Classification for ‘Professional Financial Investor’ Outdated and Needs Reform, Peak Body Says

A peak financial advice body has proposed raising the threshold for classifying investors who specialise in more risky investments to protect them from harm due to misclassification. At a recent parliamentary inquiry hearing, Philip Anderson, a general manager at the Financial Advice Association of Australia (FAAA), raised the issue that the current “wholesale investor” regime was outdated and needed to be reformed to catch up with the development of the market. Wholesale investors are generally those with more experience, knowledge, and capital than normal (retail) investors. To be classified as a wholesale investor, one needs to pass one of several tests, including making an investment of at least $500,000 (US$337,000) in an investment fund, having a gross income of at least $250,000 for each of the last two financial years, having an Australian Financial License, or having a net asset of at least $2.5 million....