Twenty years after the Bachar reform pulled asset management out of the banks, the Israel Securities Authority, the Finance Ministry and Bank of Israel have published the final report for a sweeping change in mutual fund fees. The plan comes nine months after the interim report and targets a fast-growing market now worth 830 billion shekels, up 130% since the end of 2022.
The centerpiece is the elimination of the historic distribution fee, now 0.35%, that banks receive from fund managers. In 2024, banks collected 412 million shekels from that charge alone, and the regulator says they did little to earn it. But the industry fears the reform could backfire and make products more expensive.
The package has three stages. The first, which does not require legislation, would let banks bundle services and charge customers a combined fee for securities activity, including mutual funds, as well as a separate advisory fee depending on the type of advice or channel. The second would cut the distribution fee to 0.2% and extend it to index-tracking products, including mutual funds and exchange-traded funds tracking the Tel Aviv indices, S&P 500 and Nasdaq. Money market funds would remain at 0.1%. Only customers who use bank investment advice would pay it, but this stage needs legislation and may be delayed until after the next election.
The third stage would replace percentage-based bank custody charges with a fixed shekel fee for securities accounts. Today banks usually charge 0.3% to 0.6% of portfolio value, and sometimes 1%, meaning annual fees of 1,500 to 3,000 shekels on a 500,000-shekel portfolio and 3,000 to 6,000 shekels on a 1 million-shekel portfolio. Private investment houses typically charge about 240 shekels a year, so the new model would erase that price advantage.
The market remains bank-dominated, with only about 30% of Israelis holding a trading account, while roughly 75% of savers still manage investments through banks. Critics argue the reform will raise fees on passive funds, hurt competition and reduce the appeal of investment advice. One senior industry source warned that the authority is “making products more expensive and slowly killing the sector,” while another said the new charges could weaken the economics of bank advice. Securities Authority chair Sefi Zinger said the plan creates a fairer, more competitive capital market, and Supervisor of Banks Dani Hahiashvili said it balances interests and strengthens retail customers.
