Distribution is changing in the Nordics, especially in Sweden, where the regulator is about to introduce a ban on upfront commission. “Regulators have done good things, but it’s important not to go too far,” said Edgar Luczak (pictured), chief executive officer, Garantum Fondkommission, speaking on a panel at the inaugural SRP Nordics conference, held at The Grand Hotel in Stockholm on May 28. “There should be all kinds of commission and payment models. If people want to pay for advice, they should get advice but a success fee should also be possible.”
SIP Nordic International has been considering how to adapt to the upfront commission ban, particularly with the prospect that tied advisers, distributors, and those with their own advisory network offer products other than their own, according to Mats Halvorsen, CEO, SIP Nordic International.
The panellists agreed that there needs to be a level playing field for the regulation of all investment products. “Investors need to understand the risks they are taking,” said Ilkka Väkeväinen, director, structured debt and investment solutions, Taaleritehdas Wealth Management in Helsinki. “Finland’s speciality is that there is little IFA (independent financial adviser) distribution, although many IFAs have become distributors. New regulation [relating to commissions] might mean that retail investors will not [be able to afford to] go to a bank and get advice. This would reduce competition and, therefore, the number of investments to choose from.”
Garantum has responded to the likely changes by improving relations with advisers and offering them better advisory tools, said Luczak. “The important things are product quality, good results and keeping promises,” said Luczak.
The response to the pending commission ban in Sweden has, so far, included the merging of smaller distributors, with some exiting the business, said Luczak.
The move to lower costs has included automation, with a particular accent on online development, said Halvorsen.
Luczak agreed: “More web-selling, the easier listing of products and efficient secondary markets might help reduce costs. The average annual charge for mutual funds is over 156 [basis points] per year. But the fact is, managing products costs money, no matter what you do.”
Transparency and operational efficiencies are prerequisites, said Väkeväinen. “The key thing is that we need to communicate more professionally, and talk more publicly about performance data, since clients know this information already.”
The panel agreed that the top three drivers of successful distribution are, that products deliver what the client expects, there is a good service offering to advisers, and that good educational packages are available to everyone.
But the ultimate test is, what would mother say? When you offer a product, you should think, ‘what would your mother think about this product’, said Luczak.
Sometimes it is important to discontinue trades if the market environment no longer works in their favour, said Ilkka Väkeväinen.