyo-based FinTech asset management firm WealthNavi.
At McKinsey, his main task was to support institutional investors with offices in Wall Street, managing as much as 10 trillion yen in assets. Mr. Shibayama was responsible for developing an algorithm based on an investment theory advocated by Nobel laureates to manage the risk and assets of a portfolio for the investors. Using the algorithm, he realized that the asset management formula would be the same whether it is 10 trillion yen or 1 million yen.
Around the same time, he learned that his parents-in-law in the United States had entrusted their asset management to their companies’ benefit services. They had kept placing their salaries after deducting essential expenses and payments in long-term, diversified investments since they were young. He was shocked to learn that they had financial assets valued at almost 10 times that of his parents in Japan, who had just kept their salaries in bank accounts, despite the fact that both the parents are similar in terms of age, education and occupation.
These two findings prompted him to found the company, WealthNavi.
What Does WealthNavi Do?
WealthNavi offers an application that allows customers to use its asset management service powered by a robo-advisor. They can start with a minimum of 100,000 yen. Based on a customer’s answers to six questions, the application will prepare a tailored investment plan, automatically optimizing the portfolio.
As of September 2018, 90,000 people have signed up for the service, and the total deposit is approximately 100 billion yen with an average investment of 1.1 million yen per person. Half of them are using a service enabling regular automatic transfers from a savings account, and their average monthly deposit is 32,000 yen. WealthNavi is primarily used by busy working-age people: 94% of the users are in their 20s to 50s. The financial service is highly appreciated among them as they are busy working and raising children.
Three Basics of Asset Management: Long-Term, Continuity, and Diversification
Behind the popularity of this kind of service is the fact that there is an increasing awareness of the significance of asset management due to a growing concern over a decrease in retirement bonuses and pension funds, in addition to the fact that few financial institutions have provided asset management services targeted at the working-age population.
To the question of what we should do about asset management, Mr. Shibayama replies that asset management could be reduced to three basics: long-term, continuity, and diversification–continued, diversified investment over time. He pointed out that the world economy had continued to expand while Japanese economic growth remained lackluster. He also taught us about the relationship between interest rates and bond prices and demonstrated the effectiveness of the three basics using WealthNavi’s unique simulation results.
Competitive Edges of the Robo-Advisor
Even if we have understood the basics of asset management, we humans are easily influenced by emotions. We tend to become too sensitive to changes in stock prices and sell and buy short-term, whereas Robo-advisors manage assets simply based on the three basics, unaffected by emotions. This is why automated services like WealthNavi are highly appreciated among users.
As part of its continued efforts to improve the service, WealthNavi has been working with the Matsuo Lab., the University of Tokyo, to jointly develop AI-assisted asset management models. The company is endeavoring to improve the accuracy of robo-advisors’ investment advice with the aim of creating a society where everyone can access the same level of asset management services enjoyed by private banking for wealthy investors.
In the Q&A session following his keynote speech, Mr. Shibayama kindly answered each of the wide-ranging question by participants at length, such as about his view on the future of AI, his business development plans going forward, and his way of finding out peers at the start-up stage.
I was impressed when the Q&A session surfaced issues and potentialities that can be shared among start-ups in restricted industry sectors like financial services and tourism.
AI has recently been used for various services in the tourism industry as well, such as providing recommendations on travel destinations. We are grateful to Mr. Shibayama for his inspiring speech on how he has managed to build a new financial service using AI.
The guest speaker in the next seminar is Ms. Fumiko Kato, CEO of WAmazing Inc.