The Financial Supervisory Service held a seminar to improve sales practices for all financial companies across sectors that sell financial investment products related to equity-linked securities (ELS), and emphasized that they must build a sales process that meets consumers' expectations.
On the 26th, the Financial Supervisory Service (FSS) held a "financial consumer protection seminar" at its Yeouido headquarters and heard policy recommendations from a Seoul National University research team that conducted a study to improve sales practices. It also shared key cases of financial companies strengthening consumer protection.
About 200 people, including executives and employees of financial companies that design and manufacture ELS-related financial investment products and handle sales and consumer protection duties, attended the event.
No Young-hu, senior director general of consumer protection supervision at the Financial Supervisory Service (FSS), said, "This research presentation is the first pilot project to empirically examine the impact of disclosure documents on consumer decision-making," adding, "It will be a great help in building a sales process that aligns with consumers' expectations."
For the study, an improvement plan for product disclosure documents was prepared based on an analysis of ELS sales data and a review of behavioral economics literature, and the improvement effects were measured at commercial banks, the point of sale.
Choi Seung-ju, a professor at Seoul National University, noted that providing only formal information, such as handing out product disclosure documents, makes it difficult for consumers to fully understand actual investment risks, and said the explanation methods should be improved from a consumer-friendly perspective.
Choi said that to ensure consumers clearly recognize product risks, it is necessary to present a graph that separates losses and gains and explains losses first, instead of a profit-and-loss graph, and to provide products with different risk levels, such as equity-linked bonds (ELB), for side-by-side comparison so consumers can make rational choices.
In fact, through the related pilot project, it was found that explaining loss risks to consumers in a more accessible way reduced high-risk investing among older adults.
Key cases of strengthened consumer protection were also shared. Seol Gwang-ho, head of consumer protection at KB Kookmin Bank, presented the global consumer protection trend of shifting to a "principles-based" regulatory framework.
KB Kookmin Bank said it would proactively adopt the United Kingdom Financial Conduct Authority's (FCA) stringent consumer protection regulation, "Consumer Duty," to establish a consumer protection paradigm and design KPIs. It also plans to significantly strengthen internal controls, including the roles of the product committee and the chief consumer officer (CCO).
The Financial Supervisory Service (FSS) plans to actively reflect key project outcomes proven effective through the study in system improvements and to continue communication by listening to diverse voices from consumers, academia, and the financial industry.
No, the senior director general, said, "Cooperation from financial companies that interact with consumers on the front lines is essential to spreading a consumer protection culture that consumers can feel," calling for active interest and effort from financial companies.