Brokerage houses push to attract banking customers in pension market

An aerial view of Seoul's financial district of Yeouido in fall / Courtesy of Seoul Tourism Organization By Yi Whan-woo Securities firms seek to draw new customers in the booming pension market that is largely dominated by banks, on the occasion of a new regulation that will take effect Thursday. The regulation will allow customers who have a retirement plan to freely switch to a new company to manage the corresponding amount of money they have invested. For customer convenience, the regulation states that they will not need to discontinue the plan, including installment savings, funds or insurance, and start a new one with the company they switch to.

“The fact that customers can keep their current plan while freely switching to a new company as a pension operator is anticipated to prompt less competitive players to expand their presence in the market,” an industry source said Monday. According to the Financial Supervisory Service, banks make up 52.6 percent of the market, which was worth around 400 trillion won ($288.



72 billion) as of the end of the third quarter. The size of the market grew 14.3 percent from a year earlier, and is anticipated to expand as Koreans increasingly live longer and save more for life after retirement.

Securities firms lag behind banks in the market, holding only a 24.1 percent share. However, their presence has been expanding fast, marking a 19.

8 percent year-on-year growth in terms of the assets they manage from 2023 to 2024. Their growth rate exceeded the banks at 15.6 percent and insurance companies at 6.

7 percent. The higher growth rate was made possible as brokerage houses had higher rates of return than their competitors. In 2023, they had a 7.

11 percent rate of return, which is higher than the market average of 5.26 percent as well as the banks’ 4.87 percent, life insurance firms’ 4.

37 percent and nonlife insurance companies’ 4.63 percent. Accordingly, the securities firms’ campaign to attract new customers centers on profitability they can enjoy.

In particular, securities companies are promoting services in which customers can invest in up to 700 exchange-traded funds (ETFs), far more than the 100 to 170 ETFs that are available through banks. Meanwhile, market observers speculate that the banks will capitalize on “all possible means of marketing” to keep their current customers. “About 190 trillion won worth of products will be moved from one company to another, as customers want to find a more lucrative pension operator,” a source said.

A public relations staffer at a bank said on condition of anonymity that highlighting stable returns amid global economic uncertainty may help lenders keep their customers..