Profit CEO: In uncertain times, investing in this track is worthwhile US President Donald Trump's tariff policy and growing fears of a recession have sent the US stock market into a tailspin. The S&P 500 index, considered one of the main indicators of market performance, has approached "correction" territory (a decline of over 10% from its last peak). This was almost in line with the Nasdaq, where many of the major technology companies are traded, and which has already shed about 14% from its peak, leading Israeli savers in various investment tracks, including provident funds and pensions funds, wondering what to do should the declines get worse.
As part of the Financial Growth Track - a series of meetings on financial management, savings, and investment in a period of changing interest rates and uncertainty - Daniel Cohen, CEO and partner at the Profit Finance Group, met "Globes" news editor Bar Lavi, for the third meeting in this series, to discuss the market’s burning issues.
Cohen has 25 years of experience in the savings industry. He previously managed long-term savings at The Phoenix Holdings, serving as Executive Vice President and Deputy CEO. Profit, where he currently works, has over NIS 70 billion under management, with a workforce of hundreds of agents and financial planners.
As a senior executive at a large financial company, do you feel that you're under pressure because of the situation? Are you getting a lot of questions?
"Of course. In addition, our financial planners approach our clients and talk to them. We remind them that their investments are not for a day, two days, a month or two months, but for the long term. In this way, we try to keep them from doing the obvious, fast and foolish thing of running away from the market when it wobbles a bit."
Do people really tend to run away?
"Our clients at Profit are generally experienced in the capital market. We’ve been with them for many years, and they know what capital market volatility is. I think that even if someone wants to do that, we know how to take control and calm them down."
What is your main tip for someone who sees their money shrinking and is getting stressed out?
"Take a deep breath, plan the risk components for the money, and the required duration of the investment. The client’s needs may have changed, and then adjustments definitely need to be made. But assuming you’ve invested for the long term -- whether in provident funds, pensions, or other tracks -- you can be calm, take a deep breath and simply hope that this wave will pass. In the end, after every winter comes spring."
Do you prefer investment houses or insurance companies? You manage a wide range of products, from provident funds, through pensions, to personal consulting.
"We work with all the investment houses and all the insurance companies. We are essentially brokers. Profit is an independent entity; we do not belong to and are not owned by any institution or financial products vendor, and we certainly keep that in mind."
Diversification instead of focused investments
The savings industry in Israel is growing rapidly. Among other things, in the past two years, the S&P 500 tracks have been the hottest trend among all financial products. However, the negative reversal came sooner than expected. Just three weeks ago, the idea of a recession seemed highly unlikely. Wall Street was hitting record highs, and enthusiasm over AI was soaring. Today, however, a growing number of economists are warning of a potential downturn, and the strong sense of optimism that followed the US presidential election has faded. A series of disappointing macroeconomic indicators, coupled with ongoing trade tensions, has heightened the sense of alarm.
The recent events are severely challenging the S&P tracks, to which Israelis have flocked in recent years. Today, these tracks manage about NIS 180 billion in long-term savings. Until a few years ago, it was a few billion. In the first two months of this year alone, even before the sharp declines in recent days, savers in these tracks lost 4%, after two years during which the index rose by steeply
Profit in general, and Cohen in particular, were less enthusiastic about the S&P trend and preferred to take a different strategy. "It's complicated to take the whole puzzle, with the different pieces, and bring it to the client according to what suits them. We don’t really believe in extreme tracks that specialize only in a certain product. You can see our portfolio. It certainly isn't based solely on the S&P. Most of our portfolio is in general tracks with a little spillover into specialized tracks for Israel or stocks or things like that, depending on the type of client," says Cohen.
He adds, "We believe in very broad diversification, and the track with the broadest diversification is our general investment track, which has everything from the S&P 500 and Nasdaq, to Israeli market stocks, corporate bonds, government bonds. It also has a non-marketable component, foreign currencies and shekels."
Cohen emphasizes that this approach gives them an advantage. "Maybe when the markets are going up, the general track goes up a little less, but in times of uncertainty and upheaval, we are less affected. We want to convey stability to our clients," Cohen says.
