What wholesale client status actually means.

Retail is the default. Wholesale is the exception.

Australian financial services law starts from a single proposition: a financial product or service is provided to a person as a retail client unless a specific provision says otherwise (s 761G(1) of the Corporations Act 2001 (Cth)). There is no positive definition of a "wholesale client". A person is wholesale only because a particular provision has lifted them out of retail — for a particular service, on particular evidence.

The law also builds in a presumption. In proceedings under Chapter 7 it is presumed that a service was provided to a person as a retail client unless the contrary is established (s 761G(9)). In practice that means the licensee has to be able to prove the classification, with evidence created at the time rather than reconstructed later. If the file does not prove wholesale status, the client was retail.

The gateways

Outside superannuation and general insurance, these are the routes by which a person may be classified as a wholesale client. Each is stated here as the law states it.

What wholesale classification opens

• Breadth. Some investments — including most private markets funds — are legally available only to wholesale clients.
• Speed. Advice is not tied to the retail advice production cycle, which matters when an opportunity has a closing date.
• Flexibility. The terms of engagement are negotiated to the work rather than templated to a regime.

What sits behind the word "breadth"

"Access to wholesale investments" is a phrase that does a lot of work and explains very little. These are the categories it usually refers to, described plainly — what each one is, and what you accept when you own it. Every one of them asks you to give up something in exchange for what it offers, and the giving-up is the part that tends to go unmentioned.

These are descriptions of asset categories, not recommendations, and nothing here is an offer of any financial product. No fund, manager or product is named on this page, and whether any category is appropriate for a particular person depends entirely on their circumstances.

Two things worth saying about the list as a whole. First, none of these is inherently better than a listed portfolio; they are different risks, priced differently, and sometimes priced badly. Second, the fact that something is restricted to wholesale investors is not evidence of quality — the restriction exists because the protections were removed, not because the investment was vetted.

What it sets aside

This is the part that rarely appears on an adviser's website. As a wholesale client you no longer receive:

• A Statement of Advice — the written advice document setting out the recommendations, their basis and the fees.
• A Financial Services Guide — the standard document describing who we are, how we are paid, and how to complain.
• A Product Disclosure Statement — issuers may instead provide an information memorandum, which is not regulated in the same way.
• The statutory best interests duty — s 961B does not apply, nor do the related duties to give appropriate advice, to warn where advice is based on incomplete information, or to prioritise your interests.
• Target market determination protection — there is no regulated check that a wholesale product was designed for someone like you.
• Ongoing fee consent protections — the annual consent regime does not apply; your fee arrangement is governed by contract.
• Compensation arrangement requirements — the statutory requirement to hold professional indemnity insurance covering your claims does not apply to wholesale business.
• Full access to AFCA — we are an AFCA member and you may lodge a complaint, but AFCA has a discretion to exclude investment complaints from wholesale clients who are not small businesses. The door is narrower, and no one can promise you it will open.

What does not change

Classification does not suspend the rest of the law. Our licence obligations to act efficiently, honestly and fairly (s 912A(1)(a)) and to manage conflicts of interest apply to every client. So do the prohibitions on misleading or deceptive conduct (s 1041H of the Corporations Act; s 12DA of the ASIC Act) and on unconscionable conduct (s 12CB of the ASIC Act). Our general law duties of care, and everything promised in our written engagement, remain fully enforceable — and for a wholesale client the contract does more of the work than the statute.

How we run it

• Classification before advice. We assess the classification, obtain and verify the evidence, and record it — before any wholesale advice is given, never after.
• A written schedule of protections forgone. We are not required to give you one. We give it to every wholesale client, and we ask you to sign it.
• A written advice document anyway. Not a Statement of Advice and not required by law, but it sets out our recommendations, what we considered and rejected, the risks, and every fee and benefit involved.
• The Code of Ethics as house policy. Including the standard that we must be satisfied you understand the advice.
• Reviewed, not assumed. Certificates expire and circumstances change. We re-check classification at least annually, and whenever something material changes.
• Reversible. Ask us in writing to treat you as a retail client and we will, with the practical consequences explained first.