Financial Services Commission to Openly Test Robo-Advisor in July

South Korean Government is going to manage test zone of Robo-Advisors starting from July.

This action was taken to broaden range of consumers’ choices before allowing Financial Services Commission (FSC) to allow Robo-Advisors to be entrusted with investments. Because information about test is introduced, businesses that are related to this are also speeding up their preparation. 

According to FSC on the 27th, South Korean Government is going to make a site for testing Robo-Advisors in July and is planning to openly verify. Currently it is forming a task force that will decide on methods for verification.

“Currently we are discussing about detailed schedules and methods of verification.” said a representative for FSC. “We are planning to form a task force that has many organizations participating shortly.” Task force is planning to confirm detailed operation method and others that are needed to verify Robo-Advisor technologies.

Portfolios that represent each business will be registered, and robots will manage funds on their own. Within a range of maximum of $855 (1 million KRW) per investor of up to 10 investors per business, Robo-Advisors are going to manage on their own according to algorithms that are made by each business. Timing for verification is going to be at least 3 months.

Robo-Advisors are going to introduce information so that changes in profit ratio in accounts and others can be compared.

FSC is going to find out any unnecessary regulations or problems that are surfaced during verification process and apply them in improving system. Afterwards it is going to finish up changing system and allow Robo-Advisors to make investments and online contracts on their own by end of this year.

After FSC made an announcement about its policies on testing Robo-Advisors, related businesses have become very busy. In South Korea, NH Investment & Securities Co., Ltd., Samsung Securities Co., Ltd., Yuanta Securities Korea Co., Ltd., Quarterback Investment & Securities Co., Ltd., and December N Company developed their own Robo-Advisors. Most of them announced that they will review participation in testing Robo-Advisors.

“This test will be a good opportunity to verify their technical levels internally.” said a representative for a investment consulting company. “When FSC announce methods of verification and others in detail, they are going to participate accordingly.”

Because profit ratios are introduced as many Robo-Advisors are participating, level of tension has heightened.

“It is difficult to decide whether or not we should participate in this test now.” said a representative for a financial company. “It is also important to see how short-term algorithm strategy can be made from a verification process that will only last for 3 months.”

This representative also added that participation will be decided after careful consideration since profit ratio can be an important measuring stick.

FSC is predicting that this test will cause South Korean asset management service to be regularized.

“Currently 4 banks and 10 financial companies have either started or are planning to put out their asset management services that use Robo-Advisors by end of this year.” said a representative for FSC. “If Robo-Advisors are expanded as this test is done successfully, there will be many more opportunities where South Korean citizens’ assets can be increased at lesser expense.”

Staff Reporter Lee, Kyungmin | [email protected]