The interest rate rises, the banks profit and the public loses money.
What does the CEO of the stock exchange propose to do? (Photo: ShutterStock)
The CEO of the Stock Exchange, Itai Ben Ze'ev, goes on the attack against the banks. Today the stock exchange publishes its position regarding what it calls "the market failure that prevents the Israeli public from accessing investments" while emphasizing the fact that in Israel there are only about 1,700 advisors operating out of about 3 million Households.
Banks will not like to hear the conclusion of the stock exchange and its head: the separation of consulting from banks is necessary so that the Israeli public can benefit from access to financial knowledge, services and products.
As a stock exchange, it calls for a fundamental reform that includes strengthening the consulting systems and separating them from banks in order to increase the number of players operating in the market Israeli capital and increasing competitiveness and accessibility to proper financial management is for the benefit of the Israeli public.
Today, according to the stock exchange, due to the inherent conflicts of interest in banking, the consulting law is highly bureaucratic and severely limits the ability of consultants to act in front of the general public.
This call by the stock exchange is part of its goals to perfect the Israeli capital market similar to what is done in the world, with an emphasis on the participation of the Israeli public in investments, as was also reflected in the new strategic plan that was presented a few months ago.
The stock exchange emphasizes that the consulting in the banks is professional, at the same time they warn against the formation of a conflict of interests (Photo: ShutterStock)
More from the stock exchange's position paper: "In Israel there is an inherent and deep failure in the activity of financial advice that is accessible to the general public. A comprehensive report, the first of its kind published by the Securities Authority earlier this month on the topic of 'the activity of advisory systems in banks' showed that the number of advisers licensed to engage in investment advice has decreased By about 30% in just 5 years, this despite the growth of households and an increase in the scope of the public's assets and a significant increase in the offer of investment options and financial products.
The field of consultants is highly concentrated, with 94% of the consultants working in the banking system and providing actual consulting services only to those who hold an average of NIS 950,000 in their account.
If this is not enough, the multitude of conflicts of interest that exist in the banking system do not really allow the consultants to act in order to provide the best service to the general public.
These data, along with the huge mountain of current accounts that exists in Israel and the highest in the world, which currently stands at about NIS 520 billion, illustrate the fundamental failure that exists in the activity of the consulting systems in banks. can receive the basic advice required for more correct management of his assets. This situation causes a continuous weakness in the local capital market which does not benefit from sufficiently active participation of the general public and high marketability, which ultimately damages the local companies and the attractiveness of the stock market for Israeli and foreign investors.
The phenomenon occurring in Israel is In stark contrast to the existing trend in the world, where while the supply of financial products is only increasing and investment avenues are improving, the number of advisors in Israel is decreasing. Data from the Securities Authority report show that only about 350,000 Israelis benefit from banking advisory services, while the majority of the population receives no service This is basic and important."
Another problem, again - according to the stock exchange's position, exists in the ability to provide a professional and appropriate response, certainly when some banks operate according to profitable business models in other business lines and are not interested in cultivating the consulting systems.
An investment advisor currently serves about 250 clients and more and under these conditions his ability to provide quality and professional service to his clients is almost impossible.
Beyond that, as long as the consulting systems are part of the bank, it is not possible to give incentives to the consultants and there is no measurement related to bringing a return to customers.
This also harms the entire population of consultants who work in an environment that does not encourage excellence and an optimal level of performance and is an additional harm to both the consultants and the public.
The data from the Authority's report show that even the reduction of the consultation threshold in the banking counseling systems in recent years did not bring about the expected change in making banking counseling services accessible to the general public and in their improvement.
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CEO of the stock exchange, Itai Ben Ze'ev. A direct attack on the exclusivity of the banks on advice to the public (photo: Walla! system, Tamar Matzafi)
Those who have NIS 100,000 in their account lose about NIS 4,000 per year in the bank
The increase in interest rates in recent months was unequivocal proof that investment advice is not accessible to the general public, due to the fact that correct financial conduct is critical and depends more than ever on the ability of households to cope with the rising cost of living.
A simple calculation shows that in the current interest rate environment, an Israeli who has a current account balance of approximately NIS 100,000 loses an annual passive income of approximately NIS 4,000 per year.
The stock exchange's recommendation to strengthen the sector is the consulting reform - separation from the banks and the entry of new players in
order to deal with the situation the existing one, open the capital market and allow the entry of new players and more importantly - allow the consulting systems to expand their consulting to the general public as well, the consulting systems must be strengthened, recruit hundreds more consultants, invest in systems, increase the amount of analyzes and reviews, and more, and all this in order to upgrade the system The consultation and make it accessible to every house in the State of Israel and adjust the structure of the consultation as accepted in the world.
The stock market offer includes several stages: separating the consulting firms from the banks and establishing them as independent subsidiaries with a stable business model that earn a living from consulting services in the capital market, and in the second stage the sale of the independent consulting companies to local and global financial entities.
These will be able to operate in all worlds of financial products, and provide investment advice for a wide variety of financial products for the benefit of the general public.
This move - according to the stock exchange publications from today - will result in the companies actually competing in bank deposits and the other products and services offered in the banking system.
This is expected to have the additional benefit of reducing the concentration of banks and increasing competition in the Israeli financial industry, including an improvement in the distribution system for retail customers of financial products that are currently not accessible to the public, among other things, due to regulatory restrictions that apply to banks.
The stock exchange works directly and daily with the banking advisory systems, whose personnel are highly professional.
At the same time, in order to reduce the social gaps in Israel, the world of investments and consulting services must be made accessible to as many households as possible.
In its current form, it will be difficult to impossible for the banking system to bring about such a change, and therefore a radical change must be made and the consulting systems should be allowed to operate separately and independently from the entire system, for the sake of the economic future of the public in Israel.
Itai Ben Ze'ev, CEO of the Stock Exchange
: "The Israeli public loses hundreds of millions of shekels a year because it does not receive proper and competitive financial advice.
The astronomical mountain of shekels in the current account which currently stands at approximately NIS 520 billion is the proof of this, certainly in a variable interest rate environment which erodes the current account funds of the Israeli public every day.
The consulting systems must operate separately and independently from the banks, similar to what is accepted in the world, in order to be a factor that generates competition and to allow the general public to be given the information and access to the capital market and financial products.
Professional advice, which is not only for the rich, is a critical tool in the ability of the general public to maximize value for their money and in the ability of the State of Israel to ensure a sophisticated and dynamic capital market, for the benefit of the public and the continued growth of local companies."
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