Wealth-Management Price War Spikes in Nordics as Fees Take a Hit

(Bloomberg) -- At the biggest bank in the richest Nordic economy, the head of wealth management is about to make life harder for his rivals by cutting fees yet again.

DNB Asset Management, which oversees about 600 billion kroner ($67 billion) from Oslo, already lowered fees on several mutual funds back in February. That move gave the asset manager a bigger chunk of the market, with DNB’s share of Norwegian retail business growing to 32.2% in May from 29.8% at the end of March 2018.

“We won’t sit still in the boat when competitors follow us,” Hakon Hansen, group executive vice president for Wealth Management & Insurance, said in an interview. “We will do more to defend our position on price toward our customers.”

That means accepting smaller margins and lower prices for the whole retail segment, Hansen said. “That’s the direction we’re adjusting to.”

Wealth-Management Price War Spikes in Nordics as Fees Take a Hit

The strategy at DNB Asset Management, which is a unit of DNB ASA, is the latest salvo in an ongoing price war in the industry. The digital bank Sbanken ASA cut its price on more than 400 funds in August. Other distributors, such as Nordnet AB, are considering new pricing models. Hansen says pricing is “an important strategic discussion.”

Money management has emerged as a key way for banks to earn more as record low interest rates make traditional banking more difficult. But with more firms turning to the industry, the intense competition is eroding profits.

“One has to look at all elements of the pricing of funds, both the producers but also definitely the distributors,” Hansen said. “It has been 50-50 between distributor and producer. It’s not certain that it will be like that in the future. What is certain is that it will be cheaper for the customer.”

Wealth Mergers

The pressure on margins in the fund management industry and higher regulatory costs have led to some consolidation in the Nordics. Storebrand ASA bought Skagen AS in 2017 and Carnegie Fonder acquired Alfred Berg’s Swedish funds in August.

“The consolidation can continue,” Hansen said. “We monitor that. At the same time we have a strong underlying generic growth. We’re cautious on how simple buying asset management companies is. We have a sober attitude but if the right candidate is there we will evaluate it.”

Hansen said wealth management has a “high degree of strategic freedom” within DNB since it’s a growth area with capital light revenues, especially in private banking.

“Private banking is a super business,” he said. “Private banking is the area that had the nicest growth in the past 3-4 years. We see that continuing. We have a good position in the highest segment in Norway. And we start to do better in the lower segments within private banking.”

©2019 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.