As the new Republican tax policy takes effect, investors brace for changes in the market. But Ken Moelis, CEO of Moelis & Co. and a Wall Street veteran, said the magnitude of the changes is bigger than most people realize.

"People are underestimating the size and impact of the tax reform," Moelis said Friday on CNBC's "Closing Bell."

The major change, which slashes the corporate tax rate from 35 percent to 21 percent, will dramatically increase cash flow for U.S. businesses, Moelis said, allowing many to grow.

Of his own company, an independent global investment bank, Moelis estimated it would generate more than $20 million in additional cash as a result of the tax cuts. He predicted an "M&A wave" and plans on expanding and hiring new talent with the additional funds.

"I think everybody's going through that process right now," he said. "I think the actual addition to this cash flow to people's future plans is causing people to be on their front foot and think about, what do I want to do? What can I accomplish?"

The last major tax reform occurred more than 30 years ago during the Reagan administration with the Tax Reform Act of 1986, simplifying the tax code and eliminating tax shelters. The Reagan cuts marked some of the broadest income tax revisions in history, affecting millions of people and businesses.

While it's unclear who would benefit the most from President Donald Trump's tax reform, Moelis said it will speed up growth for the entire economy. Nine years into the expansion, he said, growth has been slow at just under 2 percent.

"That's not the United States," he said. "That's not what we can do."

A better target, he suggested, was around 3 percent. Concerