Value context and insight. lkm@koreatimes.co.kr
'Banks, brokerages, insurers care little about consumers'
By Lee Kyung-min
By Lee Kyung-min
Customers have little confidence in financial services providers about their sales practices, consumer protections and risk management, a survey from a nonprofit investor rights advocacy organization showed Friday.
This came amid heightened consumer distrust of banks, brokerages and insurers following a recent fiasco involving derivative-linked funds (DLF) sold by KEB Hana Bank and Woori Bank. Many people lost their entire investments.
In a survey conducted by Korea Financial Investors' Protection Foundation of 1,000 investors aged between 25 and 69 from Oct 21 to 31, 10 out of 12 questions received an average score of less than 50.
The foundation based the questionnaire on Good Practices for Financial Consumer Protection designed by the World Bank.
The respondents were asked to evaluate how much they agreed with each given statement on a scale of one to five, with one meaning they do not agree at all and five they absolutely agree.
The final score was converted to a scale of one to 100.
The statement that drew the lowest score of an average of 38.8 was about whether financial service providers fully provide information on mediation procedures in the event of a dispute concerning their products and sales practices among other complaints.
An average score of 39.9 was given to a statement about whether financial services providers are held accountable to the full extent of the law for what customers could consider illicit promotions and marketing tactics.
The average was 43.2 for a question about whether the service providers were upfront and forthcoming about all possible risks following financial investments.
The score was 44.9 on whether they fully provide information about risks entailed by buying derivative products including equity-linked funds and DLFs.
The respondents gave an average of 45.9 over whether they are fully provided with information about the risks entailed by financial investments as well as the performance of products after sales.
The respondents expressed skepticism about whether the financial authorities provided stringent oversight of service providers.
They also remained highly doubtful whether the complicated financial products are explained in easy terms on consent forms and that sales workers make sure buyers understand the products and possible risks.
“The survey showed consumer distrust in the financial services sector was prevalent,” said Kim Eun-mi, a researcher at the foundation. “Future legislative efforts should take the survey results into account to prevent recurrence of similar incidents.”