Competition among South Korean banks and brokerages is heating up to sell new individual savings account (ISA) products, with some banks offering cash gifts or preferential interest rates well above the market average to woo more customers, industry watchers and officials said on May 16.
The government-sponsored ISA scheme is designed to allow customers seeking higher returns amid record-low interest rates to manage diverse financial products in a single account. The ISA product offers some tax exemptions on financial gains for up to five years, according to the Financial Services Commission (FSC).
KB Kookmin Bank offers various inducements, such as tailored product lineup and supplementary services, to customers when purchasing “KB Kookmin Almighty ISA.”
The bank’s ISA comes in 10 model portfolios to give its customers wide choice in selecting the ISA account, which is categorized depending on the risk factors. The bank divided up the ISA portfolio models based on the five safety categories including “safety type,” “safe profit seeking,” “high profit seeking,” and others. The five ISA category has again been categorized in a number of types, including one for seeking high dividends (A Type), S type seeking high dividends as well as minimal taxes, and other types such as one seeking extra high interest rate income, called the “interest rate neutral type.”
Under the type seeking mid-level profit, around 30 percent of the bank’s investment funds went for domestic bonds and 20 percent each for overseas and domestic stocks, while 15 percent of the fund went to domestic bonds. The bank also plans to introduce Robo Advisors in its operation of ISA products. The Robo Advisors will analyze the investment patterns of customers and suggest appropriate investment fund management plans based on the Financial Engineering Algorithm. An official of the bank said it will come up with new ISA products for which Robo Advisors will use Big Data as the base for advisory services and the customers can easily subscribe to them.
In January, the bank put on the market “Qaurterback R-I,” an advisory-type trust product using Robo Advisors, in cooperation with the Quarterback Investment Advisory financial consultant firm for the first time in the banking community. Robo Advisors will analyze more than 920 trillion data in 77 regions under six asset groups to select the best investment targets for the product. The product was able to produce 2 percent profit in the first two months since its introduction in January while most investment funds made negative growth in the same period, the official said.
The bank is focusing on preventing incomplete sales. An official from KB Kookmin Bank said, “The bank aims to design fruitful products and provide efficient asset management services through the individual savings accounts (ISA).”
A trust-based ISA, which is a specified trust product, requires the asset management capability of a financial company. As of the end of January, KB Kookmin Bank ranked top in the banking industry in terms of market share in the specified trust sector with 27.6 percent. The KB Kookmin Almighty ISA involves 90 products, such as savings, exchange traded funds (ETF), funds and equity-linked securities (ELS).
The bank offers a wide range of customized recommended products that meet customer demand and investment patterns. Based on experience in the ETF and ELS and expertise in the asset management, it also suggests an efficient diversified investment strategy when a customer includes fund and savings products in an ISA.
KB Kookmin Bank has the largest product lineups among ISA sellers. With 10 years the know-how on ETF trust managements, the bank has 12 types of ETF product lineups, including two local stock-type ETFs on dividend theme, three bond-stock mixed types and seven overseas funds.
Moreover, the bank released ELS products with 45 percent of the knock-in barrier, which is the lowest level among banks, and sold 14 billion won (US$12.01 million) of the products in three days after the launch. The lower the know-in barrier level is, the safer the investment is. It also has 45 different types of fund products for customers’ investment patterns.
In the recent “investigation on fund sales” conducted by the Korea Financial Investors Protection Foundation, KB Kookmin Bank was awarded a first-class rating for two years in a ro. It was the first time that happened in the commercial banking industry. In addition, the bank has won the grand prize in the investor protection category in “Korea Fund Awards” hosted by fund rating firm KG Zerioin for a second successive year.
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