1 in 2 Financial Consumers Receive 'Careless Explanation from Staff' When Signing Up for Products

Korea Gallup 'Public Awareness Survey on Financial Consumer Protection'
Will Incomplete Sales Disappear... Enforcement of Financial Consumer Protection Act Requires Compliance with 6 Major Regulations

Eun Sung-soo, Chairman of the Financial Services Commission, visited the KB Kookmin Bank Gwanghwamun Comprehensive Financial Center in Jongno-gu, Seoul, on the 26th, the day after the Financial Consumer Protection Act came into effect, to hear from bank employees about the current status related to the Act.

[Asia Economy Reporter Kwangho Lee] One out of two financial consumers feels that they did not receive sufficient explanation from sales staff when subscribing to complex financial products, according to a survey.

On the 28th, the Financial Services Commission commissioned Gallup Korea to conduct the "Public Perception Survey on Financial Consumer Protection" from November to December last year. According to the report, 34.6% of respondents answered that they had experience using "financial products with complex profit and loss structures that are difficult to understand" within the past five years.

This includes cases of using complex financial products such as equity-linked securities (ELS), derivative-linked funds (DLF), variable insurance, or ultra-long-term products like whole life insurance, rather than deposits, savings, or loans.

When asked about their experience with sales staff, 46% of respondents said, "The explanation was superficial, and they guided me to sign the documents first."

Also, in multiple responses, 34.3% said, "They kept recommending products that did not seem suitable for me."

On the other hand, only 30.2% said, "They tried to explain in easy-to-understand terms as much as possible," and 30.1% said, "They carefully explained mainly the essential information such as the risk of principal loss."

Recently, many financial companies have been sanctioned or are facing sanctions from financial authorities for incomplete sales of private equity funds, and this survey also revealed some inappropriate sales practices.

More than half of the respondents, 53.4%, said they had difficulty understanding the explanations from financial company employees.

The reasons were in order: "Terms and product descriptions are too difficult" (37.4%), "There is too much content in terms and product descriptions" (35.1%), and "Employees used too many technical terms" (14.2%).

When asked about the appropriate time spent on financial product consultation and contracts, the most common answers were less than 20 to 30 minutes (34.6%) and less than 10 to 20 minutes (34.6%). Next were less than 30 to 40 minutes (12.3%), less than 10 minutes (12.3%), and 40 to 60 minutes (3.7%).

The Financial Consumer Protection Act, which came into effect on the 25th, requires financial companies to comply with six major regulations when selling financial products: explanation obligations, suitability and appropriateness confirmation, prohibition of unfair business practices, improper solicitation, and false or exaggerated advertising.

If the explanation obligations are violated, punitive fines of up to 50% of related income can be imposed, and in lawsuits for damages due to violation of explanation obligations, the financial company must prove intent or negligence.

This survey was conducted by Gallup Korea through an online questionnaire of 2,027 people nationwide aged 19 to 69. The sampling error is ±2.18 percentage points at a 95% confidence level.

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