He said: “This announcement by the FSC could be the turning point in rebuilding trust among asset managers, fund distributors and individual investors.”
The announcement, made earlier this week, means that employees in financial services companies, such as asset managers, analysts and advisers, will be able to set up investment advisory firms completely independent from their employers.
Khwarg stated that although IFAs wishing to operate in South Korea are already protected under the Financial Investment Services and Capital Markets Act (FSCMA) – the legislation, introduced in 2008 just before the global financial crisis hit, was rarely used due to a “loss of trust in asset management companies and concerns over mis-selling” in the aftermath of the crisis.
In a bid to expand the nation’s tightly-regulated financial advisory industry, the FSC is now looking to slash capital requirements for IFA firms by a whopping 80% down to KRW100m ($85,500) from KRW500m ($428,675) previously.
Khwarg said: “The introduction of independent financial advisers (IFAs) will be welcomed by individual investors as well as independent asset management companies.
“The government has been studying the successful models in the US, UK and Australia for over 10 years.
“In the near future, individual investors can choose between a bundled service from a bank, securities company or insurance company and unbundled services – independent advice from an IFA and fund transactions through online platforms.”
The FSC also confirmed that IFAs will have to adopt a fee-only model where service charges are paid for by the client with strict prohibitions on receiving commissions from product providers. If successful, the reforms are likly to come into force by May this year.
