Workplace bias strong in regional pensions in Japan
10 Oct 2012
Workplace bias is becoming particularly strong in Japanese regional firms, where human resources tend to be much tighter than in urban areas, according to Hideki Oe, CEO at Office Libertas.
There has long been a significant gap in membership according to workplace location not only in defined contribution (DC) plans but in employee stock ownership plans, property accumulation savings, group life insurance and other internal corporate schemes. Workplace bias needs to be taken into account when designing investment education programmes for DC plans.
There was one regional firm that used to have an abnormally high ratio of foreign equity investment trusts. The reason is enlightening. Among its staff of around 100 persons, there was one individual who had actively invested on his own behalf and profited nicely during the US stock market rally from the 1990s to 2000s. He was known within the company as an investment expert, and when the DC scheme began, many employees would seek his advice on where to put their money. Based on his view, many employees thus poured their resources into foreign equity investment trusts.
The implication is that unlike usual asset management by individuals, a DC scheme is a corporate system, so individuals must think about their investments whether they like it or not. Most subscribers are not experienced investors, and neither the company nor investment manager can offer specific advice. Most people thus avoid situations they don't understand, putting their money either into common products like fixed-term deposits or, as in this case, investments recommended during lunch or coffee breaks by someone they know and trust. In other words, the presence of an opinion leader among colleagues makes an observable difference in asset management patterns in the workplace, a bias that tends to extend company-wide.
The ultimate decision lies with the individual, and no one can command an investor to take or refrain from specific action. However, it is important to ensure that investment advice from colleagues does not lead to future trouble in relations within the workplace. This is one of the difficulties in asset accumulation within the workplace, and it is the responsibility of the company to manage the system effectively with such points in mind.
Clear biases exist in asset allocation according to the workplace. From this perspective, we should examine closely whether such biases exist in specific geographic areas or companies, identify the cause, and find a solution.
Author: Nenkin Joho