[Report Interview] "Digital Asset Management Market with All Sectors Participating, Platform Competitiveness is Key"

Geunbo Park, Head of Digital Asset Management Center at Hana Bank
'Platform' Competitiveness More Crucial Than 'Product'
"Few Customers Want 'Online Only'"... Bank's Strength in Offline Channels

Park Geun-bo, Head of Digital Asset Management Center at Hana Bank (Provided by Hana Bank)

[Asia Economy Reporter Minwoo Lee] As the digital personal financial management (PFM) market grows, it is anticipated that fierce competition will unfold not only among traditional financial institutions such as banks, securities firms, and insurance companies but also fintech (finance + technology) companies. Since the competitiveness of platforms encompassing digital assets is crucial, it is analyzed that leveraging the unique strengths of offline branches and commercial banks can help them survive in the competition.

On the 7th, Park Geunbo, Head of the Digital Asset Management Center at Hana Bank, diagnosed this in a written interview with Asia Economy. The Digital Asset Management Center at Hana Bank, led by him, released the '2022 Korea Digital Asset Management Report' earlier last month. Below is a Q&A with Director Park.

- According to the report, the proportion of online funds has increased significantly. Do you expect the share of funds in digital asset management to continue growing in the future?

▲ As interest in asset management and investment increases, the fund market size is also continuously expanding. The public fund market alone grew from around 240 trillion won at the end of 2019 to 300 trillion won at the end of last year. Although the proportion of direct investments in stocks and exchange-traded funds (ETFs) has increased, the fund market, which is an indirect investment product, is also growing, and this growth trend is expected to continue.

This is because indirect investment products have unique advantages. First, the benefit of diversification. It can prevent 'individual company risk (alpha risk)' such as trading suspensions or sharp price drops of corporate stocks due to embezzlement or insider trading. It also mitigates 'market risk (beta risk)' caused by market volatility. This is because professional fund managers select trading timing. Although individual investors can now easily obtain information through various online media, distinguishing between 'signal' and 'noise' remains difficult. Compared to the systematic management systems and information power of asset management companies, individuals are still at a disadvantage. Lastly, there are various platforms and products allowing investment in diverse ways. Those managing large sums can build portfolios with multiple funds for diversification or asset allocation. Those saving money can invest through installment plans.

With the development of robo-advisors through artificial intelligence (AI), MyData (personal credit information management service), and goal-based investment (GBI) algorithms enabling personalized asset management (PFM), the fund market, especially the online fund market, is expected to grow rapidly.

- As digital asset management advances, how do you see the competitive landscape among banks, securities firms, insurance companies, and fintech?

▲ Since digital transformation itself implies infinite competition, unlike before when 'product competitiveness' was the key to differentiation, now 'platform competitiveness' is important. In particular, it must become a 'participatory platform' where individuals proactively include the items they want, rather than passively listing options.

Elements such as 'convenience premium,' meaning data-driven approach and convenience as premium, and 'investment journey management through digital' must be supported. In the future, regardless of industry, companies that provide ultra-personalized digital asset management services with these elements will have an advantage in the domestic market.

Internet banks have the advantage of being simple and fast. They have IT superiority, but since their operational history is short and the number of products and solutions is limited, they can respond more quickly than commercial banks. However, not only quick and simple responses but also 'harmony' that can provide specialized services to each customer through various products is necessary. Hana Bank has already reduced the number of fund products to 100.

Commercial banks have the strength of customer management and asset management know-how accumulated through many customers' transactions. Their strengths also include robo-advisors introduced in 2016, recently adopted GBI algorithm investments, various asset reports and professional information, and investment journey management services supporting rebalancing.

- The report anticipated that the theme of 'ultra-personalization' will proceed bidirectionally between the MZ generation (Millennials + Generation Z) and older generations. Could you elaborate?

▲ The theme of 'ultra-personalization' is valid across generations. The tendency to use digital channels is increasing across generations. However, preferences and tendencies for services differ by generation because not only digital experiences but also asset management needs vary.

The older generation has relatively less digital experience but greater experience and needs in asset management. They mainly use robo-advisor investments focused on 'convenience premium' and 'investment journey management,' rebalancing services, and PFM. The MZ generation has abundant digital experience but is at the starting point of asset management, valuing interactive communication, fun, and convenience over sophisticated asset management. Since they have a strong need for 'participatory platforms,' new communication methods such as games and webtoons are necessary, and they mainly use investment services like micro-investments and GBI.

- With the trend of digital transformation, offline branch reduction seems to accelerate. Are there ways for banks to utilize offline branches in terms of digital asset management?

▲ It can be a competitive advantage. High-net-worth individuals and the elderly still often conduct their main transactions offline. Also, it is noteworthy that customers want an 'omnichannel' approach combining online and offline. Even those who conduct all transactions digitally often want additional offline consultations. Specialized consultations on taxes, real estate, etc., overwhelmingly occur offline. Offline channels are also expected to continue evolving from traditional transaction centers to consultation and asset management-focused sales or channel forms.

- Which market leads in overseas digital asset management?

▲ The United States. There are several leading companies such as Vanguard, an asset management company providing hybrid robo-advisor services; Bank of America (BOA), which combines banking and investment; and Charles Schwab, which has shifted its digital asset management platform to a subscription-based model. Domestic banks have solutions like robo-advisors and goal-based investment (GBI), but they are only allowed to recommend products, cannot provide asset advisory or discretionary management, and cannot perform universal banking (financial conglomeration) involving trust, securities, insurance, etc., which limits their business models through digital asset management platforms.

(Editor's note: Discretionary investment business is a type of business where financial consumers entrust their assets collectively to an investment manager who manages the assets on their behalf. It has been allowed only for securities firms, asset management companies, and insurance companies. Banks also handle asset management (WM) through private bankers (PBs), but they face restrictions such as not being able to charge fees, limiting their operations.)

- The asset market characteristics in 2020, the first year of COVID-19, and last year seem quite different. Could you comment?

▲ When the COVID-19 pandemic began, you may recall both the short-term market collapse and the subsequent rapid rebound and asset market rise based on global liquidity. Since last year, market volatility has increased due to expectations of liquidity withdrawal such as U.S. interest rate hikes. Changes in investment sentiment are also detected, such as individual stock buying led by the MZ generation turning into selling.

At this point, the most important basics for investors are the facts that 'performance beats sentiment in the long term' and the attitude toward volatility management. The stock market is sometimes sensitive to performance and sometimes to sentiment. Rather than being overly influenced by fluctuating investment sentiment, focusing on the long-term growth of corporate performance is the key to steady returns.

One of the best ways to manage volatility is diversification. Breaking it down, it can be time diversification, amount diversification, and asset diversification. Since there is no market that only rises continuously, adhering to the investment principle of diversification is even more important this year.

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