Australia

Sophisticated investors – an exclusive club

A ‘sophisticated investor’ might sound like a title for someone who specialises in high-end assets, but it’s actually a specific class of investor defined by law.

A wholesale or sophisticated investor was created by legislation in the Financial Services Reform Act of 1993 and essentially means products and services can be offered without meeting all of the specific guidelines in the Corporations Act.

To be classed as a wholesale investor you need to meet the sophisticated investor test and have this signed off by your accountant. A person who has aggregated net assets of $2.5 million or has aggregated gross income for each of the last two financial years of at least $250,000 a year can be classified as a sophisticated investor.

Advantages for wholesale investors

One of the main benefits for wholesale investors is they have access to exclusive investment products. This is because they do not need to be issued with Product Disclosure Statements and instead can be issued with Information Memorandums, a cheaper alternative.

Examples of this are:

  • Offers of securities before initial public offerings. Shares are often issued at a discount to the planned initial public offering.
  • Private Placements.
  • 95% of Australian Bonds are issued to sophisticated investors due to regulation.

There are certain funds that are only available to sophisticated investors as they are specifically set up to accept money from Institutions and high net worth individuals.

Due to the requirement of less documentation, decision making can occur for sophisticated investors before a Statement of Advice has been received outlining all of the advice in the prescribed format.

When classified as ‘sophisticated’ the investor maintains the right to the Financial Ombudsman, who acts as a mediator and can award action in any dispute escalation.

Our Investment Review Committee conducts due diligence into all products including those for sophisticated investors and then your wealth advisor ensures it is suitable for you. If you have any questions about becoming a sophisticated investor, please contact Wealth Advisory Director, Adrian Frinsdorf.

Sophisticated investors – an exclusive club

Adrian Frinsdorf

Adrian is the national leader of William Buck's Wealth Advisory Services division and Chair of the William Buck Wealth Advisory Investment Review Committee. Adrian has over 25 years' experience in the financial services industry with expertise in stockbroking, direct share advice, funds management, accountancy and delivery of tailored advice to high net worth clients across banking, investment advice and structured financial planning.

Read more >

Be Informed

Be Informed is William Buck's regular newsletter, filled with up to date news and relevant advice for individuals and businesses.

Get in touch!