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Yair Hamburger was first to pounce.

Nochi Dankner is agitated: It's all wrong for Harel Insurance Investments to take the lead in buying assets from the banks. Dankner, via IDB group company Clal Insurance, should have been the one at the forefront, he believes.

Shlomo Nehama is also rather annoyed. Galia Maor beat him to it, leading state-owned Bank Leumi to become the first bank to sell a mutual funds management company. Meanwhile, the bank Nehama runs, Hapoalim, may be privately held and theoretically less cumbersome, but it's still hemming and hawing.

An onlooker might think it's a Monopoly game being played by a few oversized kids selling properties to each other, and quarreling over who has the biggest one, who was first, and whose turn it is to spring a surprise.

Actually, it looks about the same to insiders too. Israel's marketplace is a tiny, congested place with a growing number of superstars, each with an ego no less towering than his or her paycheck.

The question that actually matters

But the real question is not who's on first, but what the future capital market will be like. A superficial glance might think that the problem the Bachar reform set out to solve, namely the domination by one sector - the banks - over all the rest, is not solved: it is merely passing to the insurance companies. Instead of Galia we get Yair, instead of Shlomo we get Nochi.

A deeper look discovers an entirely different reality. Before the reform, the two big banks, Hapoalim and Leumi, controlled half the general public's financial assets via provident and mutual funds, deposits, and savings accounts.

Even if the negative scenario comes to fruition in which the banks' asset management companies simply pass their business to the insurance companies, the number of hands holding most of the public's assets will increase from five to 10, which is a significant difference.

But most importantly, it will take the insurance companies years to match the special status of the banks, if they ever do.

Unlike the banks, the insurance companies do not manage checking accounts for customers. They do not supply mortgage loans and overdrafts. They are not the primary advisers when it comes to finances, and they do not carry out standing orders.

A new world, a new model

What does that mean? It means that Yair Hamburger, who owns Harel, may have bought the mutual fund management company Leumi Pia from Bank Leumi. But he knows that the company's business model will have to change.

While in Leumi's hands, Pia's main growth driver was Bank Leumi's investment advisers. That is why 90 percent of Pia's assets derived from Bank Leumi customers.

From the moment the company is passed over to Harel, Leumi's advisers have no special reason to recommend investing there.

Habits die hard. The change won't happen overnight. But in a couple of years, we will have a new capital market with less captive customers guided by automatic advice. In their place will be people guided by returns, yields, risks and performance.

The big boys in the market know all that, but not all have digested the significance. They are too preoccupied fighting over distribution fees, a hot-button issue that actually means very little in the new capital market.

When will they get it? When stocks or bonds, or both, start to fall.

Fall?

Yes. After two and a half years of steep gains, Israelis still seem to think that for stocks and/or bonds to retreat, even by no more than 10 percent or 20 percent, is silly. What about the disengagement and economic growth and clear blue skies, they ask.

True, the capital market looks good now - highly liquid, diversified and stronger than ever after the latest reforms. But at the end of the day, a cycle is a cycle and the wheel will turn.

When the boom is replaced by bust, in a month or a year or whenever, then, to paraphrase Warren Buffett, we'll see who's standing there shivering in the altogether.

We will see who bought provident and mutual fund management companies at top price, who can justify the fees taken from clients, who really has the knack for producing returns without taking over much risk - in short, who was really prepared for the new era in which clients have free choice and vote by performance.