With the number of high net-worth individuals growing, MAS has decided on classifying retail investors and accredited investors in Singapore to help widen investment opportunities to the market. What is the advantage of becoming an accredited investor in Singapore, and how does one get accredited?
What is an Accredited Investor?
An accredited investor in Singapore is someone who is recognized and has met specific requirements set by the Monetary Authority of Singapore (MAS) as having a certain level of financial capability or investment experience. This status allows them to access special investment opportunities that are not available to retail investors.
It’s important to note that being an accredited investor does not guarantee investment success, and careful evaluation and decision-making are still necessary when considering investment opportunities.
What happens when you become an accredited investor?
As mentioned, becoming an accredited investor in Singapore means that you have the opportunity of exploring investment options that aren’t given to retail investors. These investments could include hedge funds, venture capital, and real estate private equity funds. While it’s true that these types of investments often have higher returns than traditional ones, they also come with higher risk. The Monetary Authority of Singapore (MAS) has released a document that discusses in-depth about accredited investors.
Moreover, in most cases, the regulatory measures of these investments are much more lenient when offered to an accredited investor. When shares, bonds, and investment funds are being sold to the public, they need a prospectus registered by MAS and intermediaries who are licensed. All can be bypassed when dealing with accredited investors.
Becoming an accredited investor
To be considered as an accredited investor, you must fulfil at least one of the three following criteria:
- Have an annual income in the preceding 12 months of not less than S$300,000
- Have net financial assets exceeding S$1,000,000.
- Have net personal assets exceeding S$2,000,000, of which net equity of the individual’s primary residence is no more than S$1,000,000.
- Investors must opt in for consideration as accredited investors.
These criteria started to be implemented in 2019. In the past, the value of one’s house alone would categorise you as an accredited investor without opting in. This could make you a target for banks and fund managers. These financial consultants may offer you risky investment options that are nowhere to be found in the public market.
Regardless of the source of your wealth, banks would assume that you’re financially savvy as accredited investors. However, this is not always the case.
For this reason, the opt-in measure was put in place, minimising predatory tactics by financial institutions.
Yes, being an accredited investor brings several benefits, including investment options with higher returns that aren’t available to the masses. But, it’s important to remember that it’s much riskier than the traditional plans offered to the regular Singapore investor.
Becoming an accredited investor is for those with the expertise, confidence, and willingness to weather the ups and downs of a riskier investment. Are you one of the people who fall into the category? Let Lanturn and our experts help guide you to make the right investments and financial decisions for your situation.