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FinTechs belonging to this category offer advisory and broking services for investments usually via an internet platform.
Robo advisory services usually offer an investment proposition following a series of questions concerning the personal financial background and the risk-bearing capacity of the user. Sometimes the respective platform also enables the user to directly execute the proposed investment.
Auto-trading concerns all services which automatically trade on behalf of the customer according to his or her specifications.
Apart from that some FinTechs collect and offer merely or as an ancillary service market information or operate comparison portals to increase the transparency of the capital markets and to help the investor with his decision-making.
There are also FinTech-advertising-services which advertise various financial services or products.
Introduction
Attitude of the country towards modern financial advisory and broking services
The robo-advisor market has developed swiftly thanks to the launch of the robo-advisor test bed initiative in 2016 and the easing of minimum capital requirements for mobile discretionary investment services in 2019. We anticipate that the introduction of MyData, which gives individuals the ability to manage personal financial data from different financial institutions on one platform, will further spur the robust growth in the robo-advisor market.
On the other hand, recently, the Financial Consumer Protection Act was enacted to protect financial consumers, and financial regulators have taken the stance that services such as the provision of information on financial products or recommendation of customized financial products on online platforms may qualify as brokerage rather than advertisement or investment advice. As a result, major platform providers have responded by suspending customized recommendation services and/or limiting other related services.
Legal affairs
Obligations and requirements to provide financial advisory and broking services, or ancillary services described above
The FISCMA defines “investment advisory business” as the business of providing advice on the value of financial investment instruments and other investable assets or on the investment decisions of the client. Thus, where one provides advice so that clients can make investment decisions directly based on such advice, one is engaging in an investment advisory business, which requires registration with the FSC. The registration eligibility requirements are similar to those of the discretionary investment business license, and the minimum capital required is KRW 250 million.
Where the service provider manages investment assets by making investment decisions (partially or wholly) on behalf of clients, such services will qualify as a discretionary investment business, and such service provider will have to register and meet the requirements described in Section b above. We note that the applicable minimum capital requirement is higher than that of an investment advisory business. In the past, mobile discretionary investment businesses were required to maintain a minimum capital of KRW 4 billion, but this requirement was replaced in 2019 with the lower KRW 1.5 requirement applicable to other discretionary investment service providers in an effort to promote robo-advisors.
In sum, to operate a robo-advisor service or automatic trading system, the service provider will have to register as either a discretionary investment business or investment advisory business depending on whether the investor makes its own investment decisions directly. For reference, Fint, one of Korea’s leading robo-advisor companies, conducts its business under a discretionary investment structure, taking care of the entire investment process, from d