IRP Customer Acquisition Battle Heats Up in the Securities Industry

Q1 Reserve Funds Reach 9.11 Trillion Won 'Gaining Popularity'
Fierce Competition Over Fee Waivers and Cash Coupons

[Asia Economy Reporter Park Ji-hwan] Last year’s stock market boom has sparked fierce competition among securities firms to attract customers to individual retirement pension (IRP) products.

According to the financial investment industry on the 20th, as of the first quarter of this year, the cumulative IRP deposits in the securities industry reached 9.11 trillion won, a 20.7% increase from 7.5454 trillion won at the end of last year. The firm with the largest deposits is Mirae Asset Securities with 3.1969 trillion won, followed by Samsung Securities (1.7182 trillion won), Korea Investment & Securities (986.3 billion won), Hyundai Motor Securities (976.6 billion won), and NH Investment & Securities (759.2 billion won).

In particular, the IRP deposit growth of major retirement pension providers has been remarkable recently. Mirae Asset Securities’ IRP deposits rose from 1.5708 trillion won at the end of 2019 to surpass 2 trillion won in June last year, and exceeded 3 trillion won this year. Korea Investment & Securities also showed clear growth, with an inflow of 228.7 billion won in the first quarter alone, marking a 30.2% increase. This figure far surpasses competitors such as Mirae Asset Securities (26.1%), Hyundai Motor Securities (23.7%), and Samsung Securities (10.7%). Its ranking in cumulative deposits jumped from 5th at the end of 2019 to 3rd this year.

The recent increase in IRP deposits in the securities industry is attributed to the strong stock market and the simplified retirement pension transfer process implemented this year.

When individuals subscribe to an IRP through securities firms, unlike other sectors, they can invest in exchange-traded funds (ETFs) that offer higher expected returns. Investing through a securities firm’s IRP account allows for paying only pension income tax (3.3~5.5%) upon receiving the pension, which is a tax-saving advantage compared to the dividend income tax (15.4%) incurred when investing in ETFs through a general account.

Shim Soo-yeon, a senior researcher at the Korea Capital Market Institute, said, “Thanks to the simplification of transfers between retirement pension systems, the growth rate of DC-type and IRP deposits will continue to expand,” adding, “Transfers to financial companies considering consumer convenience and returns are expected to increase significantly.”

Amid the popularity of IRPs, securities firms are actively competing to secure customers.

The most aggressive marketing is by Samsung Securities, which was the first in Korea to declare a full exemption of fees imposed on IRPs. They aim to secure long-term IRP subscribers by waiving management and asset management fees.

Yuanta Securities has also lowered IRP fees to around 0.1% and offers cash coupons to new and transferred account customers. Mirae Asset Daewoo provides mobile gift certificates and Starbucks coupons, while Korea Investment & Securities offers up to 30,000 won in cultural gift certificates depending on the total amount purchased from seven target date fund (TDF) managers, including Korea Investment Management, after depositing into an IRP account.