FAQs

Asset Management

We have over two decades experience in helping new and veteran Olim, as well as native Israelis, achieve a financially successful life in Israel. We take the time to understand your situation and advise according to your specific needs. As experts in all aspects of financial planning – from drawing up budgets, to structuring large portfolios, to ensuring a successful retirement, we will guide you to reach your short, medium and long term goals. Your situation is unique, let us help you make the most of it.

When it comes to investing, the usual rule is that returns are correlated with risk. That is, the riskier the investment, the higher are the expected returns. On the downside, the riskier the investment, the higher are the chances of losses. High risk and low risk investments play an important role in a diversified portfolio, however, risk levels should not only match the risk tolerance of the investor, but also his stage of life and future cash requirements. At Labinsky Financial, we take the time to understand you and put together an investment portfolio that best suits your needs.

We deal with two types of investments; (i) publicly traded securities (primarily US exchanges and the Tel Aviv Stock Exchange), and (ii) private equity placement mostly related to real estate in the US market.

Labinsky Financial manages securities traded primarily on US exchanges and/or the Tel Aviv Stock Exchange. Occasionally, we will trade on other foreign exchanges but usually only upon a client’s request. In addition, we offer private investments to qualified clients that are mostly related to real estate in the US market.

Our team of portfolio managers is fluent in English. After initial meetings to understand your financial goals, your advisor will put together an investment portfolio suited to your needs. At least once a year your advisor will arrange a meeting by phone, online, or in person to review your portfolio. In addition, a record of all your investments and trades is available in English. And you can contact the office during office hours during which we will be available to answer any questions.

We only use publicly traded securities in our portfolios. We prefer trading in funds that contain a large number of different securities, and are therefore less volatile. In particular, we favor the use of Exchange Traded Funds(ETFs), which unlike mutual funds, can be purchased or sold on a stock exchange the same way regular securities can, making them more cost effective and liquid. ETFs typically track a particular index, sector, commodity, or other asset class. We use a combination of broad index and sector Israeli and American ETFs along with some actively managed stocks and bonds. If you are American, Israeli ETFs are problematic for US tax reasons, and would therefore not be included in your portfolio.

Every Portfolio Manager (menahel tik) at Labinsky Financial is licensed by the Israel Securities Authority. In exercising trades on behalf of clients (either Israeli or foreign securities), we use the services of licensed brokerage firms in Israel. We are not stockbrokers and you do not need to open a brokerage account with us. In Israel, securities trades are settled directly within your bank account. Through a Limited Power of Attorney Agreement, you will grant us the right to access your bank account for the purposes of buying and selling securities at our discretion. Clients wishing to maintain a portion or all of their portfolio in the US (usually for tax reasons), can do so by opening a US brokerage account. We can easily arrange to manage your portfolio with your brokerage company.

The concept of having a brokerage account actually does not exist in Israel in the way it does in the US. Even though we manage the buying and selling of securities for you, the funds are settled directly within your Israeli bank account. Those wishing to maintain a portion or all of their portfolio in the US (usually for tax reasons), can do so by opening a US brokerage account. In either case, these accounts are entirely owned and controlled by you. Through a Limited Power of Attorney Agreement, you will grant us the right to access your accounts for the purposes of buying and selling securities at our discretion.

If you are holding securities in the US for us to manage, we will do so through your US brokerage account, which is regulated by FINRA and covered by SIPC. For securities traded in Israel and therefore settled through your Israeli bank account, FINRA regulation and SIPC coverage do not apply.

We are well versed in the tax issues facing our clients with dual citizenship and base our advice on that knowledge. That said, we are not accountants and when relevant, will advise clients to seek guidance for their particular situation from a qualified accountant.

Currently, we do not receive any compensation for recommending the publicly traded securities that comprise the investment portfolios under our management. Should there be any changes to the contrary, full disclosure will be made to our clients in advance. In the case of Alternative Investments, which are not traded publicly and only available to qualified investors, we may receive 3rd party compensation on the successful closure of a deal, or alternatively, we may charge a placement fee to the client. In any event, such fees are always disclosed during the period of advisement.

