Why the Wealthy Don't Trust Advisors | Trust Blueprint Series

"In ten years, five different people have handled my account. Every single time, I had to explain everything from the beginning, and just as I started to trust one of them, someone new took over. At this point, I do not trust anyone."

I once heard these words from a person of considerable wealth, someone whose financial assets came to just over one billion yen. What struck me was not anger in the tone, but a quiet, deep resignation. It was a moment that reminded me, once again, that possessing wealth and having someone you can safely entrust that wealth to are entirely different problems.

In the first installment of this series, we asked what wealth truly means at the scale of one billion, ten billion, and one hundred billion yen. The larger a fortune grows, the deeper the question of what success actually means becomes. This time, we want to push that question one step further. What does it mean to have a truly trustworthy advisor, the kind of person essential to protecting wealth, growing it, and passing it safely to the next generation? Why is such a person so remarkably difficult to find in Japan? This installment looks directly at the structural problem hiding behind that difficulty.

Why does trust in advisors rank among the lowest in the world in Japan?

Anyone who has had a chance to see how wealth management actually operates overseas cannot help but notice how different it is from Japan. Many wealthy individuals in the United States and Europe assume, as a matter of course, that they will keep the same advisor for ten years, twenty years, or longer. Changes in family structure, the rise and fall of a business, preparation for a generational handover: an advisor in these markets is positioned as the one partner who has walked alongside a client through every major turning point in life.

Ask the same question in Japan, and the answer is often very different. Wealthy individuals frequently tell me things like, "the person in charge changes every few years anyway," or "in the end, they just want to sell me something." This is not a matter of personal prejudice. It is a conclusion that a great many people have reached through direct, repeated experience.

Here, though, an important question arises. Does this distrust exist because Japanese advisors are somehow less capable or less honest than their counterparts abroad? I do not believe that for a moment. There are, without question, individual advisors in Japan who are both highly skilled and deeply honest. The real problem is a system that prevents that honesty from ever being put to full use.

The absence of trust is not a problem of people. It is a problem of structure. That single idea is the heart of what this installment is about.

Structural flaw one: what exactly is the distortion built into commission based compensation?

"The product that sells well" and "the product that best suits the client" are not the same thing

In the world of wealth management, compensation broadly falls into two models. One is commission based, in which the advisor earns income every time a product is sold. The other is fee based, in which compensation is tied to the balance of assets the advisor manages on the client's behalf. Readers familiar with the United States will recognize this as roughly the same divide that separates a commission driven broker-dealer, held to a suitability standard, from a fee based Registered Investment Adviser bound by a fiduciary duty.

In a commission based world, an advisor's income is determined by what was sold, and how much of it. The more lucrative the commission on a given product, the stronger the incentive to push it aggressively. Even when the individual advisor is entirely sincere, if the organization's own evaluation system is built around sales volume, there is a strong pull toward recommending whatever pays best rather than whatever genuinely serves the client.

This is not a problem that gets solved by blaming the individual advisor. No matter how capable or how honest an advisor may be personally, they cannot escape the influence of the compensation and evaluation systems of the organization they belong to. Telling someone to simply "rise above it through good conscience" is not a sustainable answer.

The essential difference a fee based structure makes

Under a fee based structure, an advisor's own compensation grows precisely when the client's assets grow. In other words, the client's interest and the advisor's interest point in the very same direction. There is no need to sell any particular product; making the decision that is genuinely best for the client is, by design, also what generates the advisor's own income.

The number of Japanese financial institutions publicly moving toward a fee based model is growing, but the industry as a whole is still dominated by commission based compensation. There are also cases where a firm nominally claims to be fee based while, in practice, blending fees together with commissions, which means that a truly fee based relationship remains the exception rather than the rule.

The idea of eliminating conflicts of interest "at the level of the system itself, at the level of design itself," rather than through willpower or good intentions, is the first key to redesigning trust.

Structural flaw two: why is "enclosure" in the real estate industry a genuine conflict of interest?

The problem built into dual agency compensation

Real estate transactions contain the exact same structural problem. It shows up as what is called ryote torihiki, or dual agency, in which a single brokerage represents both sides of the deal.

