From time to time we receive requests from clients to sign a "Sophisticated Investor Certificate" (SIC), in our capacity as their accountants. The SIC basically confirms details about their financial position and ability to enter into more aggressive and less regulated investments.  The problem for us is the devil in the detail contained in the SIC (much like accountants' letters to banks) and which we have to be able to substantiate with concrete evidence. Typically these statements contain statements like "the taxpayer and all his trust/superannuation fund both have taxable income in excess of $250,000 each year" and it may be possible for either the person or their entity, but rarely does it apply to both (especially in good structure/tax planning scenarios) and that is before we even get to the asset tests!

Not surprisingly Core data has released a recent study confirming that only 12% of "sophisticated investors" can answer basic financial questions - read the full article here. We are not at all surprised by these statistics as investors are often lured by the idea of greater returns in bespoke investments but caveat emptor always applies as the risks often outweigh the possible opportunity.

The problem, my dear Watson is the minute a SIC has been obtained (assuming you meet the financial criteria) then the adviser gets off scot-free as now you are "sophisticated" and totally responsible for your choices.  Oh yes, the only other person responsible is the accountant who signed the SIC, so a real win-win for the adviser - aggressive investments, big commissions and no responsibility.

As we are financial advisers ourselves, we know that as a general rule any investment that requires a SIC is speculative and unproven, so the question we ask is "Why?".

Disclaimer: This information is general in nature. So, before acting on this or any other information, it is important to seek professional advice related directly to you and your circumstances before making any software or other changes.  Should you require our assistance, contact your Primarius Team leader, or email us at info@primarius.net.au