20060123_ey_submission

Identifying the differences in perceptions in financial consultants
providing services: an exploratory study of European and Japanese
advisors to wealthy Japanese families.
Katsura Suzuki
MBA European University
International Graduate School of Business
Division of Business
University of South Australia
Submitted on this 13th of June in the year 2005 for the partial
requirements of the degree of
Doctor of Business Administration

Contents
Submission Form......................................................................................................3
DBA Dissertation Declaration ..................................................................................4
Acknowledgements ..................................................................................................5
Chapter 1. Introduction.............................................................................................7
1.1. Background......................................................................................................................7
1.2. Aims and needs..............................................................................................................12
1.3. Contribution...................................................................................................................14
1.4. Outline of dissertation....................................................................................................14
Chapter 2. Literature review...................................................................................16
2.1. Differences in cross-cultural aspects .............................................................................16
2.1.1. Comparison of cultural differences around the world ............................................16
2.1.2. Managing cross-cultural aspects in Japan...............................................................20
2.2. Advisory services for wealth preservation in the West and East...................................23
2.2.1. Services for wealthy families..................................................................................23
2.2.2. The role of family offices and banks in wealth preservation..................................26
2.2.3. The importance of Switzerland in wealth management..........................................28
2.3. Advisory services for wealthy Japanese families .........................................................35
2.3.1. Wealth in Japan.......................................................................................................35
2.3.2. Family office service providers in western countries .............................................38
2.3.3. Advice services for Japanese clients.......................................................................39
2.4. Family wealth services and problem areas in Japan......................................................43
2.4.1. Family wealth management tax and legal concerns ...............................................43
2.4.2. Financial services currently available in Japan.......................................................44
2.4.3. Problems that exist for family wealth management services in Japan ...................45
2.4.4. Why wealthy families tend not to optimize their tax burdens to protect assets......47
2.4.5. Historical reasons for the absence of family office services in Japan ....................49
2.5. Advising wealthy Japanese and their families in Europe ..............................................50
2.5.1. Technical aspects ....................................................................................................51
2.5.2. Independence of advice ..........................................................................................51
2.5.3. Trust between advisors and clients .........................................................................52
2.5.4. Intercultural aspects of the Japanese.......................................................................53
2.5.5. Future generations...................................................................................................53
2.6. Summary........................................................................................................................54
2.7. Gap in the literature .......................................................................................................55
Chapter 3. Research design and methodology ....................................................56
3.1. Research design .............................................................................................................56
Main research questions....................................................................................................56
Research questions............................................................................................................57
Data collection..................................................................................................................61
Data analysis.....................................................................................................................62
Chapter 4. Analysis and findings..........................................................................64
4.1. Findings from the questionnaires...................................................................................64
4.1.1. Response rate ..........................................................................................................64
4.1.2. Demographic profile of the respondents.................................................................65
4.1.3. Analysis of the questionnaire responses .................................................................66
4.1.4. Limitations of the questionnaire survey..................................................................78
4.2. Findings from the interviews .........................................................................................79
4.2.1. Response rate and demographics............................................................................79
4.2.2. Analysis of interview responses .............................................................................79
4.2.3. Limitations of the interview survey........................................................................94
4.3. Propositions ...................................................................................................................95

Identifying the differences in perceptions between financial consulting services providers:
An exploratory study of European and Japanese advisors to wealthy Japanese and their families.
2
4.4. Findings and conclusions...............................................................................................97
4.4.1. Findings from the research questions .....................................................................97
4.4.2. Conclusion ............................................................................................................103
Chapter 5. Implications, limitations and future research ..................................108
5.1. Implications .................................................................................................................108
5.2. Contribution.................................................................................................................109
5.3. Limitations...................................................................................................................110
5.4. Future research.............................................................................................................111
Reference List .......................................................................................................113
Appendices............................................................................................................121
Appendix A: Some of the USA Family Office service providers ......................................121
Appendix B: Some of the European Family Office service providers ...............................126
Appendix C: Some of the Banks providing Family Office services...................................128
Appendix D: Some of the Law Offices providing Family Office services ........................132
Appendix E: The sponsors’ list for courses run by the Swiss Banking School..................134
Appendix F: Inheritance and gift taxes – Update (Japanese MoF, 2003)...........................135
Appendix G: What Ishihara (2002) dared to say in ‘Nihon yo’ .........................................136
Appendix H: The questionnaires and interview sheet ........................................................138
Appendix I: Detailed graphics for each questionnaire and interview question ..................146
Appendix J: Table of ANOVA results................................................................................180
Appendix K: Summary of Direct Investments Abroad from 1991 - 2004 .........................185
Appendix L: List of participants who wish to be named in the survey ..............................186

DOCTOR OF BUSINESS ADMINISTRATION
PORTFOLIO/DISSERTATION SUBMISSION
SUPERVISOR APPROVAL DECLARATION
Candidate Name: UniSA Candidate ID Number:
Katsura Suzuki 100013069
Dear Sir
To the best of my knowledge, the portfolio contains all of the candidate’s own work
completed under my supervision, and is worthy of examination.
I have approved for submission the portfolio that is being submitted for examination.
16 June 2005
.............................................................................. ..........................................
Signature: Principal Supervisor Date
..............................................................................
Name
N/A
.............................................................................. ..........................................
Signature: Associate Supervisor (where applicable) Date
..............................................................................
Name
Supported by:
.............................................................................. ..........................................
Chair, IGSM Doctoral Academic Review Committee Date

4
DBA Dissertation Declaration
“I hereby declare that this paper submitted in partial fulfilment of the DBA degree is my own work and
that all contributions from any other persons or sources are properly and duly cited. I further declare
that it does not constitute any previous work whether published or otherwise. In making this
declaration I understand and acknowledge any breaches of the declaration constitute academic
misconduct, which may result in my expulsion from the program and/or exclusion from the award of
the degree.”
Katsura Suzuki Date:

5
Acknowledgements
Now at last it is time to write my favourite page, my acknowledgements, putting the
tiny flag of my heart on the top of my own very high mountain.
The Doctor of Business Administration programme took more than 3 years’
dedication of time, effort and nerve, not only mine but sometimes even more so from
the special people around me – my family, colleagues and friends, who I would like to
take this opportunity to send my grateful thanks. It was a very long process during
which I not only learned a lot but also experienced a lot of caring, gratitude,
understanding and the love of the many people around me.
JM, the initials of Dr. Joseph Mula, my supervisor, Professor of the University of
South Australia, specialist in family business both academically and in practice in
USA, was my Guardian Angel – but the one with the biggest teeth! I discussed JM’s
comments a lot with Alison Bellhouse who has helped me enormously with editing
and statistical work. I would like to share one of JM’s comments, which I will never
forget and which also lead me to attend the PHD writing in English course at Zurich
University during my studies: “Katsura, your English is like that in ‘Time’ or
‘Newsweek’ and your paper is like one from a consulting company – but this is not
academic enough!’’
One source of support was from my classmates who shared this hard time, alongside
busy business lives, with a lot of humour; particularly during our study trip - especially
Ariel with his Swiss private banking background and Debra with her psychology and
intercultural communication background.
Further support came from the people who actively participated in my questionnaire
and interviews, all very important people in Europe and Japan in the business world.
With an average 17 years’ experience in their fields they included lawyers, tax
experts, consultants, private bankers, bankers, accountants, professors and business
experts with Japan business experience. So many people were kind and often
participated with particular enthusiasm, confirming my own belief that this paper has
been written at the right time for the market. They also contributed, with their
considerable knowledge, to my work.

6
As a Japanese consultant who has been living in Switzerland for a long time, I would
like to share my knowledge and experience with professional people involved in
Japan business in Europe in order to make Japan business easier and more
successful. Not only that but I would also like to explain and show to Europeans the
Japanese beauty of spirit – their selflessness as well as their absolute love. This is
more to do with dedication from the heart and not with the technical skills we learned
at school. On the other hand, I would like to show Japanese people how to enjoy life
more like Europeans do. A comparison of the different cultures was something that
emerged in addition to my academic study. The people I got to know through my
work and study are my greatest assets. In particular, I met some very successful
people who I greatly respect and who are very powerful but at the same time, also
very modest. I would also like to be like this and to use this study and my knowledge
as an ongoing contribution to the business world.
Sincere thanks go to Yumiko Ganarin who always supported me with the statistical
work and Japanese/English translations, and Dr. Bert Wolfs, the Dean of the Swiss
Business School who accepted me as a student of the DBA class.
I would especially like to mention the great understanding of my family, who once
again had to live with my long study periods; Hanspeter, my husband, who was a
constant help, Chanelle, my daughter, who wrote that I am the best mother in the
world even if not a typical one and Michel my son, now starting to find his own way in
life, who wrote to tell me he loves me just as I am.
Finally, I want to dedicate this effort to my mother who passed away 5 years ago and
who would be very proud of me as well as my father, living alone in Tokyo, for whom
I care a lot and who accepts me totally, however I am.

