Why South Korea’s Robo-Advisors Poised for Growth

Why South Korea’s Robo-Advisors Poised for Growth

by April 9, 2020

Since 2016, South Korea has seen a horde of robo-advisors come on the market. As of June 30, 2019, more than 30 financial institutions had launched robo-advisor offerings, either by teaming up with other companies or by creating their own in-house, and over seven technology firms had been providing robo-advisory platforms to banks and securities firms, according to a research by the Korea Capital Market Institute (KCMI).

Brokerage houses Mirae Asset Daewoo, NH Investment & Securities, Daishin Securities and Kiwoom Securities have all launched their own robo-advisor platforms, and Shinhan Financial Investment offers an artificial intelligence (AI)-powered stock recommendation service called M-Folio.

But within South Korea’s rapidly expanding robo-advisory landscape, several startups are standing out too. Fount, for example, is a robo-advisor startup founded in 2015 that offers customized financial portfolios. Doomoolmori is a platform that uses its algorithm named Boolio to make fund investments. And AIM (Automated Investment Management), a startup founded in 2017 by a former quantitative portfolio manager at Acadian Asset Management, utilizes a machine learning (ML) strategy to recommend exchange-traded funds (ETF) based on a user’s age, income and investment style. AIM has accumulated asset under management (AUM) of 165 billion won (US$139 million) since its inception.

Other popular names include Quarterback Investments, the company behind the very first robo-advisor in South Korea, QARASoft, a developer of robo-advisory platforms and the new KOSHO app, and Newsystock, a “robo-portfolio” platform.

Favorable regulations

Despite South Korea’s rapidly expanding robo-advisory landscape, adoption has remained slow, with Bloomberg Intelligence analyst Diksha Gera estimating a penetration rate of only 0.05% compared with over 2.5% in the US.

South Korea’s robo-advisory sector is poised for growth, however, as demand for online automated wealth managers is expected to grow rapidly within the next few years and as regulators ease up rules.

Throughout 2019, South Korea’s Financial Service Commission (FSC) implemented a series of regulatory reforms aimed at promoting robo-advisory services. These include allowing robo-advisors to manage funds and entrusted assets commissioned by asset management firms, and reducing capital requirement for smaller fintech firms to provide online services via robo-advisors.

To be permitted to operate, robo-advisors must pass Koscom’s Robo-Advisor Testbed. Koscom is a state-run financial IT solutions company and the system manager of the nation’s bourse operator, the Korea Exchange.

Following the implementation of the new rules, at least four robo-advisors have launched, according to the KCMI research, and major securities firms like Samsung Securities and Daishin Securities are reportedly readying to release similar service.


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