By Yoon Ja-young
Staff Reporter
Securities companies and asset management companies have started an all-out war to take the leadership in the fund sales market once dominated by banks.
Kookmin Bank and other banks, taking advantage of their nationwide branch network, have been major sellers of fund products, but brokers are mounting their challenges against those lenders to take a greater share of the market. To make up for a smaller number of branch offices, they are opting to sell funds online. In return, commissions they charge on customers are falling.
Kiwoom Securities, an online brokerage house, is one of the most aggressive players fortifying marketing efforts online. It saw a huge success since the opening of an online fund shopping mall in May. The number of accounts soared to 17,770 with sales amounting 60.2 billion won in August, compared with 2,235 accounts and sales totaling only 3.4 billion won in the January.
The secret of success lies in low commissions. For a fund investing in Chinese stocks and managed by Hanwha Investment Trust Management, for example, investors are charged 1.5 percent commission if they subscribe to it through Kiwoom.com Securities' online fund shopping mall.
If they subscribe to it offline at other securities firms, the commission would be 2.45 percent. The commission is even cheaper for funds linked with indices. Kiwoom's online shopping mall charges only 0.2 percent commission for ``Dongbu Haeorum Index Alpha.''
Most other major securities firms are also operating online malls, or are about to open one, where some hundreds of fund products are available. Mirae Asset Securities, for example, makes 18 percent of the company's total sales through its online mall.
They are also launching products sold only though the Internet, most of which are index funds. Daewoo Securities' ``e-Fun Index Fund,'' for example, recorded around 4 billion won in sales online. It charges only 0.29 percent commission.
Asset management companies, which solely depended on banks and securities companies for fund sales, are also boosting online fund sales. Foreign asset management companies, which don't have sister securities firms here to boost sales, are especially interested in the online market.
Their efforts also go hand in hand with the financial regulator's decision to scrap regulations on direct fund sales by asset management companies. The Financial Supervisory Service aims at inducing lower commissions by diversifying fund sales channels, and especially by promoting online sales.
Investors have complained that financial institutions are reaping too much commission without providing much useful information for them.
Banks, meanwhile, now have to defend their market share, while they are still the dominant channels for fund sales. Kookmin Bank, the largest lender of the country, recorded 24.5 trillion won in sales as of the end of July, followed by Shinhan Bank with 19.6 trillion won.
Banks say that they offer services that online shopping malls or securities firms cannot. ``Banks suggest a portfolio based on thorough analysis of each investor's characteristics, such as whether he or she is risk-averse or seeks higher returns,'' said Kim Eun-jung, head of the investment technology team at Shinhan Bank.
She said diverse services banks provide to loyal customers, such as banking transaction fees cuts or favorable interest rates when they seek loans, shouldn't be neglected. Experts also point out that investors aren't likely to thoroughly understand fund products at online shopping malls.
However, banks are also being pressures to lower commissions. Kookmin Bank already cut commissions for a number of funds in June. The introduction of the Capital Market Consolidation Act is expected to further drag commissions down. A fund supermarket selling all fund products and insurance salespeople will be in competition as deregulation continues.
``Many financial consultants at insurance companies are equipped with knowledge on investment and taxes, and they know the financial status of their customers. I bet they will be more competitive than bank clerks in fund sales,'' said a spokeswoman for a foreign life insurance company.
chizpizza@koreatimes.co.kr