CLA is intent on changing the Australian mindset from one of saving to investing in businesses, public and private companies. We need to become a nation of investors. Why – for two reasons: One is that far better returns on investment can be expected from a portfolio of top-listed shares than on term deposits and far higher expected returns are expected from unlisted companies than from the top-end of listed companies.
For example: The current (April ’26) interest rates on 1-year term deposits with the smaller banks are 5% to 5.40% pa. The expected return (including capital growth) on shares in top listed companies would be about 9% to 11% per annum (government bond rate plus 4% to 6%). A business making $4 million in EBIT profit a year may trade on a 5 times EBIT value multiple, so have a value of $20 million. Assuming it has a term loan of $10 million at an interest rate of 5% pa and has an income tax rate of 25%, its NPAT would be $2.6 million. This gives it an expected return (excluding capital growth) of 26% pa. Chalk and cheese between those three asset classes.
If you compound those returns over seven to ten years, it will be apparent what you need to do to get ahead.
Ordinary folk wanting to enjoy the higher expected returns from investing in unlisted companies have two problems to overcome. One is, where do they find these investment opportunities? The other is, who can they go to for professional advice on whether the investment opportunity offered to them stacks up – whether its expected return-for-risk is sufficiently attractive?
As regards finding opportunities to invest in unlisted companies: If you are financially loaded, you may be on the target list of a stockbroker or investment bank promoting a pre-IPO opportunity but most of the more attractive opportunities are before this stage. Again, if you are loaded, you may be on the prospect list of a placement agent for unlisted companies. If you’re not financially loaded, not worth tens of millions of dollars, you’re unlikely to be of interest to them. In summary, most of us do not get opportunities to invest in unlisted companies. As a result, we suffer an enormous opportunity cost. The wealthy get these attractive opportunities, while the rest of us essentially get much lower ‘index equivalent’ returns.
As regards investment advice: If you overcome that obstacle or are approached out-of-the-blue by someone you know with an investment opportunity, who can you approach for advice on whether that investment stacks up? That’s right, there is no industry that provides this service. Not stockbrokers, not financial planners, not wealth managers and not accountants. The ultra wealthy employ investment analysts to assess investment opportunities and others form informal groups of likeminded people to consider such opportunities. That needs to change – we need to develop an industry of true investment professionals who can, for a fee, assess investment opportunities.
CLA wants an efficient financial market where the better investment opportunities attract the necessary capital, and private investors get the opportunity to invest in those businesses. CLA would like to see ordinary Australians being given the opportunity to invest at any early stage in the next Canva or Atlassian.
CLA will repeal financial services legislation that impedes the prospect of ordinary folk getting opportunities to invest in unlisted companies. It will also encourage the establishment of an investment advice industry and encourage the establishment of placement agents for unlisted companies. The best investment opportunities should not be exclusively for the wealthy.