The Korea Financial Investment Association (Kofia) is to send out an RFP to global consultants next week seeking help in building an online funds supermarket that promises to revolutionise the way retail products are bought and sold in the country.

Kofia, the main body for financial industry lobbying in South Korea, has a government mandate to reform the fund distribution system to foster a more level competitive landscape for foreign-owned players and small and mid-sized firms, and to drive down costs.

There are really only two fund distribution outlets in Korea: banks and brokerages. The field is dominated by the big players, many of which have asset management arms. As a consequence, they tend to sell a lot of their own product.

Recognising this, new legislation was announced in December that will force distributors to sell less than 50% of in-house product. It is due to come into effect in April, with a one-year grace period. Firms that have not complied within a year will be reprimanded and could face sanctions.

Korea has also recently announced plans to set up a new layer of distribution by introducing independent financial analysts (IFAs) for the first time. The aim is for them to provide retail investors with independent advice.

And now Kofia is moving to set up an independent funds supermarket online, financially backed by the country's asset management firms (it is understood not to have been universally welcomed by them): a funds platform with common ownership modelled on a similar system used in the UK.

The aim is to offer peer comparison to allow retail investors to choose what to invest in, and also to provide transparency over fees, which in Korea are charged on an annual basis. Kofia expects that over time this platform will drive down costs.

Cheol-Bae Kim, managing director of the association's Collective Investment Services Division, tells AsianInvestor it is planning to set the online supermarket up in the first half of this year.

The association is working on the business model and structure and will send out a Request for Proposal (RFP) next week asking consultants to provide advice on how best to set up such an electronic platform and on issues such as the human resources required to run it.

"There are two parts to any asset management company – asset management and distribution," says Kim. "The asset management side has developed quite well, but on the distribution side there are only two outlets – banks and brokerages.

He notes that one of the impacts of the present system is that foreign-owned firms and small and mid-sized asset managers are not given enough opportunity to build a business. "They have suffered because of the lack of distribution outlets," he adds.

Asked whether retail investors would really use this online platform, he replies: "This is the main consideration for us, how to attract investors to this fund supermarket system. How we promote it is something we are talking about, and something we hope the consultant can advise us on."

Kofia is acting in line with a drive by the new government of president-elect Park Geun-hye to foster economic growth and competitiveness by crimping the dominance of chaebols.

Park is set to become the country's first female president once incumbent Lee Myung-bak's five-year term ends later this month. She was swept into office on the back of a strident reformist agenda, pledging to create a more democratic economic system.