For Financial Planning, we charge on an hourly basis. For Investment Management, fees are charged as a percentage of the portfolio market value, which is calculated based on a monthly average. In general, we charge between 0.75- 1% +VAT per year. The exact amount depends on factors specific to your situation. Labinsky Financial charges no other fees or commissions, however since the buying and selling of securities is settled directly within your bank account (unless you choose to maintain a portfolio in the US using a US brokerage account), your bank may charge custodial fees (שמירה דמי) and transaction fees. We have negotiated preferential transaction fees with most of the banks, and a charge of 0.1% of the value of the transaction is reasonable. Fees for foreign listed securities are usually higher, approximately 0.15% of the value of the transaction. Custodial fees vary depending on the bank. For example, our deal with Bank Leumi eliminates custodial fees for balances above NIS 1 million. Other banks offer a 50% discount for balances up to NIS 1 million, and a 75% discount for balances beyond that. It is important to negotiate with your bank and/or compare different banks. Don’t be afraid to play one offer against another.

Banks do offer free investment advice provided you have minimum assets of NIS 50,000 – 100,000 (depending on which bank). However, they do not actively manage your investments and will only excercise a trade upon your request, for which they usually charge a commission. When there are major shifts in the financial markets or your life situation, it is upon you to contact your bank advisor and request a reexamination of your investment portfolio. Bank advisors usually don’t have a strong personal connection or deep understanding of their client’s financial needs. In fact, you may get a different advisor each time you call! Many are not aware that US citizens can be hit with very high taxes when investing in TASE listed companies. At Labinsky Financial, we take the time to understand your full financial picture and actively manage your investments, making adjustments so that your portfolio is always balanced for growth, and stability in the event of market downturns. We are also compensated based on the value of your portfolio, not by commission. So your success is our success.

Financial Planning

We have over two decades experience in helping new and veteran Olim, as well as native Israelis, achieve a financially successful life in Israel. We take the time to understand your situation and advise according to your specific needs. As experts in all elements of financial planning, from drawing up budgets, to structuring large portfolios to ensure a successful retirement, we will guide you to reach your short, medium and long term goals. Your situation is unique, let us help you maximize it.

Creating a financial plan is an opportunity to shape your current as well as future financial well being. It’s about making informed decisions and taking a hard look at reality so that you are prepared to maximize the success of your life goals. Some people are lucky enough not to have to worry about money, but most of us have limited financial resources that we need to balance with a desired quality of life. Even people of means should manage their finances responsibly if they wish to pass down their wealth or make donations to worthy causes. As with anything in life, it is always best to have defined goals and a sequence of steps to arrive there. Circumstances and goals will change, and you’ll need to update your financial plan accordingly. In any event, having a plan will help position you for success, or at the very least, minimize unnecessary expenses or losses.

Your financial plan should be reviewed at least once a year, or sooner in the event of changes to your life situation or changes in your short, medium or long term goals. A well structured investment portfolio, that reflects your goals, can better withstand market instability. If you aren’t sure that your financial plan is structured correctly, call us to schedule a consultation.

Congratulations! With the compounding effect of money, investing early means reaping exponentially large benefits when you cash out at retirement. However, chances are you will have many important short and medium term goals before then. In addition, there are tax and other benefits that can be gained with proper structuring of your finances and investments. Good financial planning takes all those elements into consideration along with your current earnings and future sources of income. With good planning you will know that you can reach your goals and secure your future.

Retirement Planning

When it comes to retirement planning, the earlier the better. With the compounding effect of money, investing early means reaping exponentially large benefits when you cash out at retirement. In addition, there are tax and other benefits that can be gained with proper structuring of your retirement investments. Good retirement planning takes all those elements into consideration along with your current earnings and future sources of income. With good planning you will know that you can reach your goals and secure your future.

