The mutual fund industry in Israel currently manages about NIS 360 billion. Despite the large volume, and despite the fact that there are about 20 management companies in the market, 99% of the funds ‘trading is done through the banks’ investment advisers. Due to their involvement in trading, the banks charge shifts and buying and selling commissions from investors, and according to market estimates, these commissions are estimated at NIS 700-900 million per year.
This week, the fintech company FAIR submitted an application to be accepted as a member of the Tel Aviv Stock Exchange, as the almost final step on the way to establishing a digital platform that will allow the investing public to purchase Mutual Funds Without paying the fees in question.
The FAIR platform, the company claims, will open up to investors the ability to purchase mutual fund units already in the initial search and sorting process for an investment product, in an online process. From the other side of the trade, for the first time since the Bachar reform in 2005, mutual fund companies will be able to distribute mutual fund units directly to investors through the new digital arm.
Will not engage in traditional activities of stock exchange members
FAIR was established by the APMR Group, which currently provides the platform to most members of the stock exchange operating on the Tel Aviv Stock Exchange, and as a result, most trading is also based on this platform. However, FAIR notes that the application to be accepted as a stock exchange member was made for the benefit of distributing mutual funds open to the public in Israel only, and will not engage in traditional activities of stock exchange members, such as securities trading, underwriting and brokerage. This is not a simple statement, given the fact that the company that specializes in developing financial systems also includes a provident fund management company – Slice Provident.
In FAIR, they add that the establishment of the system will lead to improvements for both consumers and fund managers. “For the consumer himself, for the first time in the country the search and purchase will be in the same place. To date, the investor has sought and found a mutual fund he is interested in investing in, and the purchase itself was made in a separate process elsewhere. With FAIR launch the investor Explain. For fund managers, this is a direct approach to investors, without the mediation of a third party, in this case the banks.
According to the company’s business model, they will be rewarded by the management companies who will use the platform to distribute their products. These are currently only traditional Israeli mutual funds. However, and in order to maintain objectivity during the process, whoever enters the digital platform itself will find an alphabetical list of funds without any preference or analysis of the market.
The system will be implemented in websites and publications
FAIR wants to remain a mere platform for trading, and aims to make the main use of the system through its implementation in various websites or publications, so that a customer who is exposed to a particular fund can purchase it directly from the location where he was exposed to it.
The establishment of the platform was made possible after about two years ago the Securities Authority and the Stock Exchange issued a “call for proposals”, which was directed to all parties interested in operating as a retail broker in Israel in the distribution of mutual funds. The move is designed to enable the general public to enjoy direct, advanced, cheaper and more accessible trading services in favor of promoting technological innovation in the capital market and lowering the costs of financial services.
To this end, the Authority and the Stock Exchange have worked to promote changes in the regulation and stock exchange regulations in order to facilitate brokers, with an emphasis on reducing capital requirements and fully digitizing the securities account opening process, as is customary in the world’s developed and advanced capital markets.
“In the company’s opinion, the objective fintech platform activity in this format is expected to benefit the public, by turning mutual funds into an end-to-end digital product and addressing the public’s needs and desires. The process of joining a potential customer to the service and making it accessible, available and efficient, all through providing a complete digital experience to the customer, “FAIR noted.
NIS 800-900 million The estimated total fees charged by banks per year in mutual funds
NIS 360 billion – The volume of funds currently managed in the mutual fund industry