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Chapter 1. Introduction
1.1. Background
In order to understand wealth in Japan today, it is necessary to know something of
the country’s rich and varied history. Japan is an empire and there have been
emperors there for over 1500 years, all descended from the same Imperial family1
.
They have often had only limited powers or a merely symbolic role but they have
always been highly respected by the people and the actual rulers. Some have even
been revered as deities (Yoneyama & Nathan 1998, 2001, Ishihara & Tahara 2005).
Japan experienced a long period of feudal conflicts ending in the late 1500s.
However, stability was restored in about 1600 when leyasu Tokugawa, who had
achieved great wealth and virtually unlimited power, was appointed Shogun (‘chief
warrior’) by the emperor. The Shogun was the effective ruler and leyasu Tokugawa
and his familial successors led the country as a military dictatorship for the next 250
years. This period became known as the Edo period and the country was at peace
during this time. The Samurai warriors, who no longer had to prove themselves as
fighters, began to educate themselves in other areas such as martial arts, literature
and the arts. However, at the same time, Japan became isolated from the rest of the
world (Lehmann & Turpin 2002) and overseas travel and the reading of ‘foreign’
books was forbidden. There was only very limited trade, with China and the
Netherlands, so domestic and agricultural trade grew (Japan Guide 2005). This move
towards national seclusion and the exclusion of outside interests was known as
sakoku, which literally means ‘closed country’. The long period of isolation from the
rest of the world, together with Japan’s geological location as a group of isolated
islands is still a factor that contributes to the closed Japanese mentality (Itasaka
1987).
During the Edo period, hierarchical order became very important and a four-tier class
system, the shinokosho emerged. The highest order shi was the Samurai or the
warriors, who were disciplined and loyal but not necessarily wealthy. The second
1
Some historians believe that the Imperial line dates back to 660 BC, whereas others believe that the first 14
Emperors were purely legendary figures and the first Emperor, who can be historically confirmed, dates back to
only 359AD (Gomi et al 1998). Other historians dispute the unbroken line of succession (Bix 2005).

8
class noh included the peasants who were often workers in the rice fields, even
paying tax in rice, but who were never landowners2
. They were followed by the kho
artisans, the makers of tools for light engineering, who were also not wealthy people
and finally by the sho merchants and money exchangers (Gomi et al 1998,pp256-
264). In addition to this 4-tier system there were also the kizoku or kuge, the
aristocrats as well as a class for outcasts3
. It was not possible to move from one
class to another (Ishihara & Tahara 2005).
The stability of the Edo period came to an end as other countries began applying
pressure on Japan to establish international trade links. The Japanese people, led by
a group of highly educated samurai from the Mito, Choshu and Satsuma areas,
aristocrats and scholars (Gomi et al 1998 pp 311-313, LoC 2005) became
increasingly disaffected and called for the re-introduction of Imperial rule and access
to the West. Imperial power was re-established in 1868 and this change, known as
the Meiji restoration, saw the capital move from Kyoto to Tokyo (Gomi et al 1998 pp
311-313). Political power was given to a group of former samurai and a small number
of the aristocrats. Kyoto, however, remained as a symbol of the Empire (Japan Guide
2005).
Some of the merchants, who although they came from the fourth tier of the Edo
period class system, became very wealthy and started to form financial cliques
known as zaibatsu. These were family enterprises with official status which, during
the Meiji period, diversified, grew and gained in importance. One family, the Mitsui,
introduced money changing shops and a system of promissory notes, which was
safer than transporting money from town to town. This service also enabled them to
act as intermediaries between the government and traders and saw the introduction
of lending services. In 1876 the Mitsui bank was formed and had powerful influence
with the government. The Mitsui Trading Company still exists today. Other zaibatsu
such as Sumitomo, Mitsubishi and Furukawa specialised in areas such as metals,
shipping and silk and also amassed both wealth and influence (Kasuya 2002,
Yasuoka 2002).
2
The landowners, the Daimyo, were usually regional chiefs under the Shogun and were therefore part of the shi
class. The non-working aristocrats, who now had little power, did not own much land and lived off the taxes paid
by the peasants (Gomi et al 1998, LoC 2005).
3
The outcasts, known as eta (polluted) hinin (non-persons), were employed to do the work that others would not
do such as removing dead bodies. As they typically have a lower standard of living than most Japanese, they are
not considered relevant to this research (Gomi et al 1998 pp255-256).

9
Emperor Taisho succeeded Emperor Meiji and Japan entered a period of conflict and
economic decline, which was aggravated by the devastating earthquake of 1923.
Furthermore, Emperor Taisho was weak and unhealthy and died at an early age in
1926. He was succeeded by Emperor Showa who faced a period of popular unrest,
aggravated by the worldwide economic depression of 1929. The 1930s saw the
beginning of a long period of hostilities with other countries, such as the intervention
in and occupation of Manchuria, concluding with an attack on Allied Powers in Pearl
Harbour and around the Pacific in December 1941 (Gomi et al.1998 pp 440-441,
447-451). Japan increased its hold until it was eventually driven back by Allied
Forces in 1945. Emperor Showa surrendered unconditionally after the release of
atomic bombs on Hiroshima and Nagasaki. The Allied Forces occupied Japan until
1952 during which time they tried to reduce the power of the emperor and they
introduced measures to boost the economy. This was stimulated further by the
Korean war in 1950 when Japanese industry developed rapidly, led by heavy
industry such as ship building, steel and other metals as well as the chemical and oil
industries (Gomi et al.1998 p485). There then followed a boom period during which
Japan achieved trade surpluses and dominated markets such as electronics, car
making and computer technology 4
(Japan Guide 2005, Okazaki 1993 pp183-207).
One impact of the occupation was the break up of monopolies and the introduction of
privatisation. Large concentrations of power were broken up by the dissolution of the
powerful zaibatsu cliques (Yasuoka 2002, Japan Guide 2005) as the Allied Forces
sought to introduce a system of equality. The measure was only partly successful as
the groups soon re-grouped and emerged, with popular support, as keiretsu (‘system
or series’). The keiretsu pooled their resources and established intricate networks
instead of having a single line of control through one family. They were a major part
of Japan’s economic boom and its emergence as a global power.
4
According to Werner (2003), key parts of the post-war economic structure of Japan had already been
established during the war by the Japanese government itself, with the emphasis on ‘public before the individual’
and the shift from agriculture to industry. The USA urged the West to buy Japanese goods, pushing some
companies out of business and raising unemployment in these countries still further. At the same time, Japan
imposed high import tariffs to discourage exports to Japan even though they were themselves exporting to these
countries. The driving force was not profit but the desire to create huge trade surpluses. The influence of the
USA, under General Macarthur, was the advent of greater social quality through the break up of the zaibatsu (not
entirely successful as they regrouped as keiretsu) and the reallocation of land.

10
In the period prior to World War II, Japan had three levels of high society5
. The first
level was the kizoku (‘aristocrats’), who were born into their position but who were not
always in a position of wealth, although some did inherit fortunes. The very wealthy
were typically large real estate owners and industrial capitalists who paid their
employees very little whilst creating more and more wealth for themselves from their
investments (Kasuya 2002, Kurashina 2003). The war and its aftermath brought
drastic changes and high society effectively disappeared under the system of
equality introduced by the occupying Allied Powers. Under the command of General
MacArthur, new agricultural legislation was introduced which returned land to the
people, removing it from the wealthy land owners.
As a result of the post-war boom, a new segment of wealthy individuals was born,
who had made their wealth from employment in the large companies involved with
the reconstruction of the Japanese infrastructure, such as construction, banks,
department stores and dealers in real estate. These people accounted for some 25%
of jobs, which guaranteed employment for life (Yashiro 1997 pp34-36) and there was
economic stability (Yamane 2005 p61). Employees were expected to pledge loyalty
to their firm and this was rewarded with pay rises based on their length of service. At
this time, unemployment had been practically eradicated (Werner 2003 pp19-20).
The wealthy were now typically large company owners and salaried presidents who
had made their way to the top rather than landowners with inherited wealth. Others
were prominent within the government, with positions of political, governmental and
financial power. Many of them were graduates of Japan’s elite Tokyo University (Abe
2001, JTB 1996, Yoneyama and Nathan 1998, 2001). In the 1980s the economic
bubble burst; fortunes were lost and unemployment increased.
From the end of the 1980s a different segment of wealthy individuals emerged.
These included entrepreneurs, who were not necessarily highly educated, in
businesses offering services, as well as educated people such as medical doctors.
Their status is linked to occupation, education and income rather than to inherited
wealth and position (Oshita 2005).
The old elite does not necessarily accept this new generation of wealthy individuals,
which includes highly successful and often well-educated women and, as a result,
5
In the pre-war years there were huge differences between the wealthy and the ‘ordinary’ classes. The
landowners, the kizoku, lived off rent and dividends whilst the owners of powerful zaibatsu families lived off the
profits from their holding companies (Werner 2003).

