Israel Aims to Regulate Online Financial Influencers and Streamline Investments
Inbal Pollak, head of the investment department at the Israel Securities Authority (ISA), is spearheading a significant overhaul of the Israeli investment landscape, aiming to democratize access to financial markets and curb the risks associated with online financial advice. Pollak, who has been with the ISA since 2021, is pushing for reforms that would allow broader public access to funds investing in real assets like real estate and infrastructure, previously exclusive to institutional investors. She criticizes the current system where "the average investor is only sold daily liquidity: you rise with the market and fall with it," emphasizing the need for diversified investment tools beyond stock market fluctuations.
Simultaneously, the ISA is tackling the chaotic online environment fueled by social media and financial influencers. Pollak's proposed regulations aim to bring order by requiring content creators discussing investments to obtain licenses and disclose their interests, a move that has sparked controversy. Pollak argues that while some influencers provide valuable financial literacy, others engage in deceptive practices, including impersonation and promoting "pump-and-dump" schemes. The ISA's initiative seeks to update investment advice laws from 1995 to reflect the digital age, ensuring transparency and accountability.
Beyond regulating online discourse, the ISA is also advancing a "Investment Account" reform. This initiative aims to decouple tax benefits from specific investment products, attaching them directly to the individual. This would allow investors to move funds between different products like provident funds and savings policies without incurring tax penalties, fostering greater competition among financial institutions to offer lower fees and better performance. While a temporary cap of NIS 200,000 per lifetime has been set for this account, Pollak hopes it can be revisited as the budget allows.
Pollak also highlighted the conflict of interest within the banking sector, where banks may not actively promote higher-yield cash funds over low-interest current accounts because it impacts their ability to extend credit. The ISA is pushing banks to improve the accessibility and clarity of information regarding these alternative options. Furthermore, the ISA is exploring the integration of Artificial Intelligence (AI) into financial advisory services, aiming to enhance personalization while addressing concerns about data security and the potential for AI-driven manipulation.
