Investment Management 2.0 – Internet Platform for Investment Management

Last week the Israel Securities Authority published a directive on “Investment Management 2.0”. 

Investment Management 2.0 is effectively a service model for internet investment management operated through investment in mutual funds. Through this service, companies that hold an investment management license and that market investments may offer their clients investment management and marketing services over the internet and via investment in designated mutual funds specifically established for this service.

Under the provisions of the ISA directive, each service provider will manage the investments of four designated mutual funds, each with a different risk profile—low risk, medium risk, medium-high risk, and high risk.

The process of joining the service, and effectively the entire service, will be conducted online via the internet. First, the service provider will determine the client’s needs and the risk level appropriate for it. Accordingly, the service provider will recommend the designated mutual fund suitable for the client’s needs. The client will then be given the opportunity to purchase units of the recommended mutual fund directly via the service provider’s online system.

According to the ISA’s explanatory note to the directive, Investment Management 2.0 was designed to respond to the following goals and needs:

• Access to investments in the capital market via investment management provided through mutual funds, with its obvious advantages, also to non-traditional clients of investment management services;
• A simple service that is operated digitally and at a relatively low cost; and
• The facilitation of competition in the field of investment management, and opening up to the client the possibility of comparison between the performances of different investment management companies.

For review of the entire directive, click here (Hebrew).