"If the S&P 500 drops 50%, not everyone will be able to handle it psychologically"
Asaf Banai, the controlling shareholder of the insurance, pension, and financial group Profit, was speaking at the Tech1 conference in Eilat. Banai warned that “the fluctuations are taking a heavy toll, people are finding it difficult to stay the course despite their declarations.”
In the wake of increased global market volatility, significantly impacted since Donald Trump’s reelection as U.S. President and especially following tariff announcements, understanding how to manage personal finances, particularly long-term investments like pensions, is crucial. At the Tech1 conference in Eilat, we sat down with Asaf Banai, CEO of Profit, one of Israel's largest insurance, pension, and finance groups, to gain insights. Profit currently manages close to 70 billion NIS for its clients, many of whom are from the high-tech sector.
Profit is a very large financial group. Could you briefly explain what you do?
Asaf Banai: Profit today is a very, very large financial group. We have 300 agents, financial planners, and licensed professionals. We are considered big in the market, managing almost 70 billion NIS for our clients. A lot of our clients are from the high-tech sector, but not only.
Many of your clients are high-tech workers. In recent months, we've seen significant volatility in the S&P 500, which dropped sharply and has now recovered. The S&P 500 has become very popular in pensions and provident funds, especially among high-tech workers. We've also seen this movement among them – fleeing and returning.
Look, I'll tell you the truth. At Profit, for a very long time, we've been quite against pure tracks in everything related to pension investments and investments in general. Not because they are wrong, not because the S&P doesn't do the job over time and maybe will do the best job possible. But the standard deviation of this market does not always suit the standard deviation of the human soul.
You know, the guys in high-tech, usually very young, they tell themselves 'I'm focused on the long term'. But we claim that human beings, almost all of them, will eventually be subjected to one of the three: ego, fear, or greed. Fear will arrive, and these fluctuations, from my experience, exact a very heavy price; people find it very difficult to persist, despite their declarations that they would persist. After many, many meetings with different people, almost 20,000, I have learned to rely less on what they say, and more on the basic understanding of the human soul.
So you're essentially saying, and you mentioned this in our preliminary conversation, that you're less of an economist and more someone who tries to understand and match the human soul to the investments one makes, right?
Professionally, we are, of course, investment people and professionals in economics and the capital market and so on. But the truth of life requires the psychologist to understand the person sitting in front of you and to tailor the products and the investment tracks to them. And I can tell you that few are the people who are truly suited for pure tracks.
There is a general track; it's simply a winning recipe with very broad diversification. Diversification is a medicine for risk, and I am a big proponent of it. Of course, everyone needs their 'custom aid,' their personal suit. But as a general rule, be very cautious with these tracks.
You're saying even a high-tech worker who invests their pension purely in the S&P 500, thinking they've got it all covered, when there are cruel drops, it's not certain they'll hold on.
I am quite sure they will not be there, not for the long term. And it also usually happens in reality that several things happen at once. If the S&P, God forbid, drops by 50%, that's the same time his work options are probably out-of-the-money. That's the same time the bonus is lowered, and sometimes they are even fired from work. This is not a simple reality. I've seen this happen, and I'm telling you that it can shake any soul.
And one more thing, I'm telling you that the pure tracks are so unsuitable for movements in pension products. Because people don't know this, but you have two days 'in the air', with every change you make, an entry day and an exit day. Just recently, there was that crazy day with Trump's tariff announcement, where we saw markets crash by 12% and rise back up the next day. There are people who caught only the drop and didn't get the rise. And it's crazy. And they made the transfer at that time from a general track to the S&P, or sometimes moved from S&P to S&P in different bodies to save zero point something in management and lost yield that could take them years to get back.
High-tech workers, in particular, change jobs every few years, certainly not like my parents who worked until age 65 at the same job. Do you have any tips for them on how to manage general tracks?
I'll tell you the truth. My recommendation for everyone is to have someone personally accompany them. One of the big failures, I talk about this a lot, that happens especially in the high-tech industry, where there's a culture from the past where the concept of a pension manager... it's a culture where there's no arrangement to manage anymore. The product today is simple, and there are operators and so on. The next problematic issue is that you don't have someone accompanying you.
You move from one workplace to another, and you are required to change who accompanies you, even if it's with the same financial planner. This reality is very, very problematic; there is no planning memory. A friendship or a binding relationship is not created between the financial planner and the employee. And this thing almost always, with every job transition, involves changes. Life should be simple. Sometimes you have the same barber, the same lawyer, the same accountant for a long time. Stay with an agent who knows you, who will be your friend.
We wanted to talk about investments, and we also got a lesson in psychology.
Investments are people's psychology. After all, what is the stock market? If not a mirror image or a sum or a collection of the opinions and behaviors of human beings.