11
these groups tend not to hold positions of political power at the present time. They
are however beginning to exert more influence in society through their increasing
economic power and are responsible for driving the Japanese economy forward
(Tachibanaki & Mori 2005 p220). The cartels established by the keiretsu groups have
presented a huge barrier to outsiders, both Japanese and foreign, but liberalisation of
policy is helping to break down these barriers (Werner 2003 p185).
Rich people save more than people in general and they sometimes have
extraordinarily high asset values, which cannot always be easily explained. For
instance, luck can play a big part in the accumulation of wealth (Tachibanaki and
Mori 2005).
Liberalisation of economic policy, starting in the 1980s, (MOF 2003, Okazaki 1993,
p38) has allowed people to seek investment opportunities outside Japan and to
extend their entrepreneurial businesses abroad. In 1980 capital flows were
deregulated, followed by a process of almost two decades of liberalisation and
continuing deregulation6
(Werner 2003 p187). Finally, in 1998, major reform,
popularly referred to as Japan’s ‘Big Bang’, saw the removal of foreign exchange
restrictions. This globalisation has affected the lives of wealthy families, leading to
higher international mobility and diversification into real estate and company holdings.
Accordingly, the need for international tax advice has increased, and estate planning
has had to adapt to take account of international rules. Dedicated Japanese
consultants are necessary to offer support services in the Japanese language, law
and intercultural aspects (Beer 1997, Hofstede 1980, Walker, Walker & Schmitz 2003,
Yoshida 2000). An increasing number of young Japanese are willing to take risks
and create new businesses, creating additional wealth (Swiss-Japanese Chamber of
Commerce 2003). Whilst overall tax revenue, as a percentage of national income, in
Japan is relatively low in comparison to countries such as the United Kingdom, The
United States and Germany (OECD 2005), inheritance tax rates are very high.
(Hauser 2001, Kurashina 2003, MoF 2005) and people are looking for more tax
efficient ways of saving abroad, whilst remaining inside the law.
6
This liberalisation of policy coincided with a period of negative growth in Japan – a situation which still taxes
analysts today (Werner 2003 p278).

12
1.2. Aims and needs
This research addresses the needs of wealthy Japanese, their families and
successors who are seeking to realise their visions on the global platform. It aims, in
part, to compare financial consulting services in Japan and Europe in order to find
where there are strengths and weaknesses and, additionally, to identify the perceived
cultural and technical gaps that may exist between European and Japanese advisors
serving wealthy Japanese and their families. This could then lead to the provision of
more appropriate advisory services for their clients. It seeks to help not only the
current owners, and successors of Japanese family businesses but also university
researchers, tax specialists, private bankers, lawyers, and consultants inside and
outside Japan in their further academic research and in the challenges faced by their
family wealth management businesses.
Family companies play a very important role in the Japanese economy. Some 95%
of companies are family companies and approximately 40% of the listed companies
are family businesses (Kurashina 2003). Wealthy Japanese families and their asset
management companies demand that their professional service teams work for them
internationally. Company owners should be able to act independently, leaving behind
the constraints of historical, political, and economic systems such as banks,
insurance companies, the Ministry of Finance and the government of the United
States of America. This should encourage them to think more freely and openly and
to act globally when making decisions. Such freedom requires them to engage
independent service teams and to be innovative and entrepreneurial.
It is not just established family businesses that need a comprehensive range of
financial services. Young entrepreneurs and wealthy individuals who are setting up
new companies which will eventually be passed on to a second generation, also
demand international solutions.
Additionally, there is limited knowledge about the services provided to and required
by wealthy Japanese who work in overseas locations. This includes the significant
number of Japanese women who marry non-Japanese and live outside Japan. They
also want to invest outside Japan in different assets, including businesses, and to
protect their wealth. This research aims to address this important area and the
findings should provide the basis for further research as well as the provision of more
appropriate services.

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A review of the literature relating to family wealth management reveals the existence
of firms offering financial planning, in the form of family office services, in the USA as
well as private banking services in Europe. However, it appears that a recent history
of formal centres like these for managing and preserving the wealth of a family in
Japan at an international level does not exist. Additionally, there is little published
academic research on such services, with even less written in Japanese. In short,
there is limited knowledge about advisory services available to wealthy Japanese
and their families. ‘It is difficult to gain research access particularly at the most senior
levels. Since the existing body of work comes from the USA or Western Europe, our
knowledge is limited’ (Goffee 1996, p.37).
As a result of the lack of published information, there is therefore a need to identify
the characteristics and components of the advice that meets the requirements of
wealthy Japanese and their families. This means that initially, it is necessary to
identify the characteristics and components of the advice already being provided and
to ascertain whether these do in fact meet the required needs. A review of the
literature suggests that it is indeed possible to identify these characteristics and
components. Such services should be able to provide objective financial advice,
creative solutions to financial problems and the delivery of complex services
(Hamilton 2002).
This study attempts to:
increase the understanding and awareness of cultural differences so that Japanese
clients can obtain advice from European advisors
identify what advice is required so that advisors can provide appropriate services
increase the intercultural awareness of Japanese and European advisors.
Walker and Schmitz (2003), among others, agree that Japan is a high-context
communication culture, which means that communication is implicit and indirect and
advisors from different cultures have to understand the implications of this. Yoshida
(2002, p2) states ‘a critical agenda for the Japanese will be to improve
communication with the rest of the world’. Japan is the country of Zen Buddhism and
in order to understand the Japanese, their spiritual values should be acknowledged
and understood too (Beer 1997, Neubauer 1998).

14
1.3. Contribution
By examining the available literature about existing financial consulting services for
wealthy Japanese clients and through the questionnaires and interviews, this
research should contribute to the field by proposing a system of more appropriate
advisory services in Europe, in particular in Switzerland, thus enabling advisors to
give relevant advice to their wealthy clients. This should also encourage further
research into the needs of wealthy Japanese and the services they require. It
highlights the need for cross-cultural understanding, not only between advisors and
clients but also between advisors of different nationalities. It further demonstrates the
need for Japanese advisors to acquaint themselves with European financial vehicles
so that they can offer international solutions to their clients. This mutual co-operation,
in combination with European advisors’ knowledge of technical aspects and
Japanese advisors’ understanding of culture, should lead to the provision of services
more suited to the needs of the clients.
1.4. Outline of dissertation
Wealthy Japanese are increasingly looking for financial planning services outside
Japan in order to protect their wealth. Additionally, many Japanese reside or wish to
reside in Europe and seek investment advice from European as well as Japanese
advisors. However, because of differences in cultural perceptions, this advice may
conflict. As a result, the services provided might not be appropriate for the clients.
The dissertation reviews concepts that will contribute to a conceptual framework for
the research study. Based on the literature review in chapter two, important
characteristics of the services provided for wealthy individuals and their families are
identified. These characteristics can be divided into five categories: technical aspects,
independence of advice, trust between advisors and clients, intercultural aspects of
the Japanese and future generations. In chapter three, the study attempts to improve,
validate and justify the theoretical characteristics developed from the literature with
the development of a framework designed to identify gaps in cultural perceptions of
services. These perceived gaps between advisors and services are investigated
using the questionnaires and interviews detailed in chapter three.

15
Chapter four of the dissertation deals with the analysis of the questionnaire and
interview responses and reports on the findings. It looks at the response rate and
demographic profile of the respondents and assesses the validity and reliability of the
results before drawing conclusions from the results.
The final chapter of the dissertation discusses the contribution this research makes to
the academic field and to consultants in the field. It looks at the implications and
limitations of the research and makes suggestions for future study.

