Since the Bacher reform about 20 years ago, one of the markets that has remained more or less static is the mutual fund market. Today, those who are interested in buying mutual funds, the main option before them is through the banks that have a firm control over their distribution. For the service they charge buying and selling commissions, as well as quarterly custody fees. This is in addition to the management fee that the investor pays to the company that manages the trust fund itself.
However, during the Corona period, there was a change in the industry – more and more investment houses made accessible the possibility of managing an independent trading account digitally through their application, while lowering the minimum transfer required to open an account and trade. The quarterly custody fees are replaced by account management fees at a fixed cost, regardless of the volume of trading, and in addition the investor pays the management fees to the fund itself. In general, the cost of making investments through an independent trading account in the investment houses is cheaper than the banks, but they also charge a buying and selling fee.
The model of the fintech company Fair
One of those companies that makes the possibility of independent trading accessible is Fair, which established a fintech company for trading services for members of the FMR exchange. The fintech is led by Elad Shafer, the CEO, and Yossi Ben Shoshan, the CTO.
What does the customer gain? The company makes it possible to invest in active mutual funds without collecting commissions from customers directly. Thus, the customer is exempt from the buying and selling fees and account custody or management fees, and only pays the management fees to the fund company itself.
What should you know? Fair’s business model is based on a distribution commission they receive from the fund company, not from the client. The fintech, which has become a digital stock exchange member, allows the buying and selling of active and financial Israeli mutual funds, and does not allow the buying and selling of imitators or followers. Active mutual funds manage NIS 208.6 billion, and they make up about 57% of the mutual fund market.
Not intended for every investor
Who is it for? However, the fintech company offers distribution services only, without consulting services for the client. That is, in Fair’s digital interface you can get information about the various funds, but you cannot get advice on which fund suits the client’s investment strategy, or which fund suits him in one category or another. Therefore, fintech is mainly intended for investors who know which fund they are looking for, either after research they conducted independently, or whether they received advice from another body and get to apply the advice more cheaply themselves.
What is the threshold requirement? In order to make the initial purchase, a minimum of NIS 250 is needed, and to go through the “know the customer” process required by the anti-money laundering regulations. The fintech works so that the customers can make the purchase before transferring the money and completing the identification. However, if they do not complete it in a short time, the fund will simply be sold.