When it comes to retirement savings, it is best to start as early as possible in order to maximize compounded growth. If you’ve had a late start, it is still better to save as much as possible during the remainder of your working years. Proper budgeting and the use of tax sheltered savings plans can help you increase the amount you save. Depending on your situation, other assets such as a business or real estate may be restructured in order to save taxes or invest equity at higher returns. It is worthwhile to speak to a financial advisor not only to see what’s possible but also to make sure that your mix of assets and investments are properly diversified.

Organizing your finances can definitely improve the quality of your retirement. People in retirement are usually drawing down fixed income from a pension or savings plan. Others may be enjoying passive income from investments. The commonality is the limited ability to increase income beyond these sources once we are past working age. However, adhering to a budget, reducing expenses, and taking advantage of available benefits can go a long way in stretching your shekels and ensuring you do not run out of resources. In addition, you can look at ways to free up equity in your home either through refinancing, downsizing, or a reverse mortgage. Private health insurance can offset the cost of unforeseen medical emergencies or deteriorating health. A good financial planner will help you assess all the options available to you and construct the optimal financial plan to carry you through the rest of retirement.

Employee Benefits

There is no connection between Jewish holidays and vacation. The employer is obligated to pay employees for a full day’s work during holiday absense as long as the employee is employed hourly or daily, has completed at least 3 months of work, and was not absent on the days before or after the holiday (unless with the employer’s consent). According to the general legal provisions, the qualifying holidays are two Rosh Hashanah days, Yom Kippur, two Sukkot holidays, two Passover holidays, Independence Day, and Shavuot. Chol HaMoed and other holidays are not considered holidays for which holiday fees are paid. Members of other religions have the option of choosing between the holidays of their religion or the Jewish holidays.

A woman who gives birth is entitled to maternity benefits for up to 15 weeks, if she meets one of the following criteria: 1. National insurance contributions have been paid for her for at least 10 months out of the 14 months preceding the determining day. 2. National insurance contributions have been paid for her for at least 15 months out of the 22 months preceding the determining day. Maternity allowance is calculated per day: the full salary in the three months preceding the 1st of the month in which you stopped working, divide by 90 – or the full salary in the 6 months preceding that day, divide by 180 (whichever is higher). Fathers are entitled to take maternity leave and receive benefits during the remainder of the maternity leave remaining for the mother after the end of the first six weeks after the date of birth. However, his leave is conditional upon a number of conditions including: the mother having 14 weeks leave, the mother has returned to work during the father’s leave, and the father must take at least 3 consecutive weeks leave. In effect, he can only substitute for the mothers leave – not add to it.

In order to calculate the amount of severence you deserve, several things must be taken into account, such as the amount set aside for the pension insurance, the year you started working for the employer, if your salary increased or decreased during employment, and more. It is best to speak with the Human Resource representative of your former employer to understand your severance pay and how to apply for it.

The greatest benefit to employees currently available in Israel is called the keren hishtalmut (advanced training or sabbatical) fund. It originates from the Jewish tradition of shemittah, allowing the land to lay fallow in the seventh year. Keren hishtalmut contributions are made for six years and then, from the beginning of the seventh year onwards, the money accumulated in the fund is available tax-free to the employee (for contributions made on salaries less than NIS 15,700 bruto monthly). Maximum contributions to a keren hishtalmut are 7.5% of the bruto salary from the employer and 2.5% from the employee. This is 10% of one’s salary, prior to paying any taxes, contributed monthly, and invested over the life of the fund. It can be taken out tax-free in Israel after the sixth year, or can remain in the fund and continue to accrue gains that are tax-free in Israel for as long as you keep your account open. Once funds are taken out of the account, no new contributions can be made (new payments will need to be contributed to a new keren hishtalmut), but money in the account can continue to be invested, and all gains are tax-free. Contributions are not automatically deducted from your monthly salary or received from your employer, rather you must request this fund and negotiate your employer’s contributions.

