Indirect investment fervor is in. As of the end of July, the number of fund accounts was 7.09 million, opening the era of seven million accounts.
The figure has been growing by 250,000 every month this year. At present, one out of two households has fund accounts.
At the center of this boom stands the installment savings-type funds, whose assets under management exceeded eight trillion won at the end of June.
However, a lack of training in the bank tellers is resulting in a rule-of-thumb or careless counseling for customers wanting to purchase funds.
Banks receive service charge ranging from one percent to as high as two percent of the investment of fund customers. This is twice the amount of fees received by asset management companies.
Dong-A Ilbos reporting team visited five commercial bank branches in Seoul on August 17 and 18 to get counseling services, and the result said almost the same for all banks.
One bank staff member in Jung-gu, Seoul on hearing, I want to invest in an installment savings-type fund with a monthly payment of some three million won, answered insincerely, Just pick any three out of our six products and equally divide one million won each into them. There were no explanations on the fund products.
An employee in another bank could not even tell us what the words in the fund booklet meant that said, Growth stocks 50 percent, dividend ones 50 percent, which actually refers to investing in stocks with growth potential and dividend-paying stocks in equal portions, respectively.
Also, an employee of another bank, when questioned about what an equity-linked security (ELS) was, gave a ridiculous reply, saying, A fund which intensively invests in quality stocks to gain higher yields.
ELS refers to a fund which invests 90 percent of the capital in relatively safe bonds while buying the remainder in derivatives devised by complex financial engineering. This requires detailed explanation from bank employees because of its incomprehensible features.
After all, the customers end up shouldering all the suffering caused by such foul counsel. According to fund rating company Zeroin, of all the recently matured ELS sold by commercial banks from June to August, the majority were cleared with profits even less than bank interest rates (approximately 3.8 percent per annum) for fixed term accounts.
President of Korea Fund Research Woo Jae-ryong warned, The ignorance about funds on the part of bank tellers is very serious. Unless banks reinforce their job training, the customer damage due to reckless counseling will increase dramatically.