What is a sophisticated investor?

In a nutshell, a sophisticated investor in Australia is a High Net Worth individual who earns, invests, or holds a lot of money, and has a certificate to prove it. They are expected to have in-depth knowledge of a range of investments, and have built the wealth to prove it.

Cracking the nutshell, the finer pieces that make up a sophisticated investor involve ticking one of three criteria which measures their wealth and aptitude as an investor. And here they are…

For a person to be a sophisticated investor, they must:

  • Have assets of at least $2.5 million; or
  • Have had an income of at least $250,000 per annum over the past two years; or
  • Control a company or trust which meets the requirements of either item 1 or 2 (above).

To show they are a sophisticated investor they also need a Qualified Accountant’s Certificate.

What is a sophisticated investor certificate?

A person who ticks one of the three boxes outlined above must still apply for a sophisticated investor certificate (under the Corporations Act 2001) through a qualified accountant. This is a requirement by the Australian Securities and Investments Commission.

The sophisticated investor certificate is valid for two years and an investment must be made by the sophisticated investor within the first six months.

What are the benefits of being a sophisticated investor?

Certain investment groups, like property investment groups, unlisted property trusts, and property syndicates, must hold a certain portion of sophisticated investors in their pool of investors. This ensures the cohort of investors are not only experienced and wise to the risks and potential downfalls of a particular investment, but they have the available funds and ‘exit strategy’ should the investment go awry.

So, where’s the benefit?

Well, usually, these investments are very exclusive. Some investment groups or companies may only accept sophisticated investors, and everyone else is made to sit on the sidelines, missing out on a robust income from a safe, secure investment opportunity.

Such investments would likely offer a very appetising regular return, and a high chance of capital growth.

In short, being a sophisticated investor opens doors to a greater number of premium investment opportunities.

How to apply for a sophisticated investor certificate?

If you’re looking to become certified as a sophisticated investor, contact your accountant or financial adviser. As long as they are qualified to do so under the Corporations Act 2001, they can apply for you. The decision to do so is left up to the accountant.

Where should I invest?

For information on how to invest in high-quality sophisticated investments, get in touch with us. We invest alongside our investors in high-quality commercial property investment opportunities, with the majority of our clients being sophisticated investors. At Properties & Pathways, we’re in it together.