South Korea’s Funds Industry Evolves to Meet Younger Investors’ Needs
June 2, 2022 — Singapore
Companies have been targeting millennials and Generation Z through digital sales, as they emerge to form the largest consumer group in the next decade
As Korea’s millennials and Generation Z (MZ) gain influence, asset managers and distributors are expanding their digital presence to target these individuals and their growing wealth.
In Korea’s rapidly aging society, the MZ group will account for 60% of the working-age population by 2030, according to Woori Financial Management Research Institute. As the biggest consumer group in 10 years, building brand awareness among this cohort now is crucial to the success of corporations, as are efforts to digitalize the sales and distribution of financial products.
MZ investors have a strong preference for online transactions. In a July 2021 survey by Rich & Co, one of the largest insurance general agents in Korea, 53% of MZ consumers conducted more than 90% of their financial product purchases online. In the mobile trading system space, there has been an increase in competition to capture the attention of MZ investors, with the entrance of easy-to-use apps by the likes of Kakaopay and Toss.
Although digital sales still represent a tiny portion of the industry’s AUM, these are expected to increase as online platforms are ranked highly among the distribution channels managers wish to expand their use of in the next three years, according to new Cerulli research. Moreover, as MZ investors grow in their wealth, for example through wealth transfer from their parents, the experience they gain through digital channels currently will become important seeds of brand loyalty in 10 to 20 years.
However, the importance of private banking channels and the human touch is not expected to go away any time soon, as MZ individuals mature to become high-value consumers in 10-20 years. “Robo-advisory platforms often provide entry-level services, and clients who start at this level usually tend to graduate to higher human-interaction services as they increase their wealth,” remarks Ken Yap, managing director. Furthermore, the knowledge users gain from online trading tools and digital advisors will provide a firm foundation for future investing needs, leading to higher risk tolerance levels, and ultimately, better preparation for retirement.
Cerulli believes that in the future, financial products will be sold through a combination of online platforms and face-to-face interactions, depending on wealth levels. “Traditional distribution channels in Korea have been actively adapting to changes in the environment, for example, by expanding their digital presence and targeting MZ investors,” comments Yap. “Although the evolution of distribution channels towards online services is expected to continue, asset management companies should continuously engage with both traditional platforms as well as fintech providers to gain maximum exposure for their products.”