I believe this year marks the true first year of the robo-advisor (RA) market. To provide various pension products to investors, starting with the retirement pension RA discretionary business, it is necessary to raise the individual retirement pension (IRP) subscription limit to 9 million won and, in the long term, expand to DC-type products (to enable RA discretionary business).
Kim Young-bin, CEO of Pount, said this in an interview with ChosunBiz on the 8th. With the recent approval of robo-advisor discretionary management for retirement pensions, the financial investment industry is accelerating the development of algorithms and the launch of services.
Discretionary robo-advisors are financial services that design and execute investment strategies using artificial intelligence (AI)-based algorithms. They are distinct from advisory and free recommendation services that suggest or recommend investment strategies. Until now, discretionary services for retirement pensions were not possible, but at the end of last year, financial authorities temporarily relaxed regulations with the designation of innovative financial services (regulatory sandbox), allowing discretionary management for IRPs. The subscription limit is 9 million won annually, meaning one can deposit 9 million won each year.
Currently, the total amount managed through advisory and discretionary services is approximately 350 billion won, while the domestic retirement pension market had a reserve size of over 426 trillion won as of the end of last year. This makes the entry into the retirement pension market an important new opportunity for the robo-advisor industry.
Robo-advisor specialist Pount launched the 'Pount Retirement Pension (IRP) Discretionary Service' exclusively in partnership with Hana Bank at the end of last month, becoming the first in the industry to do so. Founded in 2015, Pount celebrates its 10th anniversary this year and aims to restructure its business structure around pensions to secure market dominance. Below are the Q&A.
─What services does Pount's retirement pension discretionary service offer?
You can think of it as 'my private banker (PB)' that manages IRPs for individual investors. Pensions can be considered the money that is, in a sense, the most inactive. High-net-worth individuals receive help through PB centers or securities family houses, but the reality is that individual investors find it challenging to manage their investments while being engaged in their primary occupations. You can understand this service as a tailored one that assigns an AI asset manager for pensions considering the circumstances of these individuals.
This service consists of a total of three products: 'global stocks,' 'growing regions and sectors,' and 'comfortable investments for you.' Global stocks involve diversification into various sector asset classes in the global stock market, while 'growing regions' focus on building a portfolio around areas and industries expected to have high economic growth rates or operating profit margins.
If investment risk is a concern, you can choose the 'comfortable investments for you' product, which focuses on investing in a target-date fund (TDF) that adjusts the allocation between risky and safe assets based on the U.S. market and retirement timing. Once the primary choice is made, the IRP will be customized based on individual investor profiles.
ㅡWhat are the fees?
We adopt a performance-based fee system for pensions. It takes 0.95% only on the profits. Honestly, shouldn't clients feel upset if fees are taken even when there is no revenue? Indeed, customer satisfaction is high, and Pount aims to demonstrate its confidence through this approach.
ㅡBeing the industry's first launch, was there a burden to it? Is there a specific reason you see the retirement pension market as important?
Pensions have an average investment period exceeding 20 years. In a society that is living in the era of 100 years, asset management continues even after the pension payout period begins. I view the retirement pension market as one that will continue to grow.
The quick push for this product launch wasn't just about a title; it stemmed from a strong desire to establish the service quickly. Since founding the company in 2015, the core issue I wanted to address was poverty in old age. Given the extreme low birth rate, the future pension system cannot be considered stable, and managing retirement pensions solely through principal and interest guarantees poses a significant risk of absolute poverty in old age.
Telling investors to trust RA investments is still premature. However, consistent management of pensions can yield long-term benefits in capital markets. Until the revenue from RA investments is proven, Pount aims to provide support in maintaining current volatility while conducting AI management that is understandable within the investor's investment tendencies.
ㅡI heard you made significant organizational changes to advance this year’s pension business.
Currently, the accumulated membership is about 320,000, and the management size, including advisory and discretionary types, exceeded 1 trillion won as of the end of last year. However, for the advisory model, we plan to conclude it without renewal once the contract period ends, and most products excluding retirement pensions will be phased out.
I thought a business focused on a long-term vision needed to be established. We plan to generate revenue by providing solutions in the corporate asset management (WM) sector or restructuring information technology (IT) businesses, and the remaining capabilities will be invested in the currently loss-making pension sector. Originally, there was also a sector for institutional fund management, but we decided to withdraw from that business to concentrate on IT and pension services. I also emphasized to our shareholders this year that it was a crucial decision for the survival of Pount.
In simple terms, the core focus for this year is on AI technology development. We aim to continually advance this technology in creating financial AI agents, generating revenue and profits to establish a structure where pension clients can invest with peace of mind.
ㅡIf there’s anything needed to activate the retirement pension robo-advisor market in the future.
I believe that not only Pount but the entire robo-advisor market must grow so that the public's retirement pensions are no longer restricted to principal and interest guarantees, and elderly preparation can be made accordingly.
To achieve that, regulatory changes are ultimately needed. Currently, this market has almost no profitability. The annual 9 million won subscription limit for RA services per person is indeed very low, and we are in a situation of absorbing losses for future prospects.
Of course, it is natural for regulatory authorities not to be able to release access to the colossal pension market all at once. Isn’t it crucial to avoid creating regulatory voids that could harm the public? However, on the other hand, regulatory reform cannot be delayed excessively. Personally, I often refer to competitors as partners, believing that growing together is important.
For the robo-advisor industry to survive, appropriate regulatory easing is necessary, and the key is to expand the investment scope in IRPs. Individuals should be able to entrust their entire individual IRP without limits, and ultimately, RA discretionary services should also be possible for DC types.
Through this, the public can actively manage pensions based on RA technology, and the robo industry can also create value while growing together stably. I hope that decisions in this direction are not delayed too long.