Korea Certified Private Banker cheat sheet

Korean financial institutions operate under the Financial Services and Capital Markets Act (자본시장법); private banking advisory activity is regulated as investment advisory or discretionary investment management depending on whether the client retains decision authority.

Investment advisory requires registration as an investment advisory business (투자자문업); discretionary management requires investment management business (투자일임업) registration, with different minimum capital and manpower requirements.

Suitability (적합성) principle: the firm must assess the client's investment purpose, asset status, and experience, and must not recommend products unsuitable for the client.

Appropriateness (적정성) principle applies to non-professional investors purchasing high-risk or complex products; the firm must confirm the product is appropriate and document the confirmation.

Explanation duty (설명의무): firms must explain key product content, risk, and cost, and obtain a signed confirmation; failure can void the client's liability for losses.

Professional investor (전문투자자) classification reduces certain protections; individuals may qualify only with prescribed asset/experience thresholds and must be re-confirmed periodically.

Korea applies the Capital Markets Act's ban on unfair trading (부정거래), including front-running, market manipulation, and use of material non-public information; violations carry criminal and administrative sanctions.

Anti-money laundering obligations under the Specific Financial Information Act (특정금융정보법) require CDD, EDD for high-risk clients, STR filing, and record retention; private bankers are front-line reporting personnel.

Conflicts of interest must be managed and disclosed; the Financial Investment Services and Capital Markets Act imposes a duty to act in the client's best interest and prohibits self-dealing without disclosure.

Net worth = total assets − total liabilities; investable assets exclude primary residence and illiquid holdings, which is the usual basis for private banking segmentation.

Cash flow planning: surplus = income − consumption − debt service − taxes; the surplus funds savings, investment, and insurance premiums.

Emergency reserve is typically 3–6 months of living expenses held in liquid instruments; the remainder can be allocated to longer-horizon assets.

Risk tolerance assessment combines objective factors (age, income stability, liabilities, horizon) and subjective factors (loss aversion, experience); the lower of the two constrains the portfolio.

Time horizon drives asset allocation: short (<3 years) favors capital preservation, medium (3–10 years) balanced growth, long (>10 years) equity and alternatives.

Insurance planning: life insurance covers premature death risk; the appropriate coverage approximates income replacement plus debt minus existing assets.

Goal-based planning discounts each goal at an assumed return to compute the required periodic savings; lower assumed return increases required savings.

Rebalancing restores target weights when drift exceeds a threshold band; it enforces buy-low/sell-high discipline and controls risk drift.

Integrated financial planning coordinates tax, investment, insurance, retirement, and estate planning; conflicts among them must be resolved against the client's stated priorities.

Expected portfolio return = weighted average of asset expected returns; portfolio variance includes covariance terms, so diversification reduces risk without lowering expected return.

Sharpe ratio = (portfolio return − risk-free rate) / portfolio standard deviation; it measures excess return per unit of total risk.

Beta measures sensitivity to market movements; CAPM expected return = risk-free rate + beta × (market return − risk-free rate).

Duration approximates bond price sensitivity: a 1% change in yield changes price by roughly duration × 1%; convexity refines this for larger moves.

Korean bonds: 국고채 (KTB), 특수채, 회사채, and 지방채 differ in credit risk; credit spreads widen in risk-off environments.

Equity valuation: P/E = price / EPS; P/B = price / book value per share; high P/E implies high expected growth or overvaluation.

Derivatives: futures and options provide leverage and hedging; options pricing depends on underlying price, strike, volatility, time to expiry, and interest rates.

Fund types: collective investment schemes (펀드) may be public or private; private funds have higher minimum investment and fewer regulatory restrictions.

Asset allocation is the dominant driver of long-run portfolio return variability; strategic allocation sets long-run weights and tactical allocation makes short-term deviations.

Korea taxes global income for residents; non-residents are taxed only on Korean-source income. Residence is generally determined by domicile or 183-day presence.

Financial income (이자·배당소득) is subject to a 15.4% withholding (14% tax + 1.4% local surtax) as final tax for most individuals, or comprehensive taxation if financial income exceeds the threshold.

