[Long Road Ahead for MyData]③ The US Blossoms in Digital Asset Management... Korea Focuses Only on High Returns

[Asia Economy Reporter Minwoo Lee] The asset management (WM) market combined with IT technology has already rapidly grown overseas, such as in the United States, where the personal financial management (PFM) market has taken root. In contrast, South Korea is still at a level where it remains focused on improving investment returns through robo-advisors, according to critiques.

◆ The PFM Market Opened in the U.S.… 'Goal-Based Investing' Becomes Everyday Life

"If you want to buy a car in five years, increasing the proportion of active funds and lowering the bond ratio to aim for a more aggressive return than now raises the likelihood of securing the target amount by 10 percentage points."

The U.S. digital asset management market has already grown while attracting attention from both traditional financial sectors and fintech industries. With the development of robo-advisors, personal financial management (PFM), and goal-based investment (GBI), the term 'wellstech' emerged in the asset management field.

Betterment, which combines GBI and robo-advisors, is a representative example. It clearly shows the likelihood of accumulating target assets at a future point through charts based on investment methods and amounts. It suggests a 'shortcut' for asset composition toward set goals, including purchasing a house or car, preparing marriage funds, and even retirement planning. In a sign-up process that takes less than five minutes, answering various questions helps build a portfolio tailored to the individual's preferences.

For a newly employed college graduate, it recommends a somewhat aggressive investment by increasing the proportion of risky assets like stocks, while for those preparing for retirement, it recommends a portfolio with a significantly higher bond ratio to achieve stable and continuous returns. Furthermore, it informs about tax burdens based on asset composition and suggests ways to manage them. This is why it is regarded as a personal financial management assistant that continuously provides advice according to life stages.

In particular, Betterment emphasizes a clear investment philosophy, thoroughly analyzes the market, and makes systematic decisions. It basically upholds five investment principles: ▲personalized plan composition ▲plan execution ▲diversification ▲balance of costs and benefits ▲tax management. Based on these, it appropriately composes portfolios of developed country stocks, emerging market stocks, and bonds. It excludes unlisted stocks, commodities, and natural resources due to inaccurate market size estimates and insufficient past performance data. It views the disadvantages from costs or data shortages as outweighing potential returns.

As investors respond positively to portfolios based on these principles, the market size continues to grow steadily. According to robo-advisor market research firm RoboAdvisorPros, as of May last year, assets under management already reached $26.7 billion (about 34 trillion KRW), increasing by about $10 billion in roughly two years compared to 2019.

◆ South Korea Remains Focused Only on Increasing Returns… Hyper-Personalization Is a Long Way Off

In South Korea, companies promoting robo-advisors are emerging by emphasizing stable investment returns. 'Fint,' a robo-advisor discretionary investment service operated by December & Company, is a representative example. However, stable returns have been shaken recently due to a sluggish stock market. According to the financial investment industry, December & Company's robo-advisor discretionary investment service Fint recently sent loss notifications to investors for the first time. Notifications are sent when the principal reaches ±5% for the first time. Due to macroeconomic adversities such as U.S.-originated tightening pressures and global supply chain concerns shaking the stock market, the notification was issued for the first time.

However, the industry views this as a market situation issue, and the returns themselves performed relatively well. According to Koscom's robo-advisor testbed, December & Company's three algorithms recorded returns of -4.81% to -1.15% over the past three months for the aggressive investment type, outperforming the KOSPI 200 index return of -7.13% during the same period.

Nonetheless, there are criticisms that South Korea has not yet advanced to comprehensive hyper-personalized services or the stage of a personal 'financial secretary' like overseas firms, remaining focused on improving returns. Not only December & Company operating Fint but also Fink and Fount have announced plans to enter the personal asset management market after receiving MyData business licenses by promoting robo-advisors, but noticeable achievements are still lacking.

There have also been business-related controversies. 'Aim,' considered one of the top three domestic robo-advisor companies, received a heavy penalty from the Financial Supervisory Service in March for exaggerated advertising. This was due to omitting investor caution phrases about principal loss possibilities and using expressions that could be misunderstood as guaranteed profit products. It was also criticized for false and exaggerated advertising, such as unfairly comparing with other financial companies' products without objective evidence or using phrases that induce excessive expectations of returns.

An industry insider said, "Beyond simply promoting guaranteed returns and strengthening business, actively utilizing MyData and offering personalized services will allow the PFM market to flourish domestically."