The shift toward brokerage-type Individual Savings Accounts (ISA) has been accelerating in Korea, driven by investor demand for direct control over real-time trading and access to stock investments.
According to the financial investment industry on March 12, Mirae Asset Securities stopped accepting new subscribers for trust-type ISA from the first of this month. Existing contract holders can only manage products, extend maturities, or make additional deposits. "Recently, inquiries and subscriptions for trust-type ISA have declined while interest has concentrated on brokerage-type ISA," a Mirae Asset Securities official explained.
The trend of scaling back trust-type and discretionary-type ISA is spreading rapidly across the industry as investors flock to the brokerage type. Currently, only three of the top 10 securities firms—Samsung Securities, NH Investment & Securities, and Korea Investment & Securities—accept new trust-type ISA subscriptions. Seven firms either stopped accepting new subscriptions years ago or halted them recently. Shinhan Investment Corp. stopped new trust-type subscriptions last year, while Daishin Securities did so in March 2023.
Even firms still handling trust-type ISA are now considering restrictions. "We currently only restrict new subscriptions for discretionary-type ISA, but trust-type assets are also declining rapidly," an NH Investment & Securities official said. "We don't have specific plans to scale back or halt new trust-type subscriptions yet, but given this trend, it's something we may need to consider."
Another securities firm official noted, "Demand is concentrated in brokerage-type accounts because investors want tax benefits while investing in stocks or exchange-traded funds (ETFs). From a securities firm's perspective, there's no need to prefer or maintain trust-type accounts."
The focus on brokerage-type over trust-type ISA comes down to differences in operation methods and investment products. Brokerage-type ISA allows real-time trading like regular stock accounts and offers diverse investment options including stocks. With brokerage-type accounts, subscribers directly invest and manage their financial products. Trust-type accounts, however, have trading restrictions because trust companies such as securities firms manage products according to subscriber instructions.
Investment product differences are also stark. Trust-type accounts mainly feature principal-guaranteed products such as deposits, savings, and repurchase agreements (RPs). Brokerage-type accounts offer a wider range including domestically listed stocks, bonds, funds, ETFs, derivatives, REITs, exchange-traded notes (ETNs), and RPs.
Industry observers note that the recent bullish sentiment in the domestic stock market has been the driving force shifting demand from trust-type to brokerage-type accounts. "Interest in stock investment has increased, and investors can expect higher returns than deposits and savings, so more subscribers appear to be flocking to brokerage-type accounts that allow stock investment," a securities firm official said.
According to the Korea Financial Investment Association, as of February 28 this year, total ISA investment stood at 58.97 trillion won ($43.4 billion), with brokerage-type accounting for 71% at 41.70 trillion won. Trust-type followed at 27% with 15.78 trillion won, while discretionary-type accounted for just 2% at 1.49 trillion won.
Within brokerage-type accounts, stocks comprised the largest share at 36% with an evaluated amount of 19.20 trillion won. Listed funds including overseas ETFs accounted for 29.6% at 15.76 trillion won, followed by listed funds including domestic ETFs at 16.4% with 8.76 trillion won. Deposits and RPs accounted for single-digit percentages at 9.1% and 1.4%, respectively.
Industry experts forecast that the concentration in brokerage-type accounts will intensify unless the types of investment products available for each ISA account type change. "In the past, when interest rates were high, there was demand for trust-type ISA because investors could put money in deposits," a securities firm official said. "But recently, even existing customers are increasingly switching to brokerage-type accounts, so the trend of investment demand concentrating there will be difficult to reverse for the time being."