16
Chapter 2. Literature review
This study is concerned with differences in perceptions between Japanese and
European financial consulting services providers, which are influenced by a range of
cultural and technical issues.
After an initial examination of cross-cultural differences globally, differences between
East and West and specifically between Europe and Japan are discussed. Existing
advisory services for wealth preservation in the West and the role of advisors are
then explored. The needs of wealthy Japanese and their families are looked at
together with the problems of the existing services in Japan. Finally the issues and
problems of advising wealthy Japanese families in Europe are discussed.
2.1. Differences in cross-cultural aspects
There are many cultural differences between peoples around the world. This section
reviews these differences globally, then compares the eastern and western cultures
and finally compares Europe with Japan.
2.1.1. Comparison of cultural differences around the world
Globally
Cultures can be described as being high or low-context. High-context cultures are
characterized by long-lasting relationships, implicit, shared and indirect
communication codes, personal authority with loyalty to superiors and subordinates,
spoken agreements, clear distinctions between insiders and outsiders, and cultural
patterns that are slow to change. Low-context cultures are characterized by short-
term, impersonal relationships; explicit, logical and direct communication codes,
bureaucratic and diffuse authority, legal, written, as opposed to spoken, agreements,

17
fewer distinctions between insiders and outsiders and by cultural patterns more
adaptable to change (Mead, 1998, p.30).
High-context cultures include Japan, as well as other Asian countries and Saudi
Arabia. Many western European cultures, including Mediterranean countries, Ireland
and France, are also high-context. As personal relations are highly valued, they first
establish social trust and goodwill is very important. Negotiations are slow and
ritualistic. High-context cultures also tend to require a great deal of contextual
information before business can be transacted. Business is personal and trust is
crucial to the relationship. A significant amount of time may be spent on what Anglo-
Saxons would consider to be ‘small talk’. High-context cultures use ambiguous
phrases such as ‘maybe’, ‘perhaps’, ‘probably’ and they talk around subjects rather
than approaching them directly. They do not need to have every detail delineated,
and relaying group information is valued above sharing personal information. These
cultures communicate indirectly (Gudykunst and Kim 2003, Guirdham 1999,
Matthews 2002, Walker and Schmitz 2003). Yoneyama and Nathan (1998, p305)
stated that high-context communicators prefer opportunities for face-to-face meetings
or any other way that favours a more complete contextual reading of a situation.
Low-context cultures include the Anglo-Saxon countries, Scandinavia, Switzerland
and Germany. Business tends to be task-centred and ambiguity is avoided
(Gudykunst and Kim 2003, Guirdham 1999, Matthews 2002, Walker and Schmitz
2003). Expertise and performance are valued and negotiations are as efficient as
possible.
Many of the differences in employee motivation, management style and the
organizational structure of companies throughout the world can be traced to
differences in the collective mental programming of people of different national
cultures. It takes considerable historical and cultural insight to understand the
processes, philosophies, and problems (Hofstede 1993). National cultures contain
the four dimensions of power-distance, uncertainty-avoidance, individualism-
collectivism and masculinity, according to Hofstede’s (1980) theories.
East and West
To prepare for doing business in a country, it is important to become familiar with the

18
history, geography, and current political and economic situation of the region.
Additionally, businesses, such as Asian businesses, are particularly interested in
getting to know a company before investing in a long-term relationship. Consequently,
negotiations can take a long time. In business dealings in Asia, the problem of
communication can be exacerbated because, as high-context communicators,
Asians often use non-verbal cues and signals, but do not always agree on their
meanings (Walker and Schmitz 2003).
Jackson (2002) compared motivational factors for Westerners and East Asians in the
following way. Motivators for East Asia are equity, the group, savings, extended
family relations, highly disciplined and motivated workforce, protocol, rank, status and
avoidance of conflict. Those for western nations are individualism, consumption, a
nuclear and mobile family, hierarchy, informality, personal competence and managed
disagreements.
In the West, managers in ‘power’ countries, such as the United States of America
and the United Kingdom, tend to place greater emphasis on control and individual
success. In the East, Japan is an example of a high uncertainty-avoidance country,
placing greater importance on harmonious working and social relationships,
preserving a public image and security, conformity and tradition (Chui et al 2002,
pp.107, 122, Matthews 2002, p5). There is generally a high level of individualism in
the United States and other English-speaking countries like Australia and the United
Kingdom (Hofstede, 1980) which has been studied using both historical (Inkeles,
1983) and empirical (Bellah, Madsen, Sullivan, Swindler, & Tipton, 1985) methods.
‘If nothing else, the general lack of success in the economic development of other
countries should be sufficient argument to doubt the validity of western management
theories in non-western environments’ (Hofstede 1993, p.86).
Europe and Japan
According to McCalman (1996, p.17), there is no national identity across the
European Community as there is in Japan and the USA. About Europeans he stated:
‘Control is difficult and success is highly dependent on the enthusiasm of the team
rather than on formalized procedures. On the other hand, a certain amount of
‘bureaucracy busting’ is necessary.’

19
Japan is a high-context country where communication is less expressed, leading to
closed communication, closed markets and procedures lacking written form.
Japanese spiritual values are subtle and not explicit, making it hard for outsiders to
understand the Japanese and to communicate with them. The Japanese culture is
homogeneous and cohesive, not least because of its geographical isolation. In other
words, the people share race, language, history and culture, making it hard for
outsiders to be part of it and for Japanese to feel comfortable outside Japan7
.
Cultural context is important. For example, translating an American web site using a
Japanese-American translation program will not create a well-written Japanese
website. A website that merely changes the language from English to Japanese but
retains the original low-context content is not appropriate for its new high-context
audience, the Japanese people. The directness of the language, the lack of
ambiguity, and the overwhelming detail will not impress the Japanese reader (Walter
1989).
Japanese management emphasizes equality as the basis for competition and
cooperation (Thurley and Widenius 1989). The Japanese have only experienced a
situation where cross-cultural communication was a necessary condition for survival,
for a relatively short period after the Second World War. An enormous amount of
information has flowed into Japan, but comparatively little has come from it. It is
difficult, even today, for the Japanese to explain, in plain language, the basic
principles of their religious values and practices, often giving westerners the
impression that they have no principles or accountability for national goals. This
highlights the long-term importance of creating cross-cultural training opportunities
for both Westerners and Japanese (Yoshida 2002). In talking about companies,
Walker and Schmitz (2003, p. 50) stated that:
‘European companies usually invest large amounts of money in market research and
product surveys, whereas in Japan a company is more likely to launch a new product
based on informed intuition. Then, based on actual consumer responses, they make
products, improvements and positioning enhancements.’
7
Within Japan there are some small ethnic and social minorities such as Koreans and Ainu, with their own
dialects and culture, which can impede communication even within the country (Wetherall & De Vos 1975).
However, these groups are not considered relevant to this research.

20
2.1.2. Managing cross-cultural aspects in Japan
This section discusses how high-context culture and Japanese spiritual values can
lead to cross-cultural communication barriers for non-Japanese advisors.
High context communication
According to Walker and Schmitz (2003, p. 67), in high-context cultures, such as
Japan, the successful exchange of information hinges on the ability to apply a shared
and implicit framework of interpretation to a message. Yoshida (2002, p.2) states that
‘a critical agenda for Japan will be to improve communications with the rest of the
world’. According to Linowes (1993,p28), there are elaborate rituals of social
reciprocity among Japanese. Conversation is indirect and adjusted to reflect good
form and the status of the listener.
Cultural concepts have strong implications for how Japanese companies do business.
Although the cultural patterns found in particular industries, regions, economic
classes and corporations vary substantially; five basic cultural practices have
changed in response to globalization and the economic downturn of the 1990s.
These are cultivating long term relationships, knowing one’s place in both role and
rank, keeping face, following form, and working diligently with perseverance (Beer
1997).
As a result of these cultural patterns, Japanese tend to obey the rules. According to
Beer (1997), Japan is a harmonious society with low rates of litigation, crime, and
divorce, a society that pays careful attention to maintaining group relationships and
where decisions are made by consensus with worker input. On the other hand, Japan
is a repressive society that trains citizens to be submissive, where exploitation,
violence, suffering, and opposition are hidden in order to keep up the illusion of
harmony. Whichever perspective one prefers, producing harmony, or the impression
of harmony, requires continual attention and significant resources. This can be seen
all over Japan in the control of crowds, training in cooperation and obedience in
schools, police surveillance, the interminable rounds of decision making and reaching
agreement, and in the wearing of uniforms.

