"Open an Account at a Branch, Pay 10 Times More?" FSS to Revise Securities Firms' Fee Practices

On-site inspections found 10 firms charging higher fees on accounts opened at branches
Ensure investors can choose account types and receive advance information on fee and service differences

The Financial Supervisory Service (FSS) will revise the business practices of some securities firms that charge fees on accounts opened at branches that are more than 10 times higher than those on accounts opened online. Going forward, investors will be able to choose whether to designate their account as a "managed account," and firms will be required to provide sufficient information at the account-opening stage about fees and differences in the services available.

The FSS said on October 14 that it had drawn up these improvement measures, reflecting the discussions of the 4th Financial Consumer Protection Advisory Committee. A review of 37 domestic securities firms found that 10 firms in total, excluding duplicate counts, charged higher trading commissions on branch-opened accounts than on accounts opened online. This included nine firms for brokerage accounts and seven for pension savings fund accounts.

This practice stems from automatically designating accounts opened at branches as managed accounts that provide consultation and wealth management services, and charging relatively higher fees for them. In particular, even when trades were made in the same way through a mobile trading system (MTS), fees differed markedly depending on where the account was opened. In an example cited by the FSS, an account opened at a branch and designated as a managed account incurred a 0.136% fee rate for online trades. This was well over 10 times the 0.010% rate charged on an unmanaged account opened online.

The FSS pointed out that investors were not given sufficient explanations of fee differences during the account-opening process, and that comparisons of the services available with managed and unmanaged accounts were also inadequate. Some securities firms replaced detailed explanations of fee rates in their terms and conditions with links to their websites. In some cases, accounts opened at branches were automatically designated as managed accounts, leaving investors unable to choose unmanaged accounts. The FSS determined that this restricted investors' right to know and their ability to choose an account type.

The key elements of the improvement measures announced on October 14 are advance disclosure of fee differences and protection of investors' right to choose an account type. Going forward, securities firms will be required to sufficiently explain how trading commissions are determined based on the account-opening method and whether the account is designated as managed. Fee differences will be specified in the terms and conditions or trading guides, and firms will also be required to provide a comparison of the services available with managed and unmanaged accounts.

Investors opening new accounts at branches will also be able to choose whether to designate their accounts as managed. When an unmanaged account is opened at a branch, a fee for the account-opening service may be charged once, within a reasonable range.

Information for investors who already hold accounts will also be enhanced. Securities firms will be required to help investors check whether they hold managed accounts through text messages or pop-up notifications in their MTS trading systems, and to explain that investors can open new unmanaged accounts and receive lower fees if needed. The information will include whether the investor holds a managed account, how to open an unmanaged account, the fee difference between the two account types, and a notice that existing services may be restricted when assets are transferred to an unmanaged account.

Since switching to an unmanaged account may mean losing access to consultation and wealth management services provided with a managed account, investors will need to consider their preferred way of investing. The FSS also advised investors to check for matters requiring attention, including restrictions on existing services, before changing account types.

The improvement measures are targeted for completion by the end of the first quarter of 2027. An FSS official said, "We expect these measures to expand investors' ability to choose their account types and reduce unnecessary trading commission costs." The official added, "We will proceed smoothly with follow-up measures, including revising relevant terms and conditions and monitoring securities firms' implementation, while continuing our efforts to establish fair and reasonable business practices at securities firms."

This content was produced with the assistance of AI translation services.