Is the financial reform good news?
A significant part of the conversation dealt with the revolution in savings being advanced by the Ministry of Finance. The interim conclusions published by the arbitrage team responsible for the reform, propose the creation of a unified platform, an "investment account," in which all savings products will be concentrated under one roof, while unifying regulatory and tax rules. However, tax benefits will be changed, so that in some cases, and especially in investment provident funds, savers may be harmed by various restrictions.
What do you think of the program?
"The intention was good: to examine whether real market competition exists. There are cases in which financial management entities are controlled by insurance companies with large holdings in them, and the committee came along to examine whether this has an impact on competition, on the price to the consumer, on the service, and on the product. In the end, several insights were published: first, that there is no impact, with which I have some disagreement, and a second conclusion, that the distribution channel, the insurance agents, must be addressed."
And you don’t like that very much.
"There’s no doubt at all that the competition in the industry, of which Profit is a part, has brought tremendous value to the customer. First of all, there has been a very significant reduction in management fees. In this respect, there is complete regulation that covers the matter. This is also a good place to say congratulations to the regulator for this. We’ve brought each customer savings in the hundreds of thousands of shekels and even more, over the years."
Cohen explains that the problem with the move being led by the Ministry of Finance -- which will restrict insurance agents, among other things -- is that all competition will be harmed.
But we have also seen cases in which agents didn't exactly act in the best interests of customers.
"In a market with thousands of agents and financial planners, there will inevitably be some who do the wrong thing by the customer. It’s a tiny minority. It happened in the past, it happens today, and it will happen in the future. I don't think it will be possible to change this through regulation."
Cohen recalls previous reforms in the sector that, according to him, worked excellently well. "When they created the 'default pension fund,' they essentially allowed clients who earn relatively low wages to benefit from competition on management fees, thereby allowing them to obtain lower fees," he says.
"Israelis continue to be loyal to the banks"
What do you think about the change they want to make to the tax benefits? On the one hand, they want to give benefits to more products such as mutual funds, and on the other hand, they will cut the significant benefit on investment provident funds, which is a product that was introduced less than ten years ago.
"With investment provident funds, for example, they’re saying people will be allowed to save through them only from age 18, and not from age zero. In my opinion, there are interests here that go far beyond the age of the saver or the terms. There are interests here regarding money exiting sleepy entities called banks. These entities have controlled savers for many, many years, and Israelis continue to be loyal to the banks. The role of your financial planner is to take your money from a sleepy place and move it to a place that gives a real return and value."
At present, in an investment provident fund, the annual deposit ceiling that qualifies for tax benefits is about NIS 81,000. As part of the reform, the Ministry of Finance is discussing lowering the ceiling - a move that Cohen criticizes roundly. "The state has a tremendous interest in my saving and starting to save for my child at the age of one, so that in the future he can buy an apartment in Israel. This is in the state's interest. They should not have set the ceiling at NIS 80,000, but at NIS 250,000 shekels, and from age zero. There is no reason in the world not to."
The Ministry of Finance claims that the benefits need to be distributed differently, as today they serve only the highest deciles.
"So you're actually stymieing those who want to economize and become wealthy, those who want to give their children a better opportunity. This opportunity can't come about if you don't start saving in tax-exempt ways, with tax benefits on children from age zero. The rich know this better than anyone else."
Although these are only interim recommendations and there is still time until decisions are made, if the reform passes then mutual funds will be on a par with investment provident funds and pensions. Does this mean that we will see you, the financial planners, in mutual funds, too?
"I think that at the end of the day, a financial planner can and should see the entire picture of the client's portfolio to be able to give them true advice and for various timeframes. You have to be much more professional to handle mutual funds and be open to this market. It’s greatly in my interests to say, ‘Yes, certainly.’ We know how to do everything, but my loyalty is to our clients. There’s still a long way to go in teaching our financial planners before we can handle more investment tracks."
This article was originally published in "Globes" in Hebrew on March 13, 2025.
The "Globes" Financial Growth Track series took place in collaboration with Profit.
Published by Globes, Israel business news - en.globes.co.il - on June 30, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.