Branch-opened accounts incur '10 times' the fees... Baffling practice to end

[Financial News] The practice of charging higher trading commissions on accounts opened at securities firms’ branches than on accounts opened online, even when the branch-opened accounts are used to trade through a mobile trading system (MTS), will be overhauled. Going forward, investors opening accounts at branches will be able to choose whether to designate them as “managed accounts,” which carry higher fees.
The Financial Supervisory Service (FSS) said on the 15th that it would improve the practice at some securities firms of charging different trading commissions on branch-opened brokerage accounts and pension savings fund accounts.
The FSS found in a review of fee policies at 37 securities firms that nine charged higher fees on branch-opened brokerage accounts than on accounts opened online, while seven did so for pension savings fund accounts. Excluding firms counted in both categories, the total was 10.
These firms automatically designated accounts opened at branches as managed accounts, which offer advisory and asset-management services, and charged relatively higher fees. Even when investors traded directly through an MTS or home trading system (HTS) using a branch-opened account, they were charged higher fees.
In one case, a securities firm charged a 0.010% fee for online trades through an account opened online, but charged 0.136% on a managed account opened at a branch for trades made in the same way. The fee was more than 10 times higher.
The FSS determined, however, that investors were not given sufficient information during account opening about the fee differences or the services available through managed accounts. It also found cases in which firms did not specify the exact fees in their terms and conditions, instead providing links to their websites, or failed to properly explain the differences in services between managed and non-managed accounts.
The FSS plans to require securities firms to compare and explain the fees and available services for managed and non-managed accounts during the account-opening process. Investors opening new accounts at branches will also be able to choose whether to designate them as managed accounts.
Existing managed-account holders will be informed of their account type and fee differences through text messages or MTS pop-ups. If investors wish, they will also be given instructions on how to open a new, lower-fee non-managed account and transfer their assets to it. However, transferring assets to a non-managed account may limit some services they previously received.
An FSS official said, “We aim to complete implementation of the improvement measures within the first quarter of next year, while proceeding without disruption with follow-up steps, including revising the relevant terms and conditions and monitoring securities firms’ implementation.”
[email protected] Lee Jeong-hwa Reporter