Bank Discount was the only bank to invest in advertising its provident fund, Tamar, in the last couple of weeks in hopes that the fund will grab some of the huge deposits typically made before the end of December. The other banks, most of which haven't yet completed the sale of their provident funds, didn't even trouble to do that much. From their viewpoint, the provident funds are somebody else's problem: The companies that bought them.
Bank Discount is the exception. Not only did it advertise its provident fund, but its promotion went beyond merely quoting the fund's returns.
The bank explained that Tamar is the highest-ranking fund in the new ranking the bank developed, which weights the performance of the provident funds according to the ratio of their returns to the risk at which the returns were achieved.
The rating is supposed to be key to Bank Discount's investment-advice model, once it finally sells Tamar to Clal Insurance and starts providing advice on pension savings.
One can applaud Bank Discount for being the first to base its (future) investment advice not only on returns, but on risk. Or maybe not. A bank that publishes an objective model - which is supposed to give unbiased advice - and finds its own product at the top of the heap, is suspect.
But why would Bank Discount go to the trouble of building a model biased in its favor if it's about to sell Tamar anyway?
Good question. Great question, even, which had financial market circles thinking that Bank Discount is signaling the market about intentions to continue grooming the portfolio. That is, it's telling Clal Insurance that it should rest easy: The bank's advisers will continue to send customers toward Tamar even after its sale.
Behind that view is the nasty spat that erupted between Clal Insurance and Bank Discount over the Tamar deal. Capital market circles wonder if the signal isn't the bank's way of furtively hinting that post-sale, everything will be fine. Or, that Clal Insurance better not hint around about discounts because Tamar will continue to flourish after its sale.
The point is, it doesn't really matter whether Bank Discount's risks model was built in total innocence, or whether it's a cynical attempt to better position Tamar ahead of its sale. The point is, how do the financial markets view the banks just before the new era of pension advisers at the banks starts.
Financial market circles view the banks as having zero objectivity. All their moves are seen as being motivated by the banks' own good.
Bank Discount is suspected of skewing a new model to benefit a provident fund it's about to shed. The banks in general are suspected of the complete opposite: crushing the mutual funds they just sold for hundreds of millions of shekels to insurance companies and foreign investment firms.
That happened to the mutual funds, which have been bleeding money since their sale. The question now is what will happen to the banks' provident funds after their sale. How will the banks' advice on investment in these funds look?
The insurance companies made a big mistake when they agreed to buy the provident and mutual funds from the banks. They signed the agreements thinking they were buying a distribution channel at the banks, too. They thought the banks would work for them. But that was based on complete misconstruction of the Pension Advice Law, which forbids the banks to do that very thing.
More to the point, the insurance companies completely failed to grasp the banks' business culture, which set out to prove they remain the strongest of them all. With a wave of their calculator they can raise or destroy any financial asset. Don't mess with them.
The message got through. The insurance companies and brokers, who had been toying with the idea of setting up a distribution system that would compete with the banks (their own clearing system), have cooled on the idea. Nobody wants to be the first to challenge the banks by setting up a competing distribution channel: One word from the advisers at Bank Hapoalim and even a giant insurance company like Migdal would be in danger of losing a million customers.
There is no question that the banks thoroughly deserve the way the market views them. With policies that range the gamut from preservation to sudden death, the interest of the customer has disappeared.
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