Most Accredited Investors probably don’t realize that they belong to that distinguished subset. Further, when informed, most of that group would likely not care. Who, What, Where, and Why may illustrate why a Michigan Member of Congress wants to expand the membership, and why I oppose the changes. The proposed legislation is called the Informed Investor Access Act (IIAA).

WHO are these Accredited Investors? Various characteristics can be used for qualifying as an Accredited Investor. First is having an annual income of $200,000 ($300,000 for a couple) for each of the last two years. Alternatively, the Net Worth test can be used. These people must have a Net Worth over $1 million, excluding their residence, and therefore be investable. Certain other obscure qualifications apply, but they are too specific for a single Blog.

WHAT these individuals are entitled to “invest” in includes several unregistered and private (often very risky) “opportunities.”

WHERE these investments can be purchased is important, as they are not offered on a public exchange and therefore are not transparent.

WHY these items are purchased is generally because the seller has stimulated a greed response in impatient investors.

Under IIAA, investors who work with certain financial professionals, including clients of Registered Investment Advisories (including Strivus Wealth Partners) would be included in the Accredited Investor class. No income or Net Worth requirements would apply. What could possibly go wrong?

Supporters of IIAA contend that current rules block certain investors from buying wealth-building investments. What a load of tripe! Wealth building for people not qualified to engage in very risky transactions can be done through the time-tested power of the stock and bond markets, supplemented by Money Markets and High-Yield Savings. Some commodities and real estate can be blended in as the portfolio expands. Until then, every portfolio investment should be registered, accessible at any time, and transparent.

Improving rules for Accredited status should begin with indexing current rules for inflation. The $1 million limit has been in place for decades, during which inflation has eroded the very concept of being a “millionaire.” Today, being an Accredited Investor is all too common, and lowering the standards would further reduce protections intended in the original legislation.

Fiduciary advisors (like the Certified Financial Planners® at Strivus Wealth Partners) are required to put their clients’ interests ahead of their own. Suggesting risky, non-transparent, and commission-producing assets for non-Accredited investors would not qualify the advisor for fiduciary status.