A keren pensia (pension plan) is a collective agreement between all members of the pension fund (i.e., anyone who opens up an account with the pension fund) and the company running the fund. The fund provides money management and insurance services to all the members of the fund and estimates what future benefits will be. It does not guarantee future benefits that may change, for instance, as the fund’s financial strength (or pay solvency) changes or as life expectancy grows. A keren pensia is generally cheaper administratively than a bituach menahalim policy and includes some disability and life insurance (paid out as a pension to the surviving spouse and children) built into the policy. However, disability insurance is provided with a more limited definition, which pays out only if a person cannot work at any occupation at all, not just in his original field.

Bituach menahalim (management insurance) policies, in contrast, are personalized contracts between the employee and the insurance company, guaranteeing you future benefits based on the agreed-upon contract. They tend to be more expensive administratively but give you more flexibility to decide whether or not to include life insurance and disability insurance. There have been changes affecting bituach menahalim policies in the last few years. The most significant change is the elimination of a fixed retirement estimate for determining one’s pension. In older policies prior to 2014, there was a fixed estimate of months the retiree was estimated to live in retirement which determined the level of the pension paid by the insurance company. This fixed rate left the insurance companies exposed if longevity continued to grow, as they would need to pay pensions for more years. The fixed estimate in bituach menahalim was thus eliminated so that bituach menahalim policies are now more similar to kranot pensia.

Budgeting

There are many strategies that can potentially save you money when you have a clear understanding of your income and expenses within your short, medium, and long term financial objectives. With that clarity you can better balance your desired standard of living with the need for lower cost alternatives. As a new immigrant, you may also be eligible for certain tax breaks. Some of these benefits may be available for only a certain time period while others may depend on the structure of your finances and investments. Let us evaluate your overall financial situation so that we can make the best recommendations to help you improve your current financial reality, and plan for the future.

With ever changing interest rates, inflation, and currency exchange rates, it is prudent to review your monthly budget at least once a year, or immediately in the event of changes to your life situation that will affect your short, medium or long term goals. A balanced budget that reflects your goals can better withstand market instability. If you aren’t sure that your budget is structured correctly, call us to schedule a consultation.

Budgeting is an important part of managing your day to day finances and savings, but it does not constitute an overall financial strategy. For most people, savings will not accumulate fast enough to meet retirement or other furture cash needs – especially unexpected ones. A financial plan is a strategy that takes all your financial issues into consideration including debt, employment benefits, insurance, retirement objectives, investments, and tax exposure, with the goal of minimizing cash outflows and maximizing investment growth while protecting your money so that it is available when you need it. A good financial plan should align with a person’s age, current and future income and expenses, risk comfort level, and timing of future cash needs.

Savings and Investments

Unfortunately, government social security and pension plans will account for only 20-40% of our required retirement income. The only way to meet the shortfall is by regularly putting aside money for additional savings and investments.

In general, younger people are better served with higher growth, and therefore riskier, securities since they will not have an immediate need for cash and can wait out any market downturns. On the other hand, for someone approaching retirement age, stable low growth investments with predictable returns offer peace of mind that enough cash will be available as drawdowns for retirement are made.

We only use publicly traded securities in our portfolios. We prefer trading in funds that contain a large number of different securities, and are therefore less volatile. In particular, we favor the use of Exchange Traded Funds(ETFs), which unlike mutual funds, can be purchased or sold on a stock exchange the same way regular securities can, making them more cost effective and liquid. ETFs typically track a particular index, sector, commodity, or other asset class. We use a combination of broad index and sector Israeli and American ETFs along with some actively managed stocks and bonds. If you are American, Israeli ETFs are problematic for US tax reasons, and would therefore not be included in your portfolio.