In an ordinary sale, the seller and the buyer each work with their own separate broker, and each broker collects a commission from their own client. This split arrangement is properly called single agency, and it is what the system is originally meant to look like. In practice, however, it is extremely common in the industry for a single firm to represent both the seller and the buyer at once, collecting a commission from both sides of the same transaction. Some jurisdictions in the United States restrict or heavily regulate this kind of dual agency precisely because of the conflict it creates; in Japan, by contrast, it remains legal and widespread.

A seller wants to sell high and sell quickly. A buyer wants to buy low. These two interests are, by their very nature, opposed to one another. When a single firm acts as agent for both people at once, that arrangement structurally contains the risk that one side's interest will end up being sacrificed for the other's.

The information gap that persists even after a listing is registered with REINS

Closely related to this is a practice known as kakoikomi, or "enclosure." A listing broker registers a property with REINS, the Real Estate Information Network System that Japan's brokers are required to use to share listing data with one another, roughly the Japanese equivalent of a Multiple Listing Service in the United States, and yet in practice restricts referrals from other brokers so that the firm can find the buyer itself and collect commission from both sides. This can end up excluding buyers who might genuinely have offered a higher price, to the direct detriment of the seller.

Japan's legal and regulatory framework has been moving to address this, strengthening disclosure obligations and expanding verification measures. Even so, rules alone cannot fix the underlying issue. As we explained in detail in a separate article on the structural flaw behind the enclosure problem, the core truth is this: banning a behavior by rule does not change that behavior so long as the underlying business remains profitable. Unless the incentive structure of compensation itself changes, this problem is exceedingly difficult to eliminate at the root.

A conflict of interest is a "problem of the system," not a problem of the individual

The idea of simply "finding a good advisor" sounds reasonable enough on its surface. But that approach runs into real limits.

First, advisors who are both highly capable and deeply honest are rare. And even when a client is fortunate enough to find one, that individual's honesty will not last if the surrounding organization's evaluation system never changes. An advisor who tries to stay honest in a system built around sales volume will see their internal evaluation suffer, and will eventually be reassigned to a more favorable position, or move on entirely. This is exactly why the cycle of starting over from scratch with a new advisor keeps repeating itself.

Second, relying on an individual's personal integrity also creates a problem of judgment: how is a client supposed to evaluate it? Given the complexity of the assets held by ultra high net worth families and the sheer scale of the transactions involved, relying purely on the instinct that "this person seems honest" is simply too risky.

This is exactly why what I emphasize is the idea of choosing an organization whose design is correct in the first place. Rather than judging an individual's personal character, the real question is whether the compensation system, the disclosure practices, and the structures meant to eliminate conflicts of interest have actually been designed properly. Trust does not live in a person. It lives in a structure.

Five perspectives for identifying a truly trustworthy advisor

Here are five checkpoints that ultra high net worth individuals actually use to evaluate the underlying structure of an advisory relationship.

1. Transparency of the compensation structure
Is the advisor fee based or commission based? If it is a hybrid, the starting point is having the advisor disclose exactly which products carry which incentives. Some clients feel this is an awkward question to ask, but an advisor who cannot answer it honestly has no real foundation for a trusting relationship in the first place.

2. Continuity of the person in charge
Is the organization structured so the same advisor can stay with the same client over the long term? If changes in personnel happen frequently as a matter of organizational routine, no amount of individual sincerity can build a lasting relationship of trust. It is worth checking how often the advisor assigned to an account has actually changed in the past.

3. Independence in the products and properties on offer
Is the structure built to steer clients toward particular products or properties? An advisor who mainly proposes "our own products" or "properties owned by our affiliated companies" carries a high risk of conflicted interest. It matters whether the environment genuinely allows for a broad comparison of what is actually best for the client.

4. The advisor's stance on disclosure
Does the advisor disclose downsides and risks along with the benefits? An advisor who emphasizes only the positives and reveals unfavorable information only later becomes a real obstacle to a long term relationship of trust. As we discussed in the frontier of real estate business for ultra high net worth clients, the wealthier a client is, the more sensitive they tend to be to any asymmetry of information. A transparent proposal that includes the downsides is exactly what builds trust over the long run.

