Korea Certified Private Banker flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Suitability principle

A regulatory requirement that a private banker assess the client's investment purpose, asset status, and experience before recommending a product, and avoid recommending unsuitable products.

Professional investor classification

A status under Korean capital markets law granting reduced investor protections; individuals qualify only by meeting prescribed asset or experience thresholds and must be periodically re-confirmed.

AML customer due diligence

Under the Specific Financial Information Act, firms must identify clients, verify beneficial ownership, apply enhanced due diligence to high-risk clients, and retain records for the required period.

Investable assets

Total assets excluding primary residence and illiquid holdings; the standard basis for private banking client segmentation and service tier assignment.

Emergency reserve

Liquid funds equal to roughly three to six months of living expenses, held to cover unexpected income loss or expenses before longer-term assets are tapped.

Risk tolerance assessment

A combined evaluation of objective factors such as age, income, and liabilities with subjective factors such as loss aversion and experience; the lower result constrains portfolio allocation.

Goal-based savings calculation

Discounting each financial goal at an assumed return to determine the periodic savings required; a lower assumed return raises the required savings amount.

Rebalancing threshold band

A rule that restores target asset weights when market drift exceeds a set percentage, enforcing buy-low/sell-high discipline and controlling unintended risk drift.

Sharpe ratio

Excess portfolio return over the risk-free rate divided by portfolio standard deviation; it measures return earned per unit of total risk taken.

CAPM expected return

Risk-free rate plus beta multiplied by the market risk premium; it estimates the return required for a given level of systematic risk exposure.

Bond duration

A measure of a bond's price sensitivity to yield changes; a one percent yield change moves price by approximately duration times one percent, refined by convexity for larger moves.

Strategic asset allocation

The long-run target mix of asset classes set from the client's goals, risk tolerance, and horizon; it is the dominant driver of long-run return variability.

Comprehensive financial income

A Korean tax rule subjecting financial income above the specified threshold to progressive comprehensive taxation rather than final withholding at the flat rate.

Gift tax 10-year aggregation

Korean gift tax is computed on cumulative gifts received within ten years, preventing donors from splitting gifts to stay within lower progressive brackets.

Annual gift tax deduction

A per-recipient exemption allowing tax-free gifts up to specified amounts, such as fifty million KRW to a spouse or adult child, subject to aggregation rules.

Tax deferral accounts

Korean pension savings and IRP accounts allow deductible contributions with taxation deferred until withdrawal, encouraging long-term retirement saving.

Capital gains tax on shares

Korean individuals generally escape capital gains tax on listed shares unless they are major shareholders; unlisted shares and major holdings are taxed.

Real estate acquisition tax

A Korean tax levied at purchase, with rates varying by property type, value, and number of homes owned; multi-home buyers face higher rates.

REIT

A real estate investment trust that pools investor capital to own income-producing property, offering liquidity and diversification compared with direct property ownership.

Illiquidity premium

The extra expected return investors demand for holding assets with long lockups and limited secondary market trading, such as private equity and real assets.

Debt service coverage ratio

Net operating income divided by debt service; it measures a property's ability to cover loan payments and is a key leverage monitoring metric.

Safe withdrawal rate

The annual percentage of a retirement corpus withdrawn without depleting it over the planning horizon; a four percent rate implies a corpus of twenty-five times annual spending.

Statutory inheritance share

Korean default inheritance fractions set by law; when children exist, the surviving spouse receives one and a half times each child's share.

Forced heirship

A legal reserved portion protecting certain heirs, including the spouse and direct descendants, which can be challenged if the will infringes it.

Life insurance beneficiary designation

Naming a beneficiary causes proceeds to pass outside the taxable estate in Korea, subject to specific exceptions and anti-avoidance rules.

Retirement income replacement ratio

Post-retirement annual spending expressed as a percentage of pre-retirement income; sixty to seventy percent is a common planning benchmark.

Know-your-client

The onboarding process collecting a client's identity, financial situation, goals, and risk profile; it underpins suitability, anti-money-laundering, and product recommendation decisions.

Fiduciary duty

An obligation to act in the client's best interest, disclose conflicts of interest, and avoid self-dealing; it takes precedence over the firm's sales incentives.

Mis-selling liability

Civil and regulatory liability arising from unsuitable or inadequately explained product sales; contemporaneous documentation is the primary defense against such claims.

Churning

Excessive trading in a client account to generate commissions, an unethical practice that conflicts with the duty to prioritize the client's long-term interests.

Client confidentiality

The duty not to disclose client information without consent, except where legally required, such as anti-money-laundering reporting or a court order.

Client segmentation

Grouping clients by investable assets into tiers such as mass affluent, high-net-worth, and ultra-high-net-worth, which determines service levels and product access.