For those approaching or already retired, the proper management of limited financial resources so they last will be critical. However, if your nest egg is small and you are no longer working, there are other ways to procure funds for savings and investment that can greatly improve your monthly fixed income. For example, consider downsizing your home to free up cash or selling altogether in favor of renting. Rent in Israel is relatively cheap at about 2.5-3% of the home value. If you sell a 2,500,000 home and invest the money at 5-6% you can enjoy an additional 6,000 NIS per month after paying rent! Creating a budget to help you understand and manage expenses is another way to free up some cash. Instead of spending the extra cash, take advantage of the compounding effect of savings and investments, even if for a short period of time. You’ll generate more income for yourself later on.

Insurance

This is an important question that you must clarify with your insurance provider. If your coverage still applies in Israel, we strongly suggest that you receive this confirmation in writing and safeguard it. If not, be sure to make up the difference with an Israeli insurance policy.

Like most purchases, it is important to shop around, compare prices, and speak to friends. Sometimes, insurance can be purchased through your pension fund at a favorable rate, or with tax sheltered funds (which constitutes a savings).

In Israel, both life insurance and property insurance are mandatory when obtaining a mortgage. People often forget to include these expenses when calculating mortgage payments. Naturally, life insurance increases with age, making mortgages very expensive for older people. Banks will often sell insurance when you sign for your mortgage. Although this is very convenient, it is often very expensive. It pays to shop around for an insurance provider and play one offer against another.

Financial Crossroads

Most definitely yes. Many people come to us because they are suddenly faced with taking control of their finances for the very first time. If you are recently widowed or divorced, we’ll tell you which documents you need to gain access to. We’ll assess exactly where you are financially, explain all the details, and then formulate an optimal strategy to maintain or improve your financial security. We are here to listen and advise as you adjust to your new situation.

Since 1981, there has been no estate tax or inheritance tax in Israel. However, there are actions of the heirs in the assets of the estate that can be taxed. For example, the sale of an apartment inherited by an heir can be subject to appreciation tax. Planning in advance can often reduce or even eliminate these tax liabilities.

If you are a spouses for less than 3 years, you are entitled to a one-time grant in the amount of 7.2 monthly allowances that the pensioner received before he/she died. If you were married for at least 3 years and are at least 45 years of age, you will be entitled to a monthly allowance. If you don’t meet those criteria, benefits may still apply if for example you are pregnant or share a child in common, so it is best to check with a qualified pension advisor.

If the deceased did not specify otherwise in a Will, the general position of the State is to award half the estate to his children and half to the surviving spouse.

The short answer is no. A prenuptial agreement applies in life. A Will applies in death. That is, if the deceased did not specify the allocation of his estate in a Will, the general position of the State is to award half to his surviving spouse and half to his children – regardless of terms set forth in a prenuptial agreement. Therefore, if one is considering a prenuptial agreement, he/she should also consider a Will that reflects the same intent for the division of the estate. It is always best to consult a lawyer on these matters.

Pre and Post Aliyah Planning

Your lifestyle in Israel may be very different to that in your home country. There is a good standard of healthcare which is socialized, making it relatively inexpensive and available. Jewish education is also much more affordable. On the other hand, salaries are much lower in Israel compared to other Western countries, although benefits can be negotiated into your package. The costs of housing, cars, food, and gas are also higher. It is therefore crucial to work out a budget and understand the cost of living based on your expectations (click here for a sample budget). At Labinsky Financial we understand the questions you are asking, even the ones you don’t know to verbalize. We will sit with you and discuss your current financial situation, your income and expenditures, and projected lifestyle. As veteran Anglo Israelis we can advise you on the expected cost of living adjustment you may need to make.

