Fee income from securities firms' paid stock information services totaled 67.1 billion won last year, prompting the Financial Supervisory Service (FSS) to move to improve the system. Some brokerages have already improved the service or ended operations.

The FSS said on Nov. 11 that 12 securities firms run stock information services, with 103,000 customers. Fee income the firms earned from related services last year was tallied at 67.1 billion won.

The stock information service is a paid service in which brokerages use artificial intelligence (AI) or external partners to provide investors with investment information such as stock recommendations and supply-demand analysis.

Brokerages have collected usage fees by adding a fixed-rate fee of about 0.05 to 0.25 percent to the basic stock trading fee, or by replacing it. In some cases, they also charge a separate flat monthly fee of around 10,000 won depending on the number of services.

The problem is that there have been cases in which investors did not properly recognise the costs they actually bear because guidance on the usage fee was insufficient after signing up for the service.

In a case presented by the FSS, an investor with a basic trading fee rate of 0.015 percent pays a general fee of 1,500 won when trading 10 million won a month. But if a fixed-rate stock information service fee of 0.1 percent is applied, it rises to 10,000 won. If the monthly trading amount is 50 million won, the cost difference expands to as much as 42,500 won.

The FSS selected the issue as an agenda item for the first Financial Consumer Protection Advisory Committee and decided to improve the system for notifying customers about service fees.

It plans to ensure customers are regularly informed of the fees and their subscription not only before signing up but also after signing up. It also plans to prevent automatic conversion to a paid service after a free trial ends without a customer's explicit consent. It aims to complete the improvements by the first quarter of 2027.

Earlier, Shinhan Investment Corp was reported to have been flagged by the FSS last month over the charging of fees for a stock recommendation service.

Data submitted to the FSS by Park Sung-hoon (박성훈), a People Power Party lawmaker on the National Assembly's Political Affairs Committee, showed the watchdog notified Shinhan Investment on Aug. 31 of 4 items requiring management attention and 1 item for improvement.

At the time, Shinhan Investment provided customers with stock recommendation information received from an external similar investment advisory firm and collected fees by adding a certain rate to the basic trading fee.

In overseas stock trading in particular, it charged an additional fee of up to 0.25 percentage points, and the fee applied even when customers traded stocks other than those recommended. It was also flagged for not providing separate guidance distinguishing between the basic trading fee and the additional usage fee.

The FSS demanded that it improve the fee-charging structure and overhaul the relevant system so customers can clearly check details of usage fees.

Shinhan Investment said the service is unrelated to a recently introduced generative AI-based stock recommendation service and that it was a past matter for which problems had been raised since about 2 years ago. It said the service operated in a way that customers directly consented to subscription and paid usage fees.

Shinhan Investment converted the service to free in May. It plans to end it in December because there are currently almost no users.

Other brokerages' positions differ depending on whether they run related services and how they charge fees.

An official at one brokerage said, "For the service we currently operate, we proceed after obtaining customer consent and the details are also disclosed on our website."

Another brokerage said it runs a subscription-based investment information service, but it has not been confirmed whether it has the same fee structure as the service the FSS recently flagged.

Some other brokerages that run investment information services also said further checks are needed on the specific method of charging usage fees and whether they are subject to the FSS's criticism.

The FSS said it aims through the improvements to ensure investors clearly recognise service fees and reduce unnecessary cost burdens.

As service operation methods and fee-charging structures differ by brokerage, checks across the industry on fee notification systems and paid conversion procedures are expected to continue.

An industry official said, "Stock recommendations are a sensitive matter even from brokerages' standpoint, so it is an issue they have no choice but to approach carefully." The official added, "We will supplement areas we have missed by reflecting the financial authorities' indications."