The use of artificial intelligence (AI) is accelerating in the retirement pension market. The robo-advisor (RA) discretionary retirement pension service, first introduced in Apr. last year, surpassed 60 billion won in assets under management (AUM) in about nine months on the back of strong demand. This is seen as part of a process in which retirement pension assets, which had centered on principal-and-interest-guaranteed products, are being diversified into performance-based products through AI algorithms. Financial authorities are reviewing institutionalization to expand innovative financial services.
On the 7th, ChosunBiz asked nine robo-advisor retirement pension providers, including Samsung Securities, Korea Investment & Securities Co., and Hana Bank, and found that the RA discretionary service totaled 63.1 billion won as of Jan. 31. Among algorithm managers, December & Company, which provides the Fint service, was the largest at 21.5 billion won.
RA is a portmanteau of robot and advisor, and is a service that automatically manages assets according to algorithms designed by the manager by analyzing an investor's risk profile. The Financial Services Commission designated the RA discretionary service as an innovative financial service in Apr. last year and allowed it to be used in individual retirement pension (IRP) accounts in addition to existing advisory-type services.
However, to minimize investment risk, RA algorithms must undergo a testbed verification process in advance. The Financial Services Commission (FSC) has entrusted Koscom with testbed verification to test the algorithms for a certain period, and once it is confirmed that the conditions are met for an RA to replace a person and directly provide advice and discretionary management, it can be operated in the market. Currently, the annual investment limit per person is capped at 9 million won.
The market cites customized investment allocation using AI as the greatest advantage. This is because the RA service surveys an investor's profile before investing and allocates assets to investors with various profiles—such as conservative, risk-neutral, and risk-seeking—according to that profile. A financial investment industry official said, "RA enables personalized portfolio allocation, making it possible to operate in line with an investor's risk profile."
The industry views it as encouraging that AUM surpassed 60 billion won even though the annual investment limit per person is set at 9 million won. A securities industry official said, "Compared with the entire Korean stock market, 60 billion won is small, but considering the limited RA discretionary market (530 billion won), attracting this level of funds in less than a year since launch means the growth rate and market penetration are quite high."
The fact that the government is reviewing the possibility of institutionalizing the RA discretionary service is also fueling expectations for market expansion. At the end of Sep. last year, at the National Assembly's Special Committee on Pension Reform, the government said satisfaction with the pilot operation of the RA discretionary service was high and noted it would discuss ways to institutionalize it.
The industry expects legalization to be pursued through revisions to relevant laws such as the Act on the Guarantee of Employees' Retirement Benefits. Officials believe the market will grow even faster if the individual investment limit is raised or the service is incorporated into the institutional framework. In particular, there is a view that inflows will expand, centered on IRP retirement pension reserves, which amounted to 98.7 trillion won at the end of 2024.