[1mm Financial Talk] Super Rich Visiting Banks... The Trend is 'Tojibosang'

Wealthy High-Net-Worth Individuals Not Interested in Returns
Prefer More Tips on Real Estate, Tax, Inheritance, and Business Succession
Banks Launch Exclusive Branches for 'Super Rich'
Banks Also Concerned About Training Aging PBs

A survey revealed that high-net-worth individuals receiving asset management (WM) services from banks are more interested in gathering information than in asset growth. This means that super-rich clients, who have solid income-generating means, visit banks not to increase returns through financial products but to obtain various information such as real estate, taxation, and inheritance.

On the 26th, after obtaining and reviewing the document titled ‘Benchmarking Survey Results on WM Sales Status of Commercial Banks’ from the Korea Post Finance Development Institute, it was found that the core reason WM clients use banks is for ‘advisory services in various fields.’ Since super-rich individuals earn sufficient income through real estate, stocks, and businesses, they are analyzed to have a high interest in complex and difficult matters such as taxation, legal issues, inheritance, and business succession. Whether clients leave or stay depends more on the quality of customer management through face-to-face contact than on product returns.

This survey was conducted by the Korea Post Finance Development Institute to analyze the WM management strategies and customer management status of commercial banks. Team leaders and researchers from the responsible department directly interviewed representatives from commercial banks’ PB centers and general branches before compiling the report.

In line with the information trends desired by WM clients, banks are moving quickly. Recently, there has been growing demand and information needs among WM clients regarding ‘land compensation.’ Land compensation refers to the rights or cash received by landowners in development zones as compensation for land expropriation. When development projects become visible and land is expropriated, inquiries about land compensation procedures, tax-saving methods, and large-scale fund management increase.

According to ‘Jijon,’ a land compensation and real estate development information platform, the scale of land compensation funds to be released into the market this year due to the creation of the 3rd new town and other projects is expected to reach 32 trillion won. About 84% of this is in the Seoul metropolitan area. As a result, some banks have formed dedicated advisory teams at their headquarters. Some have also collaborated with specialized land compensation corporations to attract clients.

Making Money by Retaining the Few Super-Rich

Nevertheless, the ultimate goal of WM sales in the banking sector appears to be profit increase. Although super-rich clients visit banks for information, banks, which need to generate profits, must link this to product sales. A commercial bank official said, “WM sales are centered on consultations with visiting clients, so the ability to create new clients is low,” adding, “The sales goal is to increase fee income through the sale of non-interest products.”

The reason major banks put effort into courting super-rich clients is that although the number of managed clients is small, their contribution to bank profits is significant. Major banks are already increasing specialized branches targeting ultra-high-net-worth individuals (with assets from 3 billion to over 10 billion won). KB Financial plans to open the country’s largest ‘Flagship Center’ in Apgujeong this July. Hana Bank is planning a third Club One branch for VVIPs near Seocho and Banpo, and Woori Bank has opened the ultra-high-net-worth specialized branch ‘TCE Signature Center’ in Yeoksam-dong.

However, there are deep concerns within the banking sector regarding WM capability development and workforce training. The average age of private bankers (PBs) managing high-net-worth clients is increasing. Becoming a PB requires holding 4 to 5 certifications, making the training process demanding, which has led to a sharp decline in preference among younger employees such as the MZ generation (Millennials + Generation Z). The increased risk of work following the private equity fund scandal has also had an impact.

When asked about the possibility of WM activation following the implementation of MyData, researchers received negative views. A banking official said, “MyData is basically mass marketing,” adding, “It is possible to expand the WM base, but it is judged to be a tool unsuitable for high-net-worth individuals.”

Regarding asset management seminars frequently held by banks, it was said, “They do not directly lead to sales,” and “They are events aimed at securing customer contact points and have a strong nature of laying the groundwork for future sales.”