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Post-retirement poverty threatens Korea’s growth, investment guru says

Oct. 28, 2021 - 16:28 By Son Ji-hyoung
John Lee, CEO of Meritz Asset Management, speaks at the Global Business Forum in Seoul on Wednesday. (The Korea Herald)
Poverty among retired South Koreans, coupled with the fast-paced aging of the country’s population, is leaving the national economic growth engine prone to a slowdown, an investment guru said Wednesday.

Individuals in Korea -- a nation where 4 out of 10 people aged over 65 are estimated to live in relative income poverty -- must learn to take control of their finances so they can build wealth that lasts until retirement, said John Lee, chief executive officer of Meritz Asset Management, at Global Business Forum 2021 in Seoul.

“An individual retiree should have accumulated at least 500 million won ($427,000) of wealth as they retire,” said the former Wall Street fund manager, who now leads the asset management house, which oversees 3.4 trillion won in assets. “Allowing that to happen in Korea will solve many of the problems Korea is facing.”

Yet there is a deep-rooted cultural mindset that perceives riches as sinful, coupled with weak policy support for stock investment by financial institutions for private pension plans, claimed the financial literacy advocate.

Although Koreans earned an average of 66.8 points out of 100 on a financial literacy test designed by the Korean financial authorities -- higher than the average for member nations of the Organization for Economic Cooperation and Development, which stood at 62 -- Lee said Koreans tend to overvalue labor and neglect capital as a source of wealth.

Economic growth “must involve the input of labor and capital, but Koreans tend to focus solely on the factor of human labor as a viable means of income,” he said.

“Labor’s contribution to the output is increasingly limited because the population is aging. Meanwhile, income from capital is growing faster than that from labor, but many Koreans still say that any income from capital is unjust. The coronavirus pandemic made people realize how risky it is for an individual to rely on labor as the only source of income.”

What is needed is financial education that nurtures entrepreneurship in children -- a bold move in Korea’s current educational environment, which, Lee argued, “stifles creativity.”

“Koreans have distanced the young generation from money,” Lee said.

“Now, it is time to teach our children how to make their money work for them. We are no longer living in the days when we encouraged our children to get better scores on exams. ... If parents have 500 million won or more handy when they retire, the parents should spend the money urging their offspring to pursue innovative business idea as entrepreneurs.”

Lee built his career on Wall Street for over three decades and returned to the country of his birth in 2014. He led Korea-focused public equity funds at Scudder, Stevens and Clark -- later acquired by Deutsche Asset Management -- and Lazard Asset Management in the US. His signature funds include the Korea Fund, which logged 1,600 percent cumulative returns for 15 years.

Lee was one of the speakers at Global Business Forum 2021, hosted by The Korea Herald. The event hosts weekly events from October to December.