Israel’s five biggest banks collected a record 3.5 billion shekels in trading fees from investors in 2025, up 18.4% in a year. That spike prompted a special interministerial team from the Bank of Israel, the Israel Securities Authority and the Budget Division at the Finance Ministry to publish the final report of its retail capital-markets reform on Tuesday, after more than two years of work and six months after the interim report.
The plan is meant to simplify fee structures and reduce hidden cross-subsidies in which small clients effectively pay for wealthier customers’ advisory services. It will be rolled out in three stages. In the first, which does not require legislation, banks may offer bundled monthly pricing for trading services instead of charging separately for each transaction, and they will have to introduce a distinct fee for mortgage advice, which is currently presented as free even though its cost is spread across all customers. Officials say that in this stage banks will likely continue fully subsidizing the service.
The second stage changes distribution fees on funds. Active funds currently pay banks up to 0.35% in distribution fees, a legacy arrangement from the Bachar reform. Under the new model, those fees will be replaced by a single 0.2% brokerage fee that will also apply to passive funds, except that it will be charged only when a purchase follows actual advice. Bank fees on money-market funds, however, will remain at 0.1%, with no transaction fees for customers, to preserve them as an alternative to deposits. The reform does not fully solve a remaining distortion, because fund managers are expected to fold the brokerage fee into management fees that all investors pay.
The third stage will convert quarterly asset-based management charges into a fixed monthly shekel amount, although pressure from the banks led regulators to drop mandatory statutory tiers for small portfolios for now. Regulators say the biggest immediate losers will be advised clients, and a survey in the report found that 66% of advised respondents would stop using the service if they had to pay directly. Only 9% of clients with portfolios up to 300,000 shekels currently receive bank investment advice, meaning 91% have been subsidizing that service for years. The report also notes that competition is already intensifying, with non-bank brokers and trading apps raising their share of new trading accounts from about 7% in 2019 to 47% in 2024. The current changes apply only to banks for now, but the team intends to extend similar rules to investment houses once the long-stalled broker-dealer law passes the Knesset.
