By Kim Jae-won
Banks and brokerage houses are competing for customers seeking to open individual savings accounts (ISAs), as the financial regulator has allowed lenders to sell the retail investment service, previously offered by securities firms only.
Financial institutions are offering gifts for ISA holders ranging from cars to overseas vacations to gain entry to the market which is expected to reach 150 trillion won in five years. The government waives income tax up to 2 million won of returns.
“We plan to offer a wide range of benefits to customers who open ISAs with our bank,” said Lee Jeong-woo, a spokesman for Woori Bank. “We will provide competitive rates for them as well as hosting many events for customers.”
According to the lender’s website, Woori promised to give away a vacation to Hawaii worth 5 million won to two customers who open an ISA.
Shinhan Bank said that it will give expensive gifts to ISA holders, including Hyundai’s Avante sedan, an LG washer and a robot cleaner.
Brokerage houses are promising to guarantee 5 percent returns to customers who open ISAs with them. KDB Daewoo Securities said that it will pay 5 percent of returns to up to 15,000 ISA customers with a limit of 5 million won. Samsung Securities are providing beverage coupons to 1,000 customers who consult with the firm on the account.
Market watchers said that banks and securities firms seek to attract ISA customers in the early stage because they can open only one account per person. This means that once a customer registers an ISA with one financial institution, it will be much harder for him or her to change the account.
The government introduced the account to help people accumulate assets in a time of sluggish growth and low interest rates. An ISA is a type of savings account where tax is not collected from interest on accounts up to a certain value, allowing account holders to accumulate money.
The accounts will be offered on March 14 in brokerage houses, and banks will start offering them in late March after obtaining investment business licenses.
“ISA is the key measure of our project to increase people’s wealth,” said the Financial Services Commission (FSC) in a statement. “We have collected a wide range of opinions through a task force along with businesspeople and the Financial Supervisory Service.”
The FSC said it expects the move will implement a culture of long-term investment in the country where retail investors often sell their stocks in three months, seeking short-term returns.