Comprehensive financial income taxation applies when financial income exceeds 20 million KRW (or 10 million KRW for certain cases); excess is taxed at progressive rates.

Capital gains on listed shares are generally exempt for individuals below the major shareholder threshold; major shareholders and unlisted shares are taxed.

Gift tax (증여세) and inheritance tax (상속세) are levied on cumulative gifts and estates; rates are progressive from 10% to 50% with a 10% surtax on the top.

Gift tax is computed on cumulative gifts over 10 years; the 10-year aggregation prevents splitting gifts to lower brackets.

Annual gift tax deduction: 50 million KRW for a spouse, 50 million for adult children (10-year aggregation), 20 million for minors, and 10 million for other relatives.

Tax-deferred retirement accounts: IRP and pension savings (연금저축) contributions are deductible up to annual limits, and taxation is deferred until withdrawal.

Tax planning must be implemented before the taxable event; retroactive restructuring is generally ineffective and may be treated as tax avoidance under substance-over-form rules.

Real estate returns combine rental income yield and capital appreciation; total return = (income + price change) / initial price.

Korean real estate taxes: 취득세 (acquisition tax) on purchase, 재산세 (property tax) annually, and 양도소득세 (capital gains tax) on sale; rates depend on holding period and number of homes.

Multi-home owners face higher acquisition and capital gains rates; the heavy capital gains surtax (중과세) applies to certain multi-home holdings.

Real estate investment trusts (REITs, 부동산투자회사) and real estate funds provide liquidity and diversification compared with direct property ownership.

Alternative investments include private equity, hedge funds, infrastructure, commodities, and real assets; they typically have lower liquidity, higher minimums, and longer lockups.

Illiquidity premium: alternatives offer higher expected returns to compensate for lockup and valuation uncertainty.

Valuation of unlisted alternatives relies on appraisal, comparable transactions, or discounted cash flow; stale valuations can understate true volatility.

Leverage in real estate magnifies both returns and losses; debt service coverage ratio (DSCR) = net operating income / debt service must be monitored.

Retirement income replacement ratio approximates post-retirement spending as a percentage of pre-retirement income; 60–70% is a common planning benchmark.

Required retirement corpus = annual retirement spending / safe withdrawal rate; the 4% rule implies a corpus of 25× annual spending, ignoring taxes and fees.

Korean public pension (국민연금) provides a basic retirement income; private pension (퇴직연금) includes DB, DC, and IRP plans with different risk-bearing arrangements.

Inheritance planning tools: will (유언), trust (신탁), life insurance, and lifetime gifts; each has different tax and control consequences.

Statutory inheritance shares (법정상속분): spouse receives 1.5× the share of each child when children exist; without children, other rules apply.

Forced heirship (유류분) protects certain heirs; the spouse and direct descendants have reserved portions, and infringement can be challenged.

Life insurance proceeds paid to a named beneficiary are generally not part of the taxable estate in Korea, subject to specific exceptions and anti-avoidance rules.

Gift and inheritance tax rates are progressive; early gifting can reduce total tax but triggers 10-year aggregation and may raise the donor's own tax.

Trust structures can provide asset protection and controlled distribution; the settlor must consider tax transparency and the beneficiary's tax status.

Know-your-client (KYC) is the foundation of relationship management; it underpins suitability, AML, and product recommendation decisions.

Fiduciary duty requires acting in the client's best interest, disclosing conflicts, and avoiding self-dealing; it supersedes the firm's sales incentives.

Suitability and appropriateness assessments must be documented at onboarding and updated when the client's circumstances change.

Client segmentation (mass affluent, high-net-worth, ultra-high-net-worth) drives service levels, product access, and minimum investment thresholds.

Confidentiality: client information may not be disclosed without consent except where legally required (e.g., AML reporting, court order).

Suitability violations and mis-selling (불완전판매) can trigger civil liability, regulatory sanctions, and reputational damage; documentation is the primary defense.

Conflict-of-interest management includes disclosure, information barriers, and independent review of product recommendations.

Client communication should be clear, timely, and free of misleading performance claims; past performance must not be presented as a guarantee.

Ethical standards require avoiding churning (excessive trading to generate commissions) and prioritizing the client's long-term interests over short-term revenue.