This publication takes an overview of the wealth management landscape in Sweden, a country that boasts a number of robust financial institutions, sometimes contrasting with those of other, perhaps more prominent, European nations.

Sweden is perhaps not the first place that comes to mind when thinking about wealth management. However, it is one of the ten largest economies in the European Union with a gross domestic product of SEK3.9 trillion ($458 billion). The country is also in eighth place in the Organisation for Economic Co-operation and Development’s wealth league and, according to Credit Suisse’s 2014 Global Wealth Report, has the fifth highest average wealth per adult in the world at $330,000.

More than 93,000 people were Swedish high net worth individuals in 2014, a 15.4 per cent year-on-year growth, according to the World Wealth Report 2015 by Capgemini and RBC Wealth Management.

“Swedish GDP growth of 2.3 per cent in 2014 combined with the continually increasing prices on the house market and the strong stock market trend is the underpinning reason for the growth of the number of Swedish HNWI. The number of HNWI has increased fourfold in Sweden compared to the rest of Europe,” the head of financial services at Capgemini Consulting, Johan Bergström, said.

According to the Swedish financial authority, Finansinspektionen, it supervises almost 2,000 companies and 900 foreign firms with operations in Sweden. Some 109 of these firms are listed under the category "investment firms", which includes wealth and asset managers, private banking and family offices. There are 88 domestic banks, 47 domestic fund managers and 266 funds.

 When looking at the financial industry, there are four large banks which dominate the market. In decreasing order of size they are Nordea, SEB, Handelsbanken and Swedbank. Combined they account for 75 per cent of the total market, according to the Swedish Bankers’ Association. The four banks are key players in the other segments of the financial industry as well, including wealth management and private banking.

In addition to the Swedish Banker’s Association, which represents 27 banks and financial institutions established in Sweden, there are two more important organisations for the wealth management industry in Sweden. One of them is the Swedish Securities Dealers Association. Founded in 1908, it describes itself as "a meeting place for the Swedish securities market" and has 29 members. The other organisation is the Swedish Investment Fund Association, which with its 42 member companies combined represents approximately 90 per cent of the net fund assets held in the Swedish market.

Most firms have their headquarters in Stockholm, the financial hub in Sweden, and have offices in Gothenburg and Malmö, as they are significant financial centres as well. There are a few more places scattered on Sweden’s financial map, mostly in southern Sweden, Uppsala and Lund being two cities worth mentioning. Otherwise Sweden’s neighbouring countries make for lucrative places to open businesses in, judging by the companies that have branches in Oslo, Helsinki and Copenhagen.

There is considerable cross-border activity for wealth managers in Sweden and the Nordics, as well as the rest of Europe. Most Swedish firms that offer private banking services operate outside of the country and equally there are many foreign firms with branches in Sweden.

An example of a noteworthy actor in the wealth management industry is Carnegie Private Bank, which services clients in areas of investment management, family law, foundation trusteeship, tax management, pensions and equity sales. Established in 1803, it is one of the oldest asset managers in Sweden, and today has operations in Denmark and Luxembourg as well.

Other wealth managers in Sweden include Danske Bank, a Danish bank with a family office and private banking services. It is the fifth largest bank in Sweden, after the four major ones.

Another aspect that strengthens the international image of Swedish investors is that Swedish HNW individuals have nearly 40 per cent of their wealth outside their home country, significantly higher than the worldwide average at 20-30 per cent.

Alfred Berg is another example of how wealth managers operate within Sweden and its neighbouring countries. This business was acquired in 2010 by BNP Paribas Investment Partners, part of BNP Paribas, and operates as an autonomous Nordic asset manager. It was established in 1863 in Stockholm, and today has branches in Norway and Finland in addition to Sweden.

Swedish investors are less open to using financial advisors for investment advice compared to people in other countries, while those who do take investment advice will use their bank to facilitate it, according to a study by JP Morgan Asset Management. It was conducted in 2014 where respondents in seven European countries, including Sweden, were asked about their attitudes to investments.

Interestingly, the JPAM study also found that investors in Sweden seem to have very little involvement or interest in their investments, with only 35 per cent of investors claiming to be “very involved”, the lowest results compared to the other six European countries.

Any talk of wealth management will naturally prompt concerns that Sweden is, almost to the point of parody, an example of a high tax-and-spend social democratic state, rather than one characterised by a friendly, low and flat-tax code. Paradoxically, however, such a system may encourage efforts to mitigate the tax burden where possible. And Sweden has, in some ways, rowed back from some of the highest tax rates seen after the Second World War.

Swedish taxes are among the highest in the world, with a highest income marginal tax rate of 57 per cent. As for VAT, Sweden again has a high rate of 25 per cent. Other taxes are more favourable to wealthy individuals, as in 2004 the inheritance tax was dropped and three years later the wealth tax was abolished. Most recently, the corporate tax was reduced from 26.3 per cent to 22 per cent in 2013.

Unique qualities
Something unique about Sweden is that other countries have considerably higher fees for investment management, such as annual fees, according to Henrik Bohman, the head of private banking, Västmanland, at Swedbank. From his experience, the service fees within private banking and wealth management are significantly lower in Sweden and the other Nordic countries compared to the rest of Europe and the world.

“The competition within the wealth management industry is tough. There is an ongoing trend of lower management fees on ‘underlying allocations’. The management offerings are becoming more and more standardised and digitalised because of the advisor commission ban along with MiFID II that will come into effect 2017,” he said.

“The whole industry is growing but the offering and services are changing. For the really 'big' private banking there will be an even more individual and tailored management solutions, which will become even more expensive than it is today, while the more standardised offerings will become significantly less expensive,” Bohman said.

Finally, Bohman thinks the majority of financial advice will be given through digital channels and model fund-of-funds solutions will become even more prevalent. He also thinks the total fund offering will be notably smaller than it is today.

Sweden’s financial industry does not have many scandals but occasionally there are events that rock the financial boat. In May this year, Finansinspektionen announced that Nordea and Handelsbanken had not complied with money laundering rules. The banks were harshly criticised and received fines of SEK50 million and SEK35 million respectively. Two years ago, Nordea received a similar warning along with a SEK30 million fine.

Lastly, there are relatively few family offices in Sweden for such a sophisticated economy, with no estimates of the number of single family offices and only a handful of multi-family offices. One example is Adecla Family Office, which started off as a single family office and in 2014 decided to offer their services to multiple families and institutions. The Labrusca Family Office, another example, was founded in 2010 and launches and manages mutual funds for its clients. Both firms are headquartered in Stockholm.

It is perhaps also worth reminding readers that Sweden had its own severe financial problems in the early 1990s, so that by the time the 2008 financial crisis hit, its banks had regained the kind of balance sheet strength that other Western banks envied. This publication has occasionally heard it said that while UK banks, for example, were cautious about lending on large real estate projects in London, even where ultra high net worth individuals were involved, Swedish banks were among the few outsider banks willing and able to participate.

The story of Swedish wealth management does not generate many big headlines, but one guesses that this works just fine for its clients.

(To see an article about Germany's private banking market, by way of comparison, click here.)