Kiwoom Securities will begin its retirement pension business from June, moving to diversify its profit structure and expand its retail customer base. Although it posted record results in the first quarter, its brokerage market share, a core business, fell, prompting it to roll out retirement pensions as a turnaround card.

Kiwoom Securities posted first-quarter operating profit of 621.2 billion won and net profit of 477.4 billion won on a consolidated basis. That was up 90.9 percent and 102.6 percent from a year earlier, respectively. Commission income from brokerage trading rose sharply on the back of increased trading value in the domestic stock market.

First-quarter stock commission income totalled 311.5 billion won, including 231.1 billion won from domestic stocks and 80.4 billion won from overseas stocks. Kiwoom Securities recorded an average daily contract amount of 27.8 trillion won as the domestic market became more active. That was up 215.9 percent from a year earlier.

The problem is that its retail market share is falling even as trading value rises. Kiwoom Securities' domestic stock retail share fell to 25.7 percent in the first quarter from 26.5 percent in the fourth quarter of last year. The downtrend continues compared with 29.4 percent in the second quarter of last year.

Kiwoom Securities cites a reduced share of KOSDAQ trading, more active branch sales by large brokerages and a higher share of ETF trading as reasons for the market share decline.

It has also shown strength in the KOSDAQ market, where the share of individual investors is high, but KOSDAQ's share of trading fell to the 23 percent range in the first quarter. With a market led by large-cap stocks continuing, Kiwoom Securities' strengths were diluted relatively.

Fee promotions by platform brokerages such as Toss Securities are also cited as a burden factor. As the No. 1 brokerage operator, Kiwoom Securities plans to respond by strengthening ETF trading convenience, improving user experience and expanding community and AI-based services, rather than jumping directly into short-term fee competition.

Kiwoom Securities' gambit is retirement pensions. From June 1, it will start retirement pension services through its mobile trading system. The company plans to run individual retirement pension plans (IRP), defined contribution (DC) and defined benefit (DB) businesses mainly online and non-face-to-face.

Pyo Young-dae (표영대), head of Kiwoom Securities' pension platform division, said at a news conference on May 28, "Kiwoom Securities will enter the market as the first non-face-to-face, online-based retirement pension operator." He added, "We will try to make the retirement pension market subscriber-oriented and centered on non-face-to-face online channels."

The retirement pension market has already exceeded 500 trillion won and is expected to grow further in the long term. Kiwoom Securities sees the retirement pension market size exceeding 1,200 trillion won in 2035. A shift is also emerging in which retirement pension reserves, once centered on banks and insurers, move to brokerages.

It judges that competitiveness of online investment platforms has become important as the market shifts from principal-protected products to investment-type products such as ETFs and funds.

Kiwoom Securities is highlighting applying its existing stock trading environment to retirement pensions as a point of differentiation. It built the platform so retirement pension customers can search for and trade ETFs in a way similar to existing stock trading. It also prepared automatic investment, installment-style investment, interest and dividend reinvestment, and AI portfolio services.

◆ Secures early customers with a 1-year fee waiver; long-term goal is top 5

Its fee strategy is also aggressive. Kiwoom Securities decided to waive, without conditions, DB, DC and IRP operation management and asset management fees for 1 year after sign-up. It will introduce a performance-linked fee structure for IRP accounts.

Under the structure, fees are waived if the customer's return falls below a standard set by the company. Kiwoom Securities explained that it received approval from the Financial Supervisory Service for the fee structure.

Kiwoom Securities says it will focus on stabilising the business rather than aggressively expanding reserves in the early stage of its retirement pension business. It also set a conservative goal of within 500.0 billion won in reserves this year. Still, its long-term goals are clear. It set targets of 10 percent retirement pension market share within the securities industry and entering the top 5 in reserve rankings by 2035.

The key is how much it can convert existing brokerage customers into pension customers. Kiwoom Securities has maintained the No. 1 share in the domestic stock market for 21 consecutive years and has a base of individual customers with extensive investment experience. If this customer group actively uses investment-type products such as ETFs and funds in retirement pensions, synergy between the brokerage and pension businesses is possible.

The retirement pension market, however, also has high barriers to entry. Banks, insurers and large brokerages have already secured corporate sales networks and reserves, making it difficult for latecomer Kiwoom Securities to raise its ranking in a short period. In particular, in the DB and DC markets, sales capabilities targeting companies and long-term management capabilities are important.

Kiwoom Securities plans to make up for the disadvantage of having no branches through non-face-to-face processing and online corporate sales. The company built an online office manager web system that can handle retirement pension tasks such as enrollment, deposits, reserve management and payments without face-to-face contact. Corporate sales will also be pursued through collaboration between its existing corporate finance organisation and a newly formed retirement pension organisation.

In the securities industry, an assessment is emerging that Kiwoom Securities' move into retirement pensions goes beyond simply expanding new businesses and represents a structural shift to reduce dependence on brokerage operations. Brokerage earnings fluctuate significantly depending on stock market trading value and investor sentiment, but retirement pensions can create a long-term source of profit based on reserves.

Still, initial profitability may be limited due to the first-year fee waiver and the introduction of a performance-linked fee structure. Kiwoom Securities also said it will focus this year on business stabilisation rather than expanding reserves.

Kiwoom Securities CEO Um Ju-sung (엄주성) said, "The retirement pension market is facing an important transition." He added, "We will extend Kiwoom Securities' accumulated experience in online investment platforms and IT competitiveness to retirement pension asset management as well."