South Korea's Wealth, Asset Management Distribution Turning More Hybrid – Study

Editorial Staff

29 August 2022

South Korea’s wealth and asset management industry must embrace an increasingly hybrid mix of in-person and digital distribution channels, as tech-savvy Millennials and Generation Z (MZ) flex more investment muscle, a report said.

In the Asian country’s rapidly ageing society, the MZ group will account for 60 per cent of the working-age population by 2030, Cerulli Associates, the consultancy, said in a report citing research from 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 digitalise the sales and distribution of financial products,” Cerulli said.

The report noted that MZ investors strongly prefer online transactions. It noted that a July 2021 survey by Rich & Co showed that 53 per cent of such consumers carried out more than 90 per cent 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.

At present, digital sales account for a “tiny portion” of industry AuM but such sales are likely to increase because online platforms are “ranked highly” among the distribution channels which managers wish to use more often in the next three years, Cerulli said.

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 to 20 years, the report continued.

“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,” Ken Yap, managing director of Cerulli's Asia-Pacific office, said.

“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,” Yap said. “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.”