5. A firm commitment to single agency (in real estate specifically)
In real estate transactions, whether an advisor commits fully to representing only the seller or only the buyer, never both at once, is the single clearest indicator of whether conflicts of interest have actually been eliminated. Whether an organization treats single agency as a firm principle says a great deal about that organization's underlying design philosophy.

None of these five points is an evaluation of an advisor's personal skill or character. Each one is a structural check on whether the organization and its systems have actually been designed correctly.

My own view

Over the course of my career in this industry, the problem of conflicted interests has never been something abstract or someone else's concern. In real estate, dual agency income is very often one of the pillars of a firm's revenue, and I have seen, more times than I can count, the moment where an advisor's genuine care for a client collides with the organization's own commercial policy, no matter how devoted that advisor is.

This is precisely why INA&Associates treats single agency as an unbending principle. This is not a marketing tactic meant to differentiate ourselves. It is a choice made so that our core values, trust and honesty, and the wellbeing of everyone we work with, live as an actual working system rather than as words on a page.

To act with full commitment as the seller's agent, you cannot simultaneously pursue the buyer's interest as well. Claiming to be "on both sides" is, in practice, exactly the same thing as being on neither side at all. I am convinced that there is no way to protect a client's trust at the level of design other than by removing conflicts of interest from the compensation structure and the transaction structure itself.

I am sometimes asked whether a fee based compensation model reduces short term revenue. It may well do exactly that. But what we are aiming for is not the maximization of short term transaction volume. It is sustainable growth built on a genuinely long term relationship of trust with our clients, a belief that connects directly to our core value of taking the long view.

Trust does not simply flow naturally out of good service quality. Real trust can only stand on a design that has structurally eliminated conflicts of interest. That is the heart of what I mean by a blueprint of trust.

Ultra high net worth individuals have the eye to judge the precision of that blueprint. INA&Associates intends to keep pursuing a design worthy of that scrutiny.

I want to leave you with a single question. The advisor you trust today, do you trust that person because they, personally, are honest? Or do you trust them because the organization behind them is designed correctly?

In the next installment, we turn to the difficulty of passing on real estate wealth, and the "first ever" generational handover that family offices are now confronting.

Summary

• The root reason wealthy individuals in Japan do not trust their advisors is not a lack of personal integrity. It is a design flaw in the compensation structure and the transaction structure itself
• Under commission based compensation, the advisor's interest and the client's interest are not structurally aligned
• Dual agency and enclosure in the real estate industry, while legal, contain a genuine and fundamental conflict of interest
• Rather than gambling on finding a good individual advisor, ultra high net worth clients are far better served by choosing an organization whose design is correct
• Trust lives in structure, not in people. Compensation design, continuity of personnel, a stance of full disclosure, and a firm commitment to single agency are what actually matter

Frequently asked questions

Q1. Is dual agency illegal?

A. Under Japanese law, dual agency is not illegal. But the structure of representing both the seller and the buyer at once inherently contains a conflict of interest, and carries the risk that one side's interest will be sacrificed. The core of the problem is precisely that it is "legal, yet conflicted." Whether something is legally permitted and whether a client's interests are actually protected are two entirely different questions.

Q2. Where can I find a fee based advisor?

A. Independent financial advisors and some trust banks and private banks in Japan offer fee based services. That said, this model is still in the process of spreading in Japan, and there are cases where a firm claims to be fee based on paper while blending it with commission income in practice. When choosing an advisor, it is important to ask directly for a specific breakdown of the compensation structure.

Q3. Why does the person in charge of my account change so often?

A. At many Japanese financial institutions, rotating the staff assigned to an account is built into the system as a matter of policy, largely intended to prevent the misconduct risk that can arise when a single advisor's relationship with a client grows too close. From the perspective of a wealthy client, however, this creates a serious problem: it becomes genuinely difficult to build a long term relationship of trust. Choosing an advisor or an organization that values continuity of personnel matters especially for ultra high net worth individuals.

Q4. What is the first thing I should check when choosing a trustworthy real estate firm?

A. The first thing to check is whether the firm treats single agency as a firm principle. This is the clearest possible indicator of whether conflicts of interest have been eliminated. Beyond that, it is worth confirming the continuity of personnel, the transparency of the compensation structure, and the firm's stance on disclosing downsides along with benefits. The very questions that feel awkward to ask are often the best test of whether a partner is truly trustworthy.