Banking Securities Authority: Discover the returns of investment advisory services for clients


Securities AuthorityIs working to remove the ambiguity surrounding the results of investment advisory systemsBanks To their clients, while providing tools for measuring the returns recorded by consulting clients at banks. The Securities Authority announced today that it is initiating a move that will create transparency on the subject for the first time, as part of which it issued a circular to banking corporations engaged in investment advice “regarding the presentation of a return to a client receiving investment advice services”.

The new circular is expected to produce, for the first time, a tool for examining performance that will be used by the Authority to estimate about 400,000 people who need investment advice from the banks and who have “advisory accounts with more than NIS 300 billion.” The move was made by the Securities Authority and the opinion of the Supervisor of Banks, which is responsible for the banking system, and with the aim of “enabling performance comparisons between different investment instruments.”

According to the circular of the authority headed by the chairman Anat Guetta“There is great importance to the transparency of material data relating to the activity and quality of performance in the advisory account which will enable the client to examine the various investment alternatives.” The Authority is aware that “there is no legal obligation to provide information to the customer”, but states in the circular that “banking corporations should act as stated while presenting the information on the basis of clear comparative data including the return calculated according to the TWR method and presenting it minus account management fees and transaction fees.” Time of the last year and of each of the two years before it. ” Note that the TWR method measures the rate of return that an average computer calculates the rate of return and neutralizes deposits and withdrawals in the portfolio.

If and when the move happens, it will be a significant step forward in terms of examining the quality of investment advice in banks – something that is not measured today. This is between the banks themselves and between them and other management instruments such as managed portfolios. However, it should be noted that this is a complex return because the client does not always act on the basis of the advice given to him, although for many clients the bank adviser has a significant status in making their decisions. Thus, from the point of view of the Securities Authority, “mirroring the data will allow consumers to improve their securities portfolios, as well as allow customers to move between investment instruments and investment bodies existing in the market,” according to a source.

The Securities Authority continues to write to the banks that “In the margins, we would like to point out that although our letter concerns advisory securities portfolios that are only under the Authority’s supervision, our approach is that publishing a return to the client is basic and important information for any securities portfolio.” Which is currently working to anchor the aforesaid obligation in the NABAT (Proper Banking Procedure – a key tool through which the Supervisor of Banks regulates the conduct of the banks and determines their instructions, RSH) that will regulate the issue in relation to all bank customers. ” The Securities Authority continues to say that “there is no impediment for us, that in the interim period, until the publication of the aforesaid NBA, the arrangement implemented by you in relation to the advised clients will apply to all your clients’ securities accounts.”

It should be noted that in contrast to the NIS 300 billion advised by the banks’ investment advisory systems, in the activities of the investment portfolios managed in the investment houses, there were assets with a total value of about NIS 260 billion at the end of March this year. The clients of the managed portfolios have a detailed and personal disclosure regarding the returns achieved.

Even before Guetta’s circular, a private member’s bill was submitted to the Knesset in August regarding “regulating the practice of investment advice, investment marketing and investment portfolio management (amendment – reporting an investment advisor to the client)”. The proposal was submitted by MKs Michal Shir, Keren Barak, Katie Sheetrit, Miki Levy, Yinon Azulai and Aida Toma Suleiman, according to which a bank that deals with investment advice will give its clients “a detailed account of the composition of its investment portfolio and its charge, directly or indirectly. Due to salaries and expenses, including the returns obtained in respect of his investment portfolio each quarter, in accordance with the provisions to be determined by the Authority; Such a report will be given to the customer in a clear and understandable manner. “

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