Welcome back to another issue of the C-Suite, a once a month interview where we speak to senior executives from the retail trading industry.
This time we’re speaking to Tomoharu Furuichi. Tomoharu is the Head of Japan at IG Group and is the CEO of their local entity.
TradeInformer is in the Land of the Rising Sun for July, so we paid a visit to IG’s office here.
We talked about revenue growth, marketing tactics, competition, market nuances, and the need for rapid product development.
Can you talk a bit about your background – I know you were from outside the trading world before?
I started with consulting at McKinsey and Company in Japan. It was 1990 and the bubble was still going on here. I spent 12 years there and after that I went into management jobs, like COO and CEO. Including IG, I have been on the senior management teams of four companies.
Two of those were local Japanese companies. The other two were foreign-affiliated companies. Three were public and one were private – so all very mixed but with the common theme that they were all B2C. But the other thing was that all of those companies were at a pivot point – they could either go up or down.
So how did you end up at IG?
It was actually an interesting experience. I had 12 interviews in London. After the last one I took a cab to the airport and the taxi driver gave me the receipt. On the back of it was the IG logo – an advertisement. I thought that might be some sort of sign that it was going to work out.
That’s one of the weird things about this industry. If you know it, you’ll start seeing it everywhere. So the next question I had was on growth. As a division, IG’s Japan entity has delivered the best organic growth within the company over the last five years – up to just under £100m last year. Can you give some idea on how you achieved that, because this was not a new business when you joined.
Well one point I’d note is that in yen terms, the growth is actually better than what you describe but obviously the pound has strengthened so much that it doesn’t look like that now. So that’s been frustrating!
I’ll talk a bit about the history of IG in Japan. The company entered the Japan market in the late 2000s. They acquired a local company called FX Online, which was one of the bigger brokers here. Then they introduced the global platform and global way of business and it didn’t fit the local market. We lost all of our employees except two, which is unusual for Japan. Revenues went down and we ended up being dead last in terms of country ranking within IG.
When June Felix became CEO in 2018 it made a big difference because Japan became a strategic growth area. That meant the main stakeholders at the company were eager to help us as well.
I’d say the first shift as a consequence of that was a decision to become a major player and not just a niche player in the Japanese market. Previously we were ranked about 30th in Japan and the brand was not a well known one. Our vision was to make it top five in terms of revenue, which we have now achieved.
One key factor there was we switched from targeting the top 2% of the market to targeting the top 50%. At the same time, we wanted to be like a challenger and grow fast, so both of those things meant we had to shift our marketing strategy a lot.
That’s sort of high level but can you say anything more ‘on the ground’ as to how you actually achieved that growth?
Well one of the first things I did was to just ask questions. I spoke to everyone in the Japan office at the time – there were 24 then, now we are 50. And a lot of them were not happy about how things had been going and said that, which actually was good. It showed where we were going wrong. So ultimately that meant we were all on the same page and it led to a change to operations, a change to marketing, a change to our product, a change to everything.
To give one example, we needed to get a lot of the basics right. In Japan, every company has an offering to auto generate self-reporting tax tools. Our service previously was to take a phone call, then send the data, which they could then use to put together the report. That kind of service is just unacceptable to a client here. Another one is system incidents. In the UK, you can fix these problems with good will to the client. You can’t really do that here.
Another one would just be the charting. In Japan, the colour scheme of charting is the opposite to what it is elsewhere. We used to do things by the global standard but clients here don’t like that. So we had to change that as well.
One point I’d add is that these all sound like simple things but they actually take a lot of work, so the global tech team supported us a lot to get them done.
Japan is like Europe in the sense that it is a very saturated market. So have you got people to switch to IG or was this a case of onboarding clients that may not have previously traded?
When I joined IG I saw a big opportunity. The FX industry in Japan is now 20 – 25 years old and a lot of the competition is based on price. There isn’t much differentiation between the brands in other ways.
I didn’t think we’d be able to crack the market on pricing, so differentiation was key. I was lucky to have a new product – knock out options – when I joined IG. We managed to make that a key selling point because no one else had that product and it has taken off.
The other thing was marketing. We lent heavily into influencer and affiliate marketing, particularly YouTubers. At that time, financial YouTubers were taking off in Japan but none of our competitors were working with them. We cannot beat our competition here in terms of spend, so this was a way to do something that they were not.
For people, including myself, who are not entirely familiar with the Japanese market, can you say who the biggest players are today?
You really have three groups of brokers. So there are OTC derivatives – that’s our market – and there you have two big players, GMO and DMM. Then in share dealing you have SBI, Rakuten, and Monex. The third group is crypto. The companies I mentioned do crypto but there are other, bigger companies that focus predominantly on that market.
So I interrupted you midflow there but can you talk more about the opportunity that you felt there was when you joined?
I think it was those two points – different products and using affiliates. The other point I’d add is that FX is still dominant in Japan, CFDs are not so big. FX revenue is about $1bn in total. We’re still working on making CFDs a bigger product, so that’s a work in progress, but we are now the biggest contributor, in FX revenue terms, to IG.
