New Unified Investment Account Could Favor Asset Managers Over Banks

Israel’s government arbitration committee is nearing final recommendations on a new unified investment account, a product intended to combine most non-pension savings and investment channels into one framework. The committee released interim conclusions in February 2025, and the final report may include startup protections for investment houses, possibly even keeping banks out of the market for several years.

The committee, which includes the Finance Ministry, Tax Authority, Israel Securities Authority and Capital Market, Insurance and Savings Authority, was set up in early 2024 to reduce regulatory and tax gaps across savings products. Officials say the current patchwork of products, including investment provident funds, savings insurance policies, mutual funds and managed portfolios, makes comparisons harder for investors and can favor intermediaries whose interests do not always match savers’ interests.

At the heart of the reform is a single account that would allow investors to hold securities, mutual funds and other products under one umbrella, with tax treatment harmonized across options. The main feature would be tax deferral, so buying, selling, switching funds or changing investment tracks would not trigger capital gains tax until money is withdrawn. The committee is also weighing a limited tax exemption on some gains if withdrawals are taken after retirement as an annuity, but the benefit would likely be capped at several tens of thousands of shekels.

The idea has triggered a sharp dispute among regulators. Securities Authority chair Sefi Zinger backs it as a way to boost competition and broaden access, while Capital Market Authority chair Amit גל objects, warning it could concentrate power in a few large investment houses and indirectly revive bank activity curbed by the 2005 Bachar reform. One senior capital markets figure called it “Bachar 2.0,” saying that if banks are kept out, the change would weaken the public’s historical reliance on banks for investment services.

The final report will not be the end of the process, since the government is not required to adopt it and some changes would need legislation. Banks are likely to resist in the Knesset, where the battle over the reform is expected to move next. At the end of 2025, the five largest banks held securities worth an estimated 4.7 trillion shekels for clients and earned about 3.4 billion shekels from securities commissions, custody fees and related trading activity. Supporters of the reform argue that without a temporary protection period, banks could use their scale and large customer base to dominate the new market immediately.