As a new Jewish year begins, it is time once again to reflect on how we can help our clients navigate the ever-changing financial environment and look for meaningful takeaways for the new year ahead of us.
Asset prices both in Israel and globally continue to rise higher, across all investment classes, equities, bonds and alternative investments. This comes despite the increased geopolitical risks and the start of the unwinding of central banks’ massive intervention efforts from the 2008 crash. In the US, interest rates have begun to rise and the Fed has outlined how it will withdraw its monetary support for the economy and deleverage its $4.5T balance sheet. Likewise in Europe and Asia, there are intentions to follow the US’s lead in reducing stimulus. Israel, in contrast, has real economic growth as opposed to fueled by central banks, an all-time high in FX reserves, commercial banks with remarkably solid balance sheets, a burgeoning high tech sector, natural resources for export and its household sector with growing wealth.
The table below most clearly shows the tremendous growth in the Israeli economy over the past decade.
Israel GDP/Capita Comparison 2016 vs 2006
| 2006 | 2016 | Change | |
| US | $46k | $57k | +24% |
| UK | $44k | $39k | -9% |
| Canada | $41k | $42k | +4% |
| Israel | $22k | $37k | +70% |
This strong economic growth underpins the strength of the Israeli shekel and is an important issue for many of our clients who may have income and/or assets in other countries, while their expenses and futures are in shekels. Over past years, we have continually advised and assisted clients in understanding their overall currency exposure and implemented the changes needed on a global basis across asset classes, investment, retirement products and accounts.
Aside from currencies, the principal risk and concern globally are the current near-zero interest rates on bank deposits and the low yield on fixed income assets. Further, in most countries demographics are a major concern. Retirement funds, both national and private, are underfunded as more people are living longer and there are not enough people coming up behind them to support today’s system. In other words the worker replacement ratio is worsening. Furthermore, retirees are living longer and therefore investments need to earn higher rates of return, at a time when safe and solid fixed income assets, that are usually the primary pension asset, yield only 1-2%.
However, this global trend is muted in Israel, due to higher fertility rate and emigration and economic growth. Further, the household sector has NIS 1 Trillion in retirement savings, meaning that the average Israeli household has significant retirement assets and is less reliant on government pensions at retirement. This is primarily due to legislated compulsory retirement contributions at high rates for all workers in the economy. Interestingly, Israel is also a good place for retirees; Israel ranks highly on the Natixis Global Retirement Index that measures retirement on the 4 axes of quality of life, finances, material wellbeing and health.
| Country | Canada | US | UK | Israel |
| Retirement Index | 76 | 72 | 72 | 71 |
In sum, we continue to be optimistic on Israel and her future, from both the strong macro factors of economic growth and national savings.
In order to provide better service, we have invested in several areas: new software that allows digital signing of most forms from banks and insurance companies, professional training for insurance and taxation issues, and closer collaboration with leading legal and accounting professionals both in Israel and abroad.
Over the year, this meant assisting on investment portfolio decisions, medical claims, bituach leumi/social security questions, house purchases, FATCA issues, employee retirement contributions, job changes, alternative investments, stock picking, to finding employment, apartments and even spouses! All with the goal of seeking to help our clients whenever possible.
I wish a year of good health and happiness to you and your family.
Moshe
THE INFORMATION ON THIS SITE IS NOT INTENDED AS AND DOES NOT CONSTITUTE INVESTMENT, INSURANCE, LEGAL OR TAX ADVICE, NOR IS AN OFFER TO SELL ANY SECURITIES TO ANY PERSON OR A SOLICITATION OF ANY PERSON OF ANY OFFER TO PURCHASE ANY SECURITIES OR INVESTMENT PRODUCTS.