21
Communication of cliques
As mentioned in the background information in chapter one, zaibatsu is the control of
large corporations by single capitalist families through stockholding companies
(Yoneyama 1998). Although the Allied Forces dissolved the zaibatsu after the
Second World War, companies such as Mitsubishi, Mitsui, Sumitomo and Fuyo re-
grouped, with popular support, into trading companies and banks, now known as
keiretsu. The top executives of these multinational companies are often relatives of
the founders. They have almost certainly optimised global taxation to protect their
assets, but none of them is willing to talk openly about these issues (Kasuya 2002,
Morck and Nakayama 2003, Sasagawa 1998, Yasuoka 2002).
The cross-shareholdings and cooperation within these group companies made
Japan’s rapid economic development possible. The presidents of each company
manage communication and coordination within the groups. The most influential
organization, which has the most major Japanese corporations as members, is the
Keidanaren, the Federation of Economic Organizations. The chairman of these
organizations is considered the ‘prime minister’ of the business world, standing at the
apex of Japanese management. His most important roles are as the voice that
represents Japanese business and to speak out on government policy. He also
conducts exchanges with economic and business organizations overseas
(Yoneyama and Nathan 1998).
Outsiders may find it difficult gaining access to the above-mentioned companies.
Gudykunst and Kim (2003) state that high contexts can be difficult to enter as an
outsider because of differences in exchanging information and creating close
relationships. Hall cited in Guirdham (1999, p 60), stated:
‘Most of the information [to be communicated] is either in the physical context or
internalized in the person, while very little is in the coded, explicit, transmitted part of
the message’.
Spiritual values of the Japanese
For westerners, Japanese people often appear difficult to understand. Beer (1997)
stated that, as the culture of a homogeneous island people, the Japanese culture is
more cohesive and developed than other cultures. Its people share language, history,

22
racial similarity, and cultural patterns that make it difficult for foreigners to understand
or be part of, or for Japanese to feel comfortable outside their own country. Ferraro
(2002, p.59) said that the purpose of communication in many Eastern cultures is not
to enhance the speaker’s individuality through the articulation of words but to
promote harmony and social integration. In such societies one is expected to be
sensitive to subtle contextual cues and not to assume that critical information will
always be verbalized.
Japan is the country of Zen Buddhism, meaning that there are fundamental
differences in philosophy. An example of this is found in the Mogi family’s constitution
- the Kikkoman Corporation of Japanese soy sauce fame, which was founded in the
seventeenth century. Their company statement has strong philosophical and
religious overtones and reflects the family’s Buddhist roots (Mogi 1994, Neubauer
1998).
Few people in Europe and America fully realize how great the communication barrier
is for the Japanese. Westerners, expecting clarity, are often confused by the
Japanese style of communication. Dr. Eugen Herrigel (1981) recognized the
essential feature of Japanese-style communication in Zen, in the Art of Archery. The
attitude of the master of archery is one of complete self-abandonment. Free from
external influences, he draws his bow spontaneously, without deliberation, fear,
doubts, or hesitation. The Japanese can communicate fully through simple
indications or hints, in contrast to Europeans and Americans who depend on words.
The concept stems from the fundamental principle of the Upanishads philosophy,
conceived in ancient India and a big influence on Japanese culture. ‘Individuals, self
and the universe are one.’ This metaphysical identity of man with the universe
underlies the basic religious beliefs and the social conventions of the Japanese. It is
not only the goal of Japanese spiritual life but also the foundation of the concept of
‘teamwork’ embedded in Japan’s modern corporate culture (Yoshida 2002).
After the Meiji Restoration, from 1868 to 1912, the approach the Japanese took for
rapid industrialization was wakon yosai, which means introducing western technology
while keeping the ethos intact. If the economy grows too fast, society becomes
unstable, resulting in the social upheaval that is observed in many corners of the
world. It is an extremely important issue for the peoples of developing nations to
maintain a balance between their traditional values and the impact of new science

23
and technology in the process of modernization (Yoshida 2002).
Yamamoto (2003) states that hospitality and cultural capital are becoming the new
way of doing business, the so-called ‘hospitality business’. Japan used to have that
spiritual value in its traditional ‘Tea Ceremony’, but with the introduction of highly
developed, customized services, it disappeared. Yamamoto further states that in the
Japanese economy ‘service’ will eventually become synonymous with ‘hospitality’.
When making decisions, the Japanese prefer a consensus to evolve naturally. They
need a lot of time, but once they have made the decision (or the decision makes
itself), they are immediately ready to implement it (Hankamer School of Business at
Baylor University 2004).
Cross-cultural differences can create communication barriers so it can be assumed
that these barriers could also create communication problems between clients and
their advisors. This issue is explored in the following section.
2.2. Advisory services for wealth preservation in the West and East
This section focuses on existing financial advisory services in the West and the East
and the challenges faced by both Japanese and non-Japanese advisors.
2.2.1. Services for wealthy families
The USA and world economies are dominated by family-owned businesses, such as
Wal-Mart, Ikea and Ford Motor Co. (Family Business Magazine 2004), which
generate much of the world’s economic output and wealth. In some regions of the
world, family companies virtually control the economy. They are often strongly
competitive, which can make them vulnerable. For instance, only 30% of family
companies pass successfully into the hands of the second generation, and only 15%
pass into the third generation, often as the result of the fierce competition (Hughes
2003). According to Grant Thornton’s International Business Owner’s Survey (2004),

24
only a few Japanese companies have formal mechanisms for succession planning.
Comprehensive consulting to wealthy families is becoming increasingly important
with family offices playing a major role. This includes portfolio management, strategic
investment consulting, tax and legal advice, real estate and arts consulting, advice on
the establishment and administration of foundations, trusts and other corporate
structures as well as succession, retirement and estate planning (Achermann, 2003,
p.8).
Swiss financial institutions enjoy a telling competitive advantage in the area of private
banking and the idea of serving wealthy individuals dates back to the eighteenth
century (Ernst & Young). The country is the largest private banking centre in the
world and its banks and savings banks are governed by Federal Law (Ernst & Young
2001). Swiss banks have been serving a small group of wealthy Japanese for some
time and, with the increasing number of young Japanese willing to take risks and
create new business, additional opportunities will be created, leading to greater
demand for their services. The Swiss banks active in Japan are confident that private
banking has great potential in the future (Swiss-Japanese Chamber of Commerce
2003) as they can serve many of the present day requirements of wealthy families.
There are already private banking services in Japan (Iso 2003) but family office
services remain rare, as they have not yet been accepted as a notion (Yamamoto
2003). However, this type of service, which focuses on the families’ interests,
appears to fit the needs of wealthy individuals and families. One difference between
the two types of service is that private banking services are provided to earn money
from financial transactions for the bank while family office services focus on serving
wealthy families (Hamilton 2002). Laird Norton Trust Company (2003), FOX
Exchange (2002) and Sakakibara (2001) explain that the idea of family office
services originated in the USA in the 1980s. Traditionally, they had their origins in
administration rather than in managing family affairs and have only gradually
assumed a greater role in wealth management (Maslinski 2003). The term ‘Family
Office’ is defined as ‘a formal centre for managing and preserving family wealth’
(Northern Trust Corporation 2003).
Many family office service providers are registered at FOX Exchange (2003); half of
the twenty-three listed are financial advisers, including accountants, bank and trust
company consultants, insurance providers, investment banks/brokers, investment

25
consultants and managers. Two of the providers are family business consultants who
deal with family systems and resources and education programs as well as multi-
family offices. The remainder include those with expertise in areas as diverse as art
and collectibles, attorneys, timber, personal services, philanthropy, search firms and
technology resources, showing that the tasks of the family office are both complex
and comprehensive. FOX Exchange (2003) describes itself as being an independent
provider of professional services, which actively promotes interaction between highly
skilled executives in the family office business. In this way it acts like a clearinghouse
for family groups with great wealth. Membership is not just restricted to families but is
open to wealthy private investors as well. FOX recognises that each family business
presents its own unique challenges and it tries to address the needs and roles of the
individual family members as well as the business as a whole.
Interest in family offices is increasing in Europe and Japan, but the USA model
should be adapted to reflect different cultures. There are currently over 4000 family
offices worldwide with about 1000 in Europe (Hauser 2001 p15). They face the
challenges of language and culture, multi-currencies and multi-jurisdiction, family
governance, privacy and transparency, and conflicts of interest. In addition to the
normal range of services, they must also offer specialized fields such as education
for the successors of family businesses, consolidated reporting services, bank
account brokerage, immigration, and trust and life insurance schemes (Hamilton, &
Hillerstrom 2003).
A family office is often created after the sale of a family business or the realization of
significant liquidity, to support the financial needs of a family group. Hauser (2001,
p.15-22) stated that a family office could be anything from one person to a private
trust company with many employees. It exists to serve the financial and lifestyle
requirements of a family and its succeeding generations (Northern Trust Corporation
2003). The family office team typically consists of highly skilled asset managers as
well as lawyers, accountants, tax specialists, and other specialists who collectively
offer customized solutions and proactive money management (Hamilton 2002).
The notion of the family office is not always clearly defined and sometimes becomes
synonymous with private banking. This no longer defines the true purpose intended –
that of providing a complete package of services for managing and preserving the
wealth of families (Neubauer 1998, FOX Exchange 2003, Legg Mason 2003, Willmott

