“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.
