Sophisticated Investor – Risk vs Return

Often as Chartered Accountants we are asked to sign off on a client’s application to become a Sophisticated investor.

While this may seem purely administrative, nothing could be further than the truth.

We take this service very seriously as it carries a high risk for the investor and for us.

A sophisticated investor is a type of investor who is deemed to have sufficient investing experience and knowledge to weigh the risks and merits of an investment opportunity. For certain purposes, net worth and income restrictions must be met before a person can be classified a sophisticated investor.

A sophisticated investor form may simply ask whether a client meets the asset or income requirements without requiring they have a knowledge or understanding of investments. Therein lies a real problem.

“Everything we do carries a risk,” says Porters senior manager Jodi Bradley. “Some things are greater risk than others. For accountants some things carry a societal burden. Sometimes we are society’s gatekeeper to protect the public from crooks, to protect people from schemes and to protect them from themselves.”

“Ask yourself why only certain people can sign off on the sophisticated investor certification.”

When we approve a sophisticated investor certificate we need our clients to be aware of the risk they are taking on.

We believe our value of service to our clients is derived from directing them to a straightforward financial planning service from reputable financial planners rather than taking the stockbroker lottery as a sophisticated investor…

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