A win-win situation for Matsumoto

“People used to call me insane,” recalls Japanese online brokerage pioneer Oki Matsumoto.

“People used to call me insane,” recalls Japanese online brokerage pioneer Oki Matsumoto. With some reason. Matsumoto gave up a lucrative partnership at Goldman Sachs in 1998 -- less than a year before the bank went public -- to start an online firm in one of the world’s worst-performing markets. And even though his start-up, Monex, became Japan’s third-biggest e-brokerage, it was swamped with red ink.

Six years later, however, the 40-year-old former bond trader is convinced that “leaving Goldman has turned out to be the right decision.” With investors again looking favorably on Japan, Monex turned its first pretax profit -- $24 million -- in the fiscal year ended March 31. What’s more, the firm announced in March that it would merge with a competitor, Nikko Beans, a unit of brokerage giant Nikko Cordial, to climb ahead of Rakuten Securities (formerly DLJdirect) and challenge E*Trade Japan for the No. 1 spot in online brokerage. At the end of May, Monex and Nikko Beans -- to be renamed Monex Beans, with Matsumoto as CEO -- had a combined 375,068 accounts, trailing E*Trade’s 389,426. (E*Trade is an affiliate of U.S.-based E*Trade Financial Corp.)

With the merger, expected to be completed next month, Matsumoto eliminates a competitor and gains the support of a deep-pocketed, well-connected investment bank. As a result, he says, he can provide customers with access to IPO allocations as well as a broader product array, including mutual funds. “We’re trying to make a new regime in Japan’s financial industry,” he says.

Matsumoto -- who in 1994, at age 30, became Goldman’s youngest-ever partner in Tokyo -- will now be Monex Beans’ biggest individual shareholder, with a 12.8 percent stake; Nikko will own about 22 percent. As of mid-June, Matsumoto’s stake in Monex was worth ¥37 billion ($337 million). Not a bad piece of change.