Many factors affect investment risk. Some are local, while others are tied to global markets. Israel must contend with hostile neighbors and a high level of security and military preparedness, all of which pose a substantial cost to resources and manpower. In addition, the country is undergoing a process of major reforms under a series of unstable governments. Despite these challenges, The Economist ranked Israel as the 4th most successful economy among developed countries for 2022, and in August 2023 the US rating agency Fitch affirmed a credit rating and outlook of A+ and stable. In that same year, Israel had the highest number of billionaires in the Middle East. According to an April 2023 OECD survey, Israel rebounded strongly from Covid-19 and has proven resilient to the war in Ukraine. This was due to a fast vaccination campaign, the strength of the high-tech sector, and self-sufficiency in natural gas. The same report cautions against a growing wealth disparity and the high cost of living. As with other Western countries, Israel currently struggles with inflation pressure and rising interest rates, which have hampered investment. However, unlike other Western countries, the Israeli population is growing and putting demands on economic growth as well as real estate – especially in the residential sector. There are definitely investment opportunities in Israel that rival or exceed those of other Western countries, hence many corporations and venture capital firms are investing in Israel. However, Olim tend to leave their money in their home country, which is often a major mistake. This lack of monetary aliyah is due to familiarity with the investment setup in their home country as well as the lack of familiarity with the Israeli investment scene and lack of comfort with the Hebrew language. A good financial planner can explain the ropes and help you create an investment portfolio that is diversified, and suited to your risk tolerance, stage of life, and tax exposure.

As of June 2023, the average Israeli salary was NIS 13,267. This is a gross amount, before deductions for pension, national insurance, and taxes. In general, salaries are 50-60% lower in Israel for the same comparable job in North America. A family of four (two parents and two children) will spend approximately NIS 14,000–15,000 a month. Anglo families tend to spend significantly more due to their higher standard of living.

There are many factors to consider when organizing your finances for aliyah. Most of these will of course depend on your personal situation. Here are a few examples. Investments in your native country (and native currency) will be exposed to currency exchange risk should you redeem them at a future date as a source of income when living in Israel. It is therefore wise to rebalance your portfolio to include a good representation of Israeli investments. If you are a US citizen and plan to maintain your citizenship while living in Israel, you may be subject to very high taxation on certain Israeli investments according to PFIC. However, this can be avoided with proper investment planning. Insurance policies may not be honored by your insurer once you are living in Israel. It is important to check with them and get written guarantees, or arrange for alternative coverage. Make sure that you will have remote access to all the financial institutions that contain your assets. You don’t want to be in a position where you have to be physically present to perform a transaction. It is always wise to consult with an experienced Financial Planner who can point out critical international taxation and estate issues, the many differences in the financial systems, and how you can maximize your financial assets in Israel and abroad.

Alternative Investments

Alternative Investments are usually related to real estate projects in the United States.

Our Asset Management service is available to clients who provide a minimum of NIS 500,000 in cash, or the equivalent in publicly traded securities, for us to manage. With these funds we create a portfolio of publicly traded securities based on the client’s profile. Most individual securities can be purchased for a relatively small amount of money and can be bought or sold fairly easily during the operating hours of a public exchange. Alternative Investments are investments in a private enterprise, usually a real estate project in the United States. The investment amount is determined on a project by project basis and is usually a fairly large sum for a single investment (e.g. $50,000). Since these projects lack the transparency and oversight of publicly traded securities, and are usually illiquid for a number of years, only clients who are deemed “sophisticated investors” may participate. Investors do not have to be existing Asset Management clients as long as they are qualified and can provide the required investment funds.

Alternative Investments are a way to diversify your portfolio and therefore protect your wealth against various changing market conditions. These investments are usually real estate projects in the United States. As such, values are affected more by local market conditions than activity on the publicly traded exchanges. Another advantage of real estate is that prices aren’t as volatile as the stock market. While some neighborhoods or properties may exhibit more risk, their prices will not change drastically on a short term basis. In some cases, these investments can offer tax benefits, however, this is a matter to be discussed with your accountant.

The concept of the “sophisticated investor” was developed in order to protect the general public from the risks associated with private investments, which lack the oversight, transparency, and liquidity of publicly traded securities. To qualifiy for these investments, a person must demonstrate either familiarity with the company receiving the investment, or sufficient investment savvy. This will be determined at our discretion based on jurisdictional law.