Opti-Money at Bank Hapoalim: A Model-Based Investment Decision-Support System for Individual Customers

Opti-Money is a decision-support system for allocating assets that was developed at Bank Hapoalim, Israel's largest bank. Based on customer- and market-specific inputs, we solve a modified Markowitz-type nonlinear programming problem to produce optimal tailor-made investment portfolios in terms of asset classes. In its five years of operation, this mature system has provided excellent quantifiable results for the bank and its customers. In 2002, we held some 133,000 consultation sessions with 63,000 customers in which we used Opti-Money. Apart from the considerable prestige the system gained through its track record and uniqueness in the Israeli banking sector, it obtained net income 88 percent higher in customer accounts that used Opti-Money than in those that did not. The annual earnings over and above benchmarks to customers who follow the investment advice provided by the system total US$244 million. In 2002, the annual income for the bank directly attributed to Opti-Money exceeded US$31 million.