Increased competition welcomed by Swedish funds association
The Swedish Investment Fund Association has responded to a competition authority report by urging improved access to savings accounts by fund investors, better access to information on funds, and more transparency around issues of commission to intermediaries and advisers.
The Swedish Competition Authority (Konkurrensverket) said in its report focused on competition in the country’s financial services sector ( Konkurrensen på den finansiella tjänstemarknaden – inlåning, bolån och fonder ) that there are still lock-in effects being felt by investors in funds. According to the Investment Fund Association, this is because of issues such as capital gains tax, which is seen as a barrier to shifting existing investments into so-called investeringssparkonto, the wrapper-type savings account that is intended to encourage tax efficient savings in Sweden.
The Competition Authority has proposed that more be done to encourage investors’ savings to shift from fund accounts into these savings accounts, and that investors’ knowledge of funds needs to be improved. This also includes proposals for a way to benchmark returns in addition to the so-called Norman-sum, which enables a comparison of costs over 10 years, and which is named after the minister for Financial Markets.
Pia Nilsson, CEO of the Investment Fund Association (pictured), said she welcomed proposals to complement the Norman-sum data, in order to improve investor knowledge.
She added: “Independent fund companies that do not belong to bank or insurance groups are concerned that their ability to compete has been degraded in recent years. We will read the Competition Authority’s report with much interest.”
The Association believes that competition has improved since 2000, when the market share of the four biggest fund companies stood at 80%. This has since dropped to 50% of total fund assets. Both independent and foreign managers have entered the market, not least because of the growth in the Premium Pension (PPM) market. However, the Association also notes that the rising burden of EU regulation is hitting smaller fund companies disproportionately, and that it is becoming harder to start new fund companies.
Ongoing issues that are reducing the scope for competition to the benefit of fund investors include: barriers to shifting assets into tax efficient savings accounts, additional taxes on those who invest via fund companies, and concerns among smaller, independent fund companies that they would lose market access should a ban on commission come into force and banks revert to promoting their own products.