Pia Nilsson, CEO of the Swedish Investment Fund Association - Fondbolagens förening - says efforts to boost investor knowledge and confidence are among her top priorities.
Second key priority
The second key priority of FF is the PPM system, Nilsson says.
This is because of another ongoing inquiry, which is linked to an “attack” on the system by groups representing older pensioners in Sweden. Effectively, such pensioners are not covered by the system. Instead, they feel that scrapping the system and reapportioning the assets would provide a fairer spread of retirement benefits.
FF has provided a multi-faceted retort. To start with, it argues that, should the PPM rules be changed, then there is a danger of affecting the proportion of income invested in long-term savings products.
And it points out that unpicking PPM would be to ignore statistical evidence suggesting that some 99% of the more than five million PPM accounts have generated a positive return since 2000. Lots of Swedes do not believe the numbers, Nilsson says, because PPM launched just before the tech bubble burst and the subsequent decade of stock market volatility since.
There is another political dimension to the debate on PPM, which is that there is a growing gap between those who are more or less successful in their fund choices. This is politically sensitive because it leaves investors, who are effectively taxpayers, enjoying different outcomes despite being within the same PPM system.
However, FF sees a number of other factors influencing the end retirement income that may be generated via PPM savings, suggesting that the system per se is fair and it is the choices made that count.
It also points to other statistics suggesting that most long-term savers would be worse off without PPM.
The retort has been sent to politicians of all political parties in the country, Nilsson says, to argue against the “myths” that some people believe regarding PPM, and which FF feels are being peddled in regards to the PPM debate.
Third key priority
The third priority of FF is its focus on regulations, both current and pending, such as the AIFMD and the Financial Transaction Tax (FTT).
Nilsson says the FTT is being closely watched for further developments because of the lack of exceptions offered via the final rules adopted by those EU member states that intend to implement it.
Sweden, like a number of other member states, has elected to stay outside the scope of the FTT for now, but its implementation raises some fundamental questions for investors in funds.
For example, could the FTT leave bond funds being taxed twice over: firstly over their trading activities buying and selling fixed income instruments, and secondly at the level of returns generated. For investors not buying such funds within a tax-efficient wrapper there is, generally speaking, a third level of personal taxation to deal with subsequently.
The FTT is seen as upsetting fair competition between different European markets, Nilsson adds.
Linked to the issue of markets is the question of fund exports. The growth of exports from Sweden has been too slow, Nilsson complains.
Ucits IV and changes to Swedish legislation should have set up fund companies and their products for a boost in exports. However, the domestic industry seems slightly stuck, despite the fact that “Sweden is an export country”.
Nilsson wants the domestic industry to look at this more closely because she feels it is well placed to take advantage of exports of funds. The country has a long history of fund management and it has proven adept at taking on new types of investments, such as emerging market instruments.
“I hope that a lot happens,” Nilsson says.
Commission ban debate
Sweden’s funds industry is closely following developments around proposals to ban rebates/commission – as already implemented in the UK through the Retail Distribution Review, the Netherlands through the introduction of zero rebate shares, and Finland, where commission is banned for insurance intermediation.
While there is no current EU blanket ban on commission, the rules leave room for individual member states to implement such restrictions if they wish.
In Sweden there has already been one government inquiry into commission, or ‘kickbacks’, which did not recommend a ban. However, another inquiry has been launched under broader consumer protection legislation, which also encompasses financial services commission.
FF does not support a ban, CEO Pia Nilsson says, but it does support moves to improve transparency, especially if this helps avoid a ban being put in place.
“We need more transparency,” Nilsson says.”
The country’s banks have made considerable moves towards developing more open architecture, and it would be a problem if the industry were to revert to recommending own funds as a result of any ban on commission.
Responsible investments, which include sustainable investments, are an area the FF is keen to push. It published a booklet last year in both Swedish and English, outlining the views of 25 authors, which are intended to improve knowledge around funds, ethics and sustainability.