‘Significant’ price differences of mutual funds between providers, Norway’s Finanstilsynet finds

The Norwegian Financial Supervisory Authority's (Finanstilsynet) investigation into the prices of mutual funds from different fund providers shows significant price differences for the same funds.

In its investigation, Finanstilsynet found several examples of the price of one mutual fund being twice as high with one provider compared to another. In recent years fund providers have mainly been paid return commission directly by consumers. Finanstilsynet said the variation in prices has a “major impact” on the final price for the consumer.

Finanstilsynet examined the prices for mutual funds offered to consumers with a deposit of NOK 200,000. The survey includes 17 fund providers and 67 securities funds.

“New price models have made it more complicated to navigate the fund market and to compare prices, but in return, vigilant consumers can reduce the price of fund savings, as the price variations are significant,” Finanstilsynet director of market supervision, Anne Merethe Bellamy, said.

The most expensive provider has an average price level that is almost twice as high as that of the cheapest. The largest observed price difference for a fund shows a price that is four times higher with the most expensive provider than with the cheapest provider.

Finanstilsynet said knowledge of the price differences is important for savers to be able to make informed investment choices.

“Many consumers save long-term in mutual funds and for pensions. Over time, the price has a great impact on the size of the future pension assets. As an illustration of the effect, a 35-year-old with NOK 200,000 invested in an actively managed global equity fund from the most expensive provider, as a 65-year-old, will expect to be left with NOK 233,599 less than if the corresponding fund was purchased through the cheapest provider,” Merethe Bellamy said.

“Finanstilsynet doubts whether most customers are aware that the fund market has changed so that the same securities funds can in many cases be obtained cheaper from another provider. There are few signs that individual customers' fund capital is moving away from high prices to low prices.”

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