Firms not showing investment risks
Financial firms have not explained investment risks well enough compared to last year and have failed to offer products suited to people’s needs, the financial watchdog said yesterday in revealing the results of its undercover inspection into the sales of mutual funds.
The Financial Supervisory Service dispatched its staff to serve as so-called “mystery shoppers” at 600 branches of 30 financial companies that sell funds, including banks, insurers and brokerage firms. It said they received an average score of 76.6 each when evaluated out of 100 points, down 7.7 from last year’s 84.3 points.
The secret evaluation was conducted from September and October.
Only three companies - Kwangju Bank, Kyobo Life Insurance and Daewoo Investment and Securities - received over 90 points, it said.
Six got the worst grades of 60 points or lower. They were Kyobo Securities, Meritz Securities, Hanwha Life Insurance, Hanwha Securities, Hyundai Securities, and Hanwha Investment and Securities. The latter was formerly known as Prudential Investment and Securities before it merged with Hanwha Securities in September.
The FSS first launched its probe on mutual funds in 2009 to protect investors from financial institutions’ unscrupulous and misleading sales techniques.
While general inspections are common, the twist in the latest round of investigations lies in the way they were conducted.
The undercover inspection evaluated financial companies on 20 categories, including whether they provided investment guide materials to investors, whether they offered products that suit each customer’s needs and whether they explained how customers can cash in mutual funds.
They graded their performances as excellent, good, average, below average or poor.
The companies averaged 82.3 points in terms of providing investment guide materials, up from 76.2 last year, but slipped in the other 19 categories.
“The average scores decreased because, unlike in previous years, the FSS didn’t give the slightest clue as to when the mystery shoppers would appear or what factors would be evaluated,” said Ban Young-hee, a senior official at the FSS’s financial service improvement department. “Those that received ‘below average’ or ‘poor’ grades will be required to submit their plans to improve their sales practices to the watchdog.”
By Kim Mi-ju [firstname.lastname@example.org]
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