The Financial Supervisory Service moved to issue investor cautions as complaints related to exchange-traded fund (ETF) investing increased. It especially urged investors to carefully check the transaction structure before investing because, unlike securities firms, investing in ETFs through banks can incur additional fees or face limits on real-time trading.
The Financial Supervisory Service on the 21st released recent ETF-related complaint cases and cautions for investors through materials titled "Consumer cautions when investing in ETFs, based on major complaint cases."
First, the Financial Supervisory Service said that when investing in ETFs through a specific money trust, trust fees and early termination fees may be added on top of transaction commissions. It said complaints were filed alleging that a bank branch employee did not explain the existence of trust fees. The Financial Supervisory Service said, "When investing in ETFs through a specific money trust, trust fees and early termination fees are charged in addition to transaction commissions, so the actual rate of return may be lower than expected."
Fee differences when investing in ETFs through a retirement pension savings account were also cited as a caution. According to the Financial Supervisory Service, ETF transaction commissions for retirement pension savings accounts opened online are in the 0.01%–0.015% range, but for accounts opened at branches they are in the 0.1%–0.2% range, up to about 10 times higher. When trading ETFs at branches, the commission rate can rise to as high as 0.5%.
It also stressed caution that the universe of ETFs available for investment may change when transferring an individual savings account (ISA) to another financial company. Unlike brokerage-type ISAs at securities firms, bank trust-type ISAs have limited types of ETFs available for transaction. Complaints were received that, after canceling a securities firm ISA and moving to a bank ISA, investors were unable to buy the ETFs they had previously invested in.
Another key caution is that ETF transactions through banks make real-time trading difficult. Because banks cannot place ETF brokerage orders directly like securities firms, they process orders through partner securities firms. As a result, there may be a gap between when the investor submits a request and when the order is actually executed. The Financial Supervisory Service explained, "It is necessary to check each bank's cut-off time for ETF trades in advance."
Consumer complaints also mounted regarding the automatic sell service. Representative cases included instances where, despite reaching the target rate of return, the actual rate of return was lower than expected, or the target rate of return was set without the investor's consent. The Financial Supervisory Service said, "You must check whether you are enrolled in the automatic sell service and what the target rate of return is," adding, "If you set the target rate of return too low, frequent trades can increase fee burdens."