The country’s growing ranks of dementia sufferers are sitting on a mountain of frozen assets, creating personal dilemmas for loved ones fretting over how to handle that money and a drag on the nation’s economic prospects as the vast pool of wealth lays idle.
The pile of captive capital held by sufferers of Alzheimer’s and other forms of dementia in the country swelled to ¥143 trillion ($1.3 trillion) in the year ending March 2018, according to research by Dai-Ichi Life Research Institute Inc. That’s equivalent to more than a quarter of the size of the overall economy.
It’s a problem on various levels: Relatives often feel overwhelmed by the responsibility of dealing with the savings and investments; policymakers must balance safeguarding the savings while ensuring they’re still used effectively to support economic growth; for brokerages the static savings represents lost business in an already shrinking market.
“This is going to have a massive impact on the economy,” said Kohei Komamura, an economics professor at Keio University who studies approaches to finance in an aging society. “We need to create new societal rules, financial products, and financial advice systems that address the cognitive capabilities of the elderly.”
The problem of idled assets could be an even bigger headache in countries like Japan, where people commit more of their savings to stocks: Japanese typically place about 15 percent of their assets in equities and investment trusts, according to Bank of Japan data, less than a third of the corresponding figure for Americans.
Brokerages and banks are starting to wake up to the existence of the pile of drifting assets. Mitsubishi UFJ Trust & Banking Corp., Nomura Trust and Banking Co. and others are trying to create a range of products that enable those with dementia to put their money in trusts or bequeath assets at an earlier stage.
Some financial institutions are also following up on a government recommendation that sufferers should be allowed to split their accounts into living expenses and savings. The hope is that people who eventually act on behalf of those with Alzheimer’s will feel more comfortable using money that has already been designated to cover the sufferer’s living costs, leaving the rest available for investment.
Yet a government plan to encourage people to appoint family members, friends or lawyers as financial guardians for the more than 5 million Japanese who have dementia still has a pickup rate of less than 5 percent. Recognizing the plan leaves relatives in at the deep end of sorting out savings and investments, the Health, Labor and Welfare Ministry is trying to make the program less daunting by providing more support from legal experts and advisers.
The government is also concerned about the misuse of savings held by the aged.
Scammers, largely targeting the elderly, defrauded people out of ¥20.2 billion in the first seven months of 2018, according to National Policy Agency data. In more than half those cases, the money was swindled simply by calling people up and saying, “It’s me, I’m in trouble.” People who transferred money to callers typically thought they were talking to a close family member.
Most banks have responded to the prevalence of fraudsters by limiting the amounts that can be transferred by ATMs each day and plastering warning notices around the machines.
In the financial securities sector, regulations designed to protect older people from buying risky products they don’t understand may be compounding problems by forcing seniors into sub-optimal investment choices.
Current guidelines created by the Japan Securities Dealers Association require sales staff to get managerial approval before recommending complex products to clients who are 75 years old or more. Their superiors must also independently interview those clients.
With the share of seniors rising, financial institutions are exploring options to stop these industry measures from becoming blanket rules that lock out able elderly investors.
83-year-old Toshiko Tanaka is one example of someone who would like to take on more risk with her investments, but is limited by current brokerage practices because of her age.
“They think I’ve gone crazy just because I’m old,” Tanaka says, barely able to hide her frustration at not being allowed to invest as she pleases. “That’s infringing my rights.”
Nomura Holdings Inc. has started joint research into financial gerontology — the study of the effects of aging — in partnership with Keio University to improve its understanding of the behavioral patterns and characteristics of the elderly.
“We would have been walking away from our more elderly customers,” said Kenji Yamaga, a managing director in retail strategy at Nomura Securities Co., commenting on what a lack of action would have meant.
And the problem is only going to get more acute as each year passes.
Around 50 percent of securities and 40 percent of all financial assets in Japan are expected to be held by those age 70 and over in 2035, according to Mizuho Research Institute. Nomura has also placed 180 staff specializing in older clients across its branches in Japan as it tries to offer seniors better service.
“In the past, the fundamental assumption of economics was that human beings can take rational courses of action throughout their lives,” said Keio University’s Komamura. “That was the basis on which arguments were based, but we’re now moving away from that.”