Financial Advisory Firms Record Big Losses
By Yoon Ja-young
Staff Reporter
Investment advisory companies recorded huge net losses in the first half of this year due to the stock market crash.
According to the Financial Supervisory Service (FSS), investment advisory firms, 90 in total, recorded 25.9 billion won ($19.9 million) in losses for the first half of this year ending in September. It is a 133 percent plunge from 78.4 billion won net profit last year.
The regulator attributed the huge loss to lower investment advisory fee income and a decrease in gains from securities investments amid the bearish stock market.
Recently, the head of a private investment advisory firm not registered with the Asset Management Association of Korea killed himself after sustaining a huge loss in stock investment.
The investment advisory firms made 32.6 billion won in advisory fees, less than half of what they made last year, and their own asset investment activities also turned to deficits, losing 125.6 percent from a year ago.
The investment advisory firms recorded 40.7 billion won in net profit in the second quarter of last year, but continued sliding since then, to 23.4 billion won in the third quarter and turning to a 16.8 billion won loss in the fourth quarter last year.
Among the 72 firms engaged in both investment advisory and discretionary investment management services, only 14 recorded profit, and the remaining 58 had net losses. Among the 18 firms dedicated to only investment advisory services, six recorded profits while the remaining 12 posted losses.
According to the regulator, investment advisory firms have contracts totaling 13.3 trillion won as of the end of September, 37.2 percent less than a year earlier.
They also have to compete with other investment advisory service providers, such as asset management companies and securities companies on top of offshore investment advisory firms registered with the financial regulator. When including these competitors, the whole investment advisory contracts recorded 234.8 trillion won, up 24.6 trillion won from a year ago.