26
2003, Hughes1977, Hamiliton 2003, NISCO 2003, Nikko Asset Management 2003).
For this reason, the term ‘family office’ was introduced in the USA to avoid confusion
with private banking.
Family businesses have been contributing to Japanese economic development since
the Second World War (Kurashina 2003), in comparison to the pre-war zaibatsu
whose apparent success focussed more on their own self-gain than the public
interest (Yasuoka 2002). These include leading Japanese businesses like Matsushita,
Honda, Toyota and Sony.
‘Before World War II, wealthy Japanese families secured their control over large
corporations by organizing them into pyramidal groups, called zaibatsu, similar to
others found in Canada, France, Korea, Italy, and Sweden. In the 1930s, the military
government imposed a centrally planned command economy, with private property
rights retained as little more than legal fiction. The American occupation forces
replaced this with a corporate sector similar to that of the United Kingdom and United
States. A bout of takeovers and greenmailing ensued. To defend their positions,
Japanese executives placed numerous small blocks of stock with each other’s firms,
creating dense networks of small-interoperated blocks that added up to majority
blocks in each firm. These networks, called keiretsu, halted hostile takeovers
completely. Although their primary functions were to secure corporate control rights,
both zaibatsu and keiretsu were also rational responses to a variety of institutional
failings. Successful zaibatsu and keiretsu were enthusiastic political rent-seekers,
expecting government favours, demonstrating that large corporate groups are better
at influencing government than individual firms. In the case of the keiretsu this almost
certainly retarded financial development and compounded long-term economic
problems’ (Morck and Nakamura, 2003)8
.
2.2.2. The role of family offices and banks in wealth preservation
Family offices and banks play a key role in wealth management and the selection of
appropriate advisors is paramount. This section looks at the skills such advisors
require as well as the role expected of these financial institutions.
The selection of different specialists requires significant knowledge and
understanding of interrelationships, international tax and law (Geiger 2003 p97). The
person who administers and oversees the team of specialists on behalf of the client
8
In the post-war period until and including the 1980s, the keiretsu system enjoyed huge success. However this
eventually led to overcapacity and a stagnant economy (Bremner & Thornton 1999).

27
could be a senior member of the family, an independent trustee, the head of the
family office or a private bank. Often, the family does have an acknowledged leader
but he or she must also have the necessary skills and experience. Families face the
dilemma of who to look to for support; their professional advisors and trustees or their
private bank (Goffee 1996, Hughes 1977, Maslinski 2003).
The tasks of a family office are becoming more complex and have diversified into
several specialist areas. A limited number of specialists, such as a lawyer working
with a private banker, cannot handle the range of requirements anymore. Therefore,
it can be hypothesized that the role of the family office is changing more into that of a
supervisor of specialists who advise the family rather than being a trusted leading
advisor to the family.
An advertisement on the website of Trust & Estate (20.03.2003) for the post of
director of a family office read:
‘The suitable candidate will be a multi-tasker, possessing great energy, leadership
and managerial skills. Ability to organize people, tasks and events with appropriate
etiquette is crucial. Must be personable, hard working and discreet with excellent
verbal and written communication skills. Experience preferred, but talent is the
prerequisite.’
Today, running a family office requires an extensive knowledge of law, tax and
investment management combined with business management experience,
communication skills and exceptional personal qualities. True multi-family offices
offer an entire range of services with consolidated reporting and, importantly, the
personal touch. Many firms have changed how they label themselves but are missing
this essential requirement. Four of the eight most experienced multi-family offices
have changed hands in the last 18 months, including Pell Rudman into Amvescap,
and Frye-Louise Capital Management into Credit Suisse (Willmott 2003).
During the last ten years, the banking industry has undergone major changes, such
as mergers, acquisitions, and consolidations, resulting in a sharp decrease in the
number of small, independent private banks. The services these institutions provided
to wealthy families in Europe had in many ways been similar to the role of the family
office in the USA and now families across Europe are looking for alternatives. In
some cases, the family notary takes on an expanded role and in others it is the
accountant who fills the void (Hauser 2001, p15-22).

28
2.2.3. The importance of Switzerland in wealth management
Switzerland has a global reputation for quality according to Ernst & Young,
Switzerland (2004), who go on to say that the favourable tax regime is a driving
factor in making Switzerland an attractive location both for individuals and
businesses. The quality of life is another key factor, with Geneva and Zurich in joint
first place despite the fact that good quality of life also means that Switzerland is an
expensive choice of location.
In the article about Switzerland, Ernst & Young (2004) list other attractions of
Switzerland, apart from its natural beauty, as its highly efficient, modern public
transport system and its three easily accessible international airports. It also has an
advanced telecommunications network. The Swiss labour market offers well-
educated, multi-lingual people who are used to working in an international
environment.
The European Union (EU) expanded to the south and east in May 2004 leaving
Switzerland the exception in the heart of the new Europe. Switzerland is keeping its
hallowed bank secrecy, as the EUbusiness website explained in January 2003,
winning a reprieve, following an EU deal, on taxing savings hidden in foreign banks.
Traditional strengths, not least banking secrecy, have come under considerable
pressure from European countries and the Organisation for Economic Co-operation
and Development (OECD). The Swiss Federal Government is currently putting seven
bilateral agreements with the EU into practice to see how they will impact on the
culture and political processes of Switzerland (SECO 2004). The Federal Council is
convinced that Switzerland must eventually join the EU in order to avoid isolation.
An (International Monetary Fund) IMF assessment confirms that the Swiss financial
market regulations conform to the highest international quality standards, particularly
with regard to monetary and system stability and anti-money laundering provisions
(Geiger 2003, p.95). Without doubt, Switzerland is one of the best locations for such
services because of the intensity of private banks and their key role in the field of
wealth management. Close to 30% of all cross-border private assets invested
worldwide are managed in Switzerland (Geiger 2003, p.94). A politically and
financially safe country is a very important issue when managing wealth. Switzerland
was given a Triple A credit rating by Moody’s having already received the same
rating from Standard & Poor’s (Weekly Swiss News Headlines, 2004). The trust in

29
Swiss banking services shown by foreign investors was confirmed by Swiss National
Bank statistics at the end of 2004. Total assets in foreign client portfolios increased
by 6.4% in comparison to the previous year, exceeding the previous record reached
in 2000 (Weekly Swiss News Headlines 2005).
Panchaud (2000, p.14), a wealth management analyst at UBS in Switzerland
concluded that the essential success factor in private banking, despite the huge,
initial infrastructure costs, is tapping wealthy new clients such as dynamic
entrepreneurs, sports and entertainment stars, well educated, computer-literate
managers and professionals who are also high-income earners.
A further advantage for clients with net wealth of over CHF 5,000,000 is the way tax
assessments can be made. It is possible to obtain an advance tax ruling from the
Federal Tax Administration so that the taxpayer knows in advance exactly what their
tax liability is. Such arrangements, known as lump-sum taxation, can be sought for
most types of tax in Switzerland and are recommended by advisors for their
international clients. The calculation of the tax liability is negotiable with the local tax
authorities although it must follow guidelines established in Swiss law. These
arrangements can also be of interest to wealthy clients and their families who decide
to live in Switzerland and are financially independent but who are not employed in
Switzerland. Switzerland, additionally, levies no federal inheritance tax and many of
the local cantonal tax authorities do not tax property transfers following the death of a
family member (Families in Business 2005).
Family office services in Switzerland
A family office is a team of professionals dedicated to preserving a family’s
substantial liquid wealth over generations, noted Ian Partrige of Loedstar SA in
Geneva, a specialist in independent training for wealthy families. There are hundreds
of private banks but only about twenty have fully integrated family office services at
the required level (Flech 2002, Hamiliton and Hillerstrom 2003). A family office can
be seen as a one-stop financial planning shop.
Hauser (2001) described the services of family offices as routine, occasional or
additional. Routine services include income tax planning and minimisation and the
coordination of all financial matters. Occasional services include mediation in

30
conflicts, assistance with succession transitions, serving as trustee, family education,
and facilitation of family meetings, family governance, and family council structures.
Additional services include preparing a total wealth audit and monitoring risk
coverage, offering offshore solutions and creating educational programs for future
generations as well as facilitating family meetings.
Kendris (2005) is an example of a Swiss firm that is an independent provider of
wealth management and financial planning with experts in the fields of law,
accountancy and banking, among others. The firm is committed to long-term
relationships and high standards of service and encourages its employees to act in
innovative ways. Its most valued asset is clients’ trust because ’…to respect and
protect privacy is something of a Swiss national virtue’.
Switzerland has many small private enterprises (Swiss-Japanese Chamber of
Commerce 2003, Krone 2003). In “A Prosperous Future for Swiss Independents”,
Soudah (2003) pointed out that smaller players have very little choice and they must
focus on the upper end of the market to be profitable. Some of the European Family
Office Service companies are listed in Appendix B.9
Specialized fields in Switzerland
Clients’ needs are catered for in a tailor-made approach and there are numerous
possibilities for applying special financial and business vehicles. Switzerland has no
trust law (Orton 2003), but lawyers can administer overseas trust funds and set up
fiduciary arrangements for the owners of foundations. Associations for retaining
wealth can also be created which have more legal freedom than normal companies.
Investing in offshore pension funds, hedge funds, and others (Zipang Consulting Ltd
2003) is not yet known in Japan but could become an attractive option for Japanese
clients.
9 The most common legal basis for family offices in the USA is as a state-chartered trust company, because
trusteeship is one of the core services for intergenerational families. The most important feature, according to
Hamilton (2002), is ‘objective financial advice’ as the family office must not have conflicts of interest. The
second is ‘creative solutions to financial problems’ meaning that they must be knowledgeable about a broad
array of sophisticated strategies in order to provide the best solutions for their clients. The third feature is
’consistent delivery of complex services’ requiring the family office to deliver consistently high quality service
to a growing number of clients (Hamilton 2002). Some of the USA family office service providers are listed in
Appendix A.

