Japan's smaller private wealth firms typically earn advisory fees rather than trading commissions. That means they tend to have lower staff costs because they don't execute trades, so don't need trading desks, back office staff and risk managers.
"Major global players face the difficulty of justifying the costs related to keeping a relatively big team of private bankers in Japan," Kagawa said.
Kagawa Asset is currently offering dollar-based foreign bond-related funds as well as alternative investments such as hedge funds for Japanese high net-worth individuals who are seeking stable returns amid the market rout exacerbated by Europe's sovereign debt crisis, Kagawa said.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, surged more than 70 percent this year amid Europe's debt crisis and stalled U.S. economic growth. The Japanese currency has strengthened more than 7 percent against the dollar in 2011, while the benchmark stock index has slumped 18 percent, heading for its worst annual performance since 2008.
Japan's rich are more conservative investors compared with those in the rest of Asia, according to a report by Capgemini SA and Bank of America Corp.'s Merrill Lynch unit in October. Wealthy Japanese allocated 19 percent to equities in 2010, compared with a global average of 33 percent, while fixed income made up 25 percent of assets versus a 22 percent global average. They held 29 percent in cash and deposits, almost double the 16 percent elsewhere in Asia.
Star Mica is offering real estate advice along with wealth management services including investments in global equities and bonds, said Yutaka Kobayashi, a former Goldman Sachs banker who started the company as a unit of a property asset management firm, Star Mica Co., in June 2007.
Real estate accounts for 23 percent of wealthy people's assets, according to the Merrill Lynch-Capgemini report.
Star Mica has about 17 clients and 8 billion yen in assets under advisory, he said. This year it started offering its own hedge-fund strategy that uses computer models for clients seeking to diversify assets, Kobayashi, 46, said.
"My understanding is that boutique private banks' role is to provide a hotel concierge-type service," Kobayashi said in a Nov. 15 interview. "Demand for investment advice from investors faced with this unstable and uncertain market is strong."