As securities firms race to attract investors to "return-to-domestic-market accounts" (RIA), so-called cherry pickers who pocket only giveaways without making real investments are running rampant. Critics say the rush of excessive in-kind promotions is undermining the system's core purpose of drawing overseas funds back into the domestic market.
An RIA allows investors to sell overseas stocks, reinvest the proceeds into won or domestic stocks, and, if they hold those assets for more than a year, receive partial relief on capital gains taxes from overseas stock sales. Since its launch on the 23rd of last month, about 20 securities firms have rolled out related products.
Like individual retirement pensions (IRP), an RIA can be opened one per securities firm. The government initially sought to limit investors to one account per person but eased the rule for investor convenience, and cherry pickers are exploiting this by rotating among multiple securities firms to collect rewards.
Cherry pickers mainly target securities firms that offer cash-like support funds or stock purchase coupons just for opening an account. Their prime targets are firms that do not restrict opening multiple accounts in a short period. This restriction—once a rule that blocked additional openings at other financial institutions if a new account was created within 20 business days—was officially abolished in 2020. Currently, some securities firms apply it voluntarily.
The firm that drew heavy attention right after launch was Korea Investment & Securities Co. It pays a 10,000 won bonus just for opening an account and offers a Starbucks coffee coupon if a 30 million won limit is set at sign-up. It also gives cash from 5,000 won up to 100,000 won when customers transfer overseas stocks from other firms, depending on the amount (1 million to more than 40 million won).
In fact, Korea Investment & Securities Co. surpassed 10,000 subscribers on the 26th of last month, just three days after launching the RIA. The bonus event is now closed on a first-come, first-served basis. LS Securities, which offered a 20,000 won stock gift certificate upon account opening, also ended its event early after about a week.
With simultaneous sign-ups possible at multiple places, cherry pickers are also flocking to NH Investment & Securities (10,000 won for the first 50,000 people), Samsung Securities (Starbucks coupon for the first 20,000 people; 5,000 to 30,000 won based on tiers of overseas stock sale amounts), Mirae Asset Securities (10,000 won for the first 33,000 people), Kiwoom Securities (20,000 won for account opening; 50,000 won purchase coupon with deposits of 5 million won or more), Shinhan Investment & Securities (5,000 won for account opening; 5,000 won financial investment gift certificate upon transaction), and Eugene Investment & Securities (Mega Coffee coupon for account opening; 10,000 to 50,000 won Shinsegae gift certificate by net purchase tier).
Securities firms with larger balance-tier rewards include KB Securities (5,000 to 210,000 won stock coupons based on tiers of overseas stock sale amounts), Daishin Securities (5,000 won for transferring in overseas stocks; random support funds of 100,000 to 500,000 won awarded to 100 winners), and Yuanta Securities Korea (cashback of 10,000 won and 30,000 won for balances of 10 million won and 30 million won, respectively).
Amid this competition, some firms, including Meritz Securities, are even dangling high-end prizes such as gold bars and gold coins, ratcheting up the intensity of their promotions.
Among cherry pickers, strategies being shared include: ▲ if you open other accounts such as brokerage accounts alongside an RIA, a 20-day restriction applies, so open only the RIA ▲ maximize rewards by transferring in stocks from other firms ▲ spread limits across securities firms that offer bigger benefits.
Some investors without capital gains tax burdens suggested as a tip buying short-term bond exchange-traded funds (ETFs) with low price volatility, then selling and closing after meeting event conditions. That is because most securities firms set conditions requiring accounts and balances to be maintained through May to June. Compared with bank deposits with maturities, the returns are higher and the products can be bought and sold anytime, while also collecting securities firm perks—yielding a two-birds-with-one-stone effect.
In fact, in the eight trading days after the RIA was introduced, the average daily trading volume of major domestic short-term bond ETFs—"KODEX Money Market Active," "TIGER Short-Term Bond Active," and "RISE Money Market Active"—rose 10% to 24% compared with the eight trading days right before the rollout.
Despite the rapid increase in the number of accounts, fund inflows are limited. At the top 10 securities firms by net capital, about 57,000 RIA accounts had been opened as of the 31st of last month, but inflows totaled 330 billion won, just 0.15% of Korean retail investors trading U.S. stocks' holdings in U.S. equities (about 223 trillion won).
A source in the financial investment industry said, "In the early stages of a launch, events can attract customers, but it is unlikely they will continue to invest funds in RIAs."