Half of financial consumers “Insufficient explanation of sales staff”
Consumers 34.6% “It is difficult to understand financial products”
Up to 50% of income is subject to penalty for violation of explanation obligation
It was found that many financial consumers felt that they did not receive enough explanations from sales staff when signing up for complex financial products.
According to the report on the’Public Perceptions of Financial Consumer Protection’ conducted by the Financial Services Commission to Gallup Korea on the 28th and conducted from November to December of last year, 34.6% of respondents have purchased financial products that have a complex profit structure and are difficult to understand within the last five years. They answered that they had experience using it.
This is the case of using complex financial products such as stock price-linked securities (ELS), derivative-linked funds (DLF), variable insurance, or ultra-long-term products such as life insurance, rather than deposits, installments, and loans.
When we asked them about their experiences from sales staff during product consultation and contracting, nearly half of the respondents (46%) answered that “I gave a rough explanation and guided the necessary signatures on the documents.”
After that, many respondents said,’It seems like a product that doesn’t suit me, but I kept recommending it’ (34.3%) (multiple responses).
Only 30.2% and 30.1% answered that’I tried to explain it in easy-to-understand terms in easy-to-understand terms’ or’I explained it step by step, focusing on things that must be known, such as the risk of loss of principal’, respectively.
Recently, a number of financial companies have been sanctioned by financial authorities for incompletely selling private equity funds or are ahead of them, and this survey also revealed some inappropriate selling practices.
In addition, more than half of the respondents, 53.4%, said they had difficulty understanding the explanations of employees at financial companies.
The reasons for this were’the terms and conditions and product description are too difficult’ (37.4%),’there is too much content of the terms and conditions and product description’ (35.1%), and’the employee uses too much terminology’ (14.2%). .
When asked about the appropriate time required for financial product consultation and contract, the most respondents answered that it was less than 20 to 30 minutes (34.6%) and less than 10 to 20 minutes (34.6%). The next was 30-40 minutes (12.3%), 10 minutes (12.3%), and 40-60 minutes (3.7%).
According to the Financial Consumer Protection Act, which took effect on the 25th, financial companies must comply with six regulations when selling financial products, including the obligation to explain, check suitability and adequacy, and prohibit unfair business practices, unfair solicitation, and false exaggerated advertisements.
In the past, individual laws such as the Banking Act and the Insurance Business Act had provisions related to the obligation to explain, but as they were consolidated and transferred to the Financial Consumer Protection Act, procedures and penalties for violations were strengthened.
Violation of the obligation to explain, punitively impose a penalty of up to 50% of the relevant income, and the financial company must prove intentional or negligent in a lawsuit for claiming damages for violation of the obligation to explain.
However, there are criticisms that the procedure for signing up financial products has become too long and complicated in the process of applying the law to the field.
Some point out that it is more important to explain the main content in an easy-to-understand manner so that financial consumers can understand it rather than a format such as reading and recording product manuals by the counter staff.
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