Outside of Japan there is a perception that this market is so different that it can be very difficult to understand the local nuances that would lead to success. So does that make it difficult from your point of view, in terms of working with headquarters to get them to understand those? And then from the client’s point of view, is it harder to get them to trust a foreign brand?
Japan is indeed very difficult, I have to admit, for many reasons. One is simply language. Japanese is very different from any western language. For example, our clients are not, at the moment, set up to search for products in the way that they are used to. We are much better than we were but there is still work to do. You have other things like the platform colours I mentioned.
Another thing is that our competitors are very strong and large as well. Some of them have multi-billion pound revenues. They are always launching new products. So we have to keep up with them.
Then you have the regulations. Japanese regulations are not the same as others globally and we have to meet quite specific regulations that other entities may not be accustomed to.
The fourth thing is that clients are different. They are very demanding from a service quality point of view and are very quick to go to the regulator with any kinds of complaints. And then mobile is very important here too – so you need to make sure you have a very good app for that as well.
I’ll give you a different example, that canned coffee (author’s note: I was given a can to drink before we started the interview) is the biggest soft drink in Japan, then comes ice tea. When Coca Cola came here, they allowed their local team to come up with new products to meet this sort of demand and it became one of their biggest products globally. Nike did the same thing. These are foreign brands but they are very successful here because they developed localised products. So localisation is definitely key but it’s easier said than done.
If you look at a lot of senior executives in this industry, they are often people who have spent their entire career with one firm and in this industry. You’ve come from outside of it, so was there anything you saw and felt you could bring something ‘new’ or vice versa, where you found the methods used in this industry striking in some way?
I think it would be a bit arrogant to say that I came in and that I knew better than everyone else. I am a little bit arrogant but not that arrogant!
My career so far has meant I am used to coming in somewhere new and working with a new team and so on. And I always start with listening to them and asking a lot of questions. My elementary school teacher actually told my parents I ask too many questions, but I firmly believe that asking questions is the first step to changing things. I had to learn a lot from our team here, in London, our clients, and so on. So I credit my colleagues with that entirely – they were eager to help and were never hesitant to help.
I think the difficult thing goes back to the previous question. It’s difficult to make a list of tasks and initiatives, then making sure our global team understands why we have to do those. That can take time but it’s necessary. The competition is so fast here, they are changing things every day and we need to stay on par with them.
You’ve done a big campaign here with two actors – Elaiza Akeda and Takumi Saitoh – did that work well?
It has gone well. We started with Takumi just after I joined. I think the campaign has 40m to 50m for each video.
I believe in branding for B2C products but particularly in this industry where the product is not tangible. If you are Nike, you can make a sneaker that people can touch and hold physically. With financial services you can’t do that, until you use the service. There are 60 FX brokers here. So how are you going to choose? You have to stand out in terms of branding. We need to get into the top 5 in terms of ‘mind share’, to be on that battle ground.
When we started with Takumi, it was another opportunity to do something different. At that time, our competitors were doing very similar adverts. I don’t know how to put it in a polite way exactly but it was all with female models. But the large majority of our clients are male. Maybe that’s actually why they used that method – who knows?
I thought instead, we could use a male, a cool guy, someone who our clients or prospective clients could resonate with. Takumi was really good for that because he was almost like an entrepreneur. He came from a small town in southern Japan. He didn’t join a big agency. He founded his own and he became big as a fashion model, then moved into acting, then film directing and producing. I wanted to position our brand as a challenger brand, which is true here. So I wanted to make people think ‘IG is an innovative brand, they’re doing something new and different from other companies.’ Takumi was really good for that. Now we are in a new stage of growth with Elaiza added as well. But the thinking is still similar.
The other big campaign you’re doing is you’ve acquired the name rights for IG Arena. What actually is the arena and why did you do it?
It’s similar to the O2 Arena in London. Again, we came to Japan as a challenger and a disruptor. AEG, which is one of the top two promoting companies in the world, came to Japan as an innovator and disruptor as well.
To give an example, Taylor Swift came to Japan and did a concert in Tokyo Dome, which is a baseball stadium. It can accommodate the people but it’s not set up for music. The client experience is bad during the concert and afterwards. So AEG wanted to disrupt that and I really liked the idea.
At the time, we were looking for something more ‘iconic’ for marketing. Like I said, people can be suspicious of a brand from abroad. They worry that you’ll go away. When Citibank left Japan, clients were in turmoil. They will never open an account with them if they come back. Coinbase had something similar. But if you commit to something like this, it reassures people. So that was the thinking behind that.
Many players in this industry are moving to being something like a ‘one stop shop’ for trading and investing, whether its derivatives, stocks, bonds, and so on. Is there a similar development here?
It’s already happened and has been going on for a while. So if you look at SBI, they started with equities but moved to other products over time, like CFDs, FX, crypto, and even insurance. So it’s definitely happened but we are doing the same.
Obviously one of the big pushes in the UK at the moment is the launch of options and futures. Is that something we’ll see here?
Options and futures is interesting because it’s not a big market here among retail clients – yet.