31
Institutions providing education in the field of family offices
Schools and institutions provide education programs that a family office could offer to
successors of a family or their advisors. The Swiss Banking School (2003), which
offers a wealth management program, says new competitors are entering the market
and clients’ needs are changing, so on-going learning is a top priority.
Wealth management programs teach finance, law, integrative wealth management
practice and interpersonal skills. General skills of wealth management include
marketing, leadership, strategy and technology. Many sponsors are interested in
promoting and supporting these curricula, including most major banks, accounting
firms, and insurance companies (Appendix E). Loedstar is one company that
specializes in training individuals, who have, or will have, responsibility for managing
significant private wealth, by offering short courses and seminars (Flech 2003, p.2).
The University of St. Thomas and Center for Family Enterprise, Minnesota USA
(2001) offers a course in ‘Family Business Consulting’, an introductory course in a
multidisciplinary environment that provides business consulting services to family
owned enterprises. It is suitable for students with backgrounds in law,
entrepreneurship, management, accounting, finance, psychology, and organization
development and takes students from an exploration of how a family business is
different to a public company to how to design a personalized consulting/advisory
methodology that meets the needs of families in business together.
Harvard Business School (2003) offers a ‘Family Business Management’ course with
a prerequisite requiring that a member of the student’s family, including in-laws, must
own a family business. The student does not have to be, or plan to be, a business
owner or even planning a career in the business. The focus of this course is in
understanding how to capitalize on the strengths and managing the challenges of
family-owned companies.
Consolidated Reporting
The management of a portfolio of assets requires dealing globally with banks and
insurance companies, the performance summaries and accounting reports of which
require consolidation. This is even harder when assets are in different countries, with

32
different languages and currencies, spread over different periods and with different
accounting standards. Consolidated reporting is an important part of the service that
clients seek and providing such reporting requires an excellent IT infrastructure and
specially trained personnel. Additionally, the laws of the country where the services
are provided must guarantee client secrecy.
Simpson (2003, p. 5) made the point that there is a lack of portfolio software for
managing separate accounts which restricts the ability of money managers to
become compliant with the Performance Presentation Standards (PPS) of the
Association for Investment Management and Research (AIMR). Managers have to
consolidate multiple inputs into one set of understandable and usable data. The cost
of this is prohibitively high for many money management firms and there is great
potential for error. One possible solution is the development of a data format and a
minimum standard for passing position and transaction information as well as
performance data from the sponsor to the management firm. However, new data
formats such as XML and more specialised derivatives like XBRL may be useful in
this area (XML Pitstop- Resources).
‘Family office managers face a unique set of accounting and financial reporting
challenges and firms such as Financial Navigator try to meet these by offering
extensive functionality to even the most complex situation’ (Financial Navigator
International 2003, Family Office Managers).
Hamilton (2002) stated that it requires teamwork to solve the unique and complex
issues for each client. This means that there must be a sophisticated back office
system for keeping track of financial details.
Swiss bank account, brokerage and immigration services
As discussed at the beginning of this section, opening a Swiss bank account, as an
offshore account, is a popular choice for foreigners and additionally, many world
famous wealthy people are immigrating to Switzerland. It is not sufficient that they
just open a bank account; they also require advice about relocation and immigration
issues such as taxation. As well as the many firms that offer relocation services, the
individual cantons often also offer services for families relocating from abroad, such
as Basel (Basel Area+ 2O05). One example of a company that offers appropriate

33
advisory services is Micheloud & Co., which offers Swiss bank account brokerage
services as well as immigration services for investors (Micheloud & Co., 2003).
Trusts in Switzerland
Despite Switzerland’s position as a site for managing so many of the world’s assets,
it does not recognise trusts as such because Swiss law does not acknowledge the
difference between legal and beneficial ownership. Geiger (2003, p.102) stated that,
although international tax and estate planning instruments do not have a legal basis
in Switzerland and are therefore not available to the Swiss themselves, the country is
still one of the major centres of expertise for setting up and managing trusts in those
jurisdictions where they are a legal option.
According to Orton (2003), Switzerland is the world’s biggest international private
banking centre and the value of its managed assets is around CHF3 trillion. Four
hundred and fifty companies are involved in trust-related activity despite the fact that
Switzerland has no trust law. The Swiss courts do, however, recognize trusts
established under offshore jurisdictions but administered in Switzerland and these
are increasingly used to help facilitate a wide range of activities in addition to private
wealth management, including in the pensions, insurance and reinsurance sectors.
There are three reasons for this. Firstly, Switzerland has good administrative
capabilities with its efficient infrastructure and global links. Secondly, Switzerland
has the skilled workforce necessary to support trust administration and finally, there
are strict bank secrecy laws. The Swiss Federal Department of Justice and Police
(FDJP 2004) issued a press release in October 2004 stating that Switzerland is
planning soon to ratify the Hague Convention on the Law Applicable to Trusts. This
means that rulings on the jurisdiction and recognition of decisions made overseas
would be incorporated into Swiss international law. This would provide greater legal
certainty, which would in turn further promote Switzerland’s image as an ideal
location for wealth management.
Life assurance schemes
Traditionally practitioners have used a wide range of financial vehicles and fiduciary

34
arrangements, including trusts, to structure their clients’ affairs in a tax efficient
manner. An alternative is a life assurance contract, which offers many advantages.
The parties to a life contract are similar to the Settler, Trustee and Beneficiary of a
trust but the overriding difference is that the life company is the legal, beneficial and
equitable owner of the policy assets. Insurance policies are contract based and
provide a high degree of certainty for the investor. This is particularly appropriate
where the concept of a trust is not recognized, as in Switzerland. In certain situations,
a life contract may be owned by a trust for asset protection purposes. The Isle of Man
Assurance Limited (IOMA) Group is one company that offers and delivers such
services, as do Lombard International Assurance SA (2004) and Eagle Star
International Life (2004). Similarly, the IOMA Group (2003) offers Life Assurance
contracts in international wealth planning.
Life contracts offer excellent opportunities for the tax efficient transfer of wealth
between generations as the death benefit is often receivable free of taxation. The
International Wealth Management Bond produced by IOMA as a single premium,
whole-life policy has a policyholder and single or multiple lives assured. Each policy
has an underlying investment portfolio, which may be invested in different ways with
minimum investment of US$ 500,000 (or currency equivalent). The bond is flexible
with many options and it is even possible to transfer an existing investment portfolio
into it. An independent professional investment manager may be appointed to
manage a portfolio of assets and investments held in the name of the bond.
Conclusion
Switzerland already has worldwide recognition as a location that offers and
administers a wide and diverse range of services catering for the requirements of
wealthy clients. It is already a major player in the global market, with advisors who
are used to working in an international context. It would therefore seem to be an ideal
and attractive location for managing the wealth of Japanese clients, particularly in the
areas of tax and estate planning.

35
2.3. Advisory services for wealthy Japanese families
The following section looks at wealth in Japan and discusses the emergence of a
new generation of wealthy individuals. It then looks at the current range of wealth
management options available to wealthy Japanese.
2.3.1. Wealth in Japan
Although Japan is the wealthiest country in the world, with a long tradition of saving,
the Japanese prefer low risk investments despite their low rates of return (PWC
2003). Caborn (2001) states that Japan regularly accounts for up to 15% of the
world's gross domestic product and has an incredible 25% of the world's private
savings, despite the recent economic recession.
Much of this wealth is tied up in family businesses and Hughes (2003, p.180)
confirms what Kurashina (2003) explains in the first Japanese holistic book on family
business, that 95% of Japanese companies are family companies or dozoku kigyo
and approximately 40% of the listed companies are family businesses.
However, since the end of the 1980s a new segment of wealthy individuals has
emerged in Japan. This includes entrepreneurs, who are not necessarily highly
educated, in businesses offering services, as well as educated people such as
medical doctors. Their status is linked to occupation, education and income rather
than to inherited wealth and position. Geographically, they are mostly centred around
the main areas of Tokyo and Osaka. The old elite does not necessarily accept this
dynamic, new generation of wealthy individuals and, as a result, they tend not to hold
positions of power. They are however beginning to exert more influence in society
and are responsible for driving the Japanese economy forward (Oshita 2005).
This group of nouveaux riche made their fortunes providing services in areas as
diverse as IT development, cosmetics, fast food chains, pachinko (‘slot machine
games’), ‘think-tank’ experts, consulting, human resources businesses and lending
services. They were no longer the managers of large companies but rather the
owners of smaller but highly successful businesses. Many of these businesses are
non-listed and about a half are passed on to the second generation (Ishihara and
Tahara 2005).

36
The nouveaux riche are not members of the traditional high society elite but are now
forming a new type of hierarchy, which is becoming established in Japan. Their
status is linked to occupation, education and income rather than to inherited wealth
and position. This has, however, created several problems. Traditionally, the rich
held positions of power in government and in the world of economics, through the
Keidanaren, the Japanese Federation of Economic Organisations. The old elite does
not necessarily accept the new generation of wealthy individuals who tend not to hold
positions of much power. The new generation is, however, beginning to exert more
influence in society and is responsible for driving the Japanese economy forward. As
a result, the ‘old’ elite is gradually beginning to lose power and status as the
economy moves towards more privatisation and liberalisation. However, the newly
rich have attracted negative comment because of their tendency to spend money and
enjoy life rather than thinking about longer term issues and philanthropy, an issue of
great importance to the Japanese and which is mentioned in more detail later in this
section (Tachibanaki and Mori 2005).
Women are also becoming increasingly important in Japan and there is a growing
segment of wealthy, ambitious, women emerging. Historically, women typically had a
low status and did not move in higher circles. Women traditionally were expected to
stay at home to be carers and housekeepers but men were expected to show
disrespect towards them, emphasizing their low position in society (Friedman 1992).
Although that attitude is changing, it is still difficult for women in a predominantly
male society (Walker & Schmitz 2003). However, it must be recognized that there is
a number of exceptional, well-educated, successful and ambitious women in society
who are highly respected in all walks of life.
Men traditionally see themselves as the breadwinners and can feel threatened by
women with power and money. Conversely, women tend to seek equality in a
relationship and are therefore unlikely to form a relationship with a man who earns
less than them (Private Wealth Management 2005 p57). Additionally, women who
have inherited their wealth can be told that ‘ as they have not earned their wealth
they are not worthy of respect’. In contrast, men who have inherited their wealth are
encouraged to increase their assets and they have the respect of the community,
making it easier for them to marry. Women who are successful in business are still in
the minority and very few find their way past the ‘glass ceiling’. It is easier for a
woman to be successful in Japan but as soon as she has children her situation, at

37
least in the short term, becomes very difficult. This situation is slowly changing, with
the gradual introduction of flexi-time, job-sharing, part-time working and childcare
facilities, there is still along way to go before women in business are equal to their
male counterparts. As a result many Japanese women are remaining single or are
leaving the country to live and work abroad, where they can be successful in
business but also marry and have a family. Both of these are a factor in the rapidly
declining birth rate in Japan (Kelsey 2000).
In her book ‘Living With Ventures – You Can Do It!’ Yuri Konno (2004) describes her
struggle to become a successful businesswoman. After the war she went to
university but, because the retirement age for women at that time was 23 and
because, for a woman, she was over-qualified having been to university, she was
unable to find a job. She decided to form her own business and established one of
the first child help lines and later set up help lines for mothers and the elderly. She
was not motivated by a desire to make money but rather by her wish to provide a
service to disadvantaged people. She was eventually supported in her efforts by
other businesses and she is now recognised and respected as one of the pioneers in
gaining respect and recognition for women in the workplace in Japan. She
established the Living Science Institute in Japan in 1979, which is an all-women
organisation, which discusses issues of major concern such as the aging population
and the role of women in business, as well as issues such as the tax system. In 1998
she was awarded the Leading Women Entrepreneurs of the World prize.
The tendency for Japanese not to marry and have children means that there is a
slow shift away from wealthy families to wealthy individuals. These individuals also
expect international solutions for managing, maintaining, optimising and passing on
their wealth, which is why family office service providers must increasingly address
the needs of the individual as well as the family by offering a wide range of services.
Wealth in Japan is closely linked with the idea of philanthropy. After World War 2
many people were in great need both materially and emotionally and so people
began to help each other. This desire and feeling of obligation to help others has
endured until the present day (Ishihara & Tahara 2005). From this time there was
also a feeling of social obligation to provide employment, which led to a situation of
full employment and the idea of jobs for life. The newly rich often don’t think in this
way and prefer to rationalize their businesses to maximise profit, leading to higher

38
unemployment (Oshita 2005). In the United States of America, financial donations
are tax deductible and can be used to boost the image of the giver. Conversely, in
Japan, giving is not tax deductible and it is not considered correct to boast about
one’s giving. However, increasingly, businesses are becoming more open about their
charitable giving.
Some family office providers offer philanthropy management as a way of reducing
the tax burdens of a business. It is possible to set up a foundation or association,
outside Japan, that benefits the charity of choice whilst reducing local business taxes
and inheritance taxes (Davies 2005). Although philanthropy in itself is the driving
issue for Japanese, this is another reason for wealthy families to consider moving
towards international wealth management solutions.
2.3.2. Family office service providers in western countries
Banks, law and accounting firms and a few Japanese players offer family office
services and Hamilton (2002) says that we should expect to see such firms working
to transform themselves in an effort to remain viable in an increasingly competitive
wealth management industry. This can be achieved through out-sourcing to
independent experts in the field or through the development of large global firms with
a wide range of expertise.
In the area of sophisticated tax and estate planning, the majority of banks have
concluded that, while this is an important requirement for wealthy clients, they cannot
develop this business successfully in-house. Instead, many have opted to co-
operate with specialized tax and law partnerships, whilst focusing on management
and administration of the assets involved (Geiger 2003, p.99). Banks offering family
office services often have information about their services on the Internet and some
of them are introduced in Appendix C.
Two USA law offices, Ballard Spahr Andrews & Ingersoll, LLP and TAG Associates
LLC, focus their services primarily on American clients (see Appendix D). The former
provides a comprehensive range of estate planning services to wealthy individuals
including drafting of wills, trusts and related tax planning and life insurance. TAG

39
Associates LLC (2003) provides financial management, administration /controllership,
tax planning and compliance, estate and trust planning.
Rothstein, Kass & Company (2003) provides financial planning, management and
reporting services. In financial planning, they help clients define their investment
goals and assist in asset allocation, personal liability, security evaluation and life
assurance requirements. In financial management, an investment manager
coordinates meetings and monitors estate and income tax planning, tax compliance,
personal liability insurance, eldercare management, personal concierge-type services
and philanthropic giving. They are responsible for among others, investment
performance reporting, combined portfolio accounting, and family office governance
reporting.
Mitsubishi Tokyo Wealth Management (Switzerland) Ltd. is a joint venture between
Tokyo Mitsubishi Bank (60%), Kokusai Securities (30%) and Mitsubishi Trust Bank
(10%) (Yamamoto 2003, Tokyo Mitsubishi Bank, Kokusai Securities Co. Ltd.,
Mitsubishi Trust Bank 2002). The firm’s family office services are provided in
partnership with Aoki consulting, tax and accounting office (Aoki 2003).
Centerseas Asset Management Ltd. (2003) explains on its website that its family
office ‘provides administrative services such as the inspection and supervision of
international banking documents, deposit analyses and their potential consolidation
and/or summarization, administrative consultations and assistance in estate planning,
including contingent investment consultations from an asset value of CHF 3,000,000.
Akiyama Holding & Finance SA (Dream technologies 2002) offers services as a
partner and consultant for family offices and private banks in Switzerland and
Monaco.
2.3.3. Advice services for Japanese clients
This section looks at services already existing for Japanese clients in Japan as well
as alliances with foreign players.
European advisors are able to give independent advice and they understand highly
technical, international financial vehicles better than many Japanese advisors, but
they generally face more difficulties winning the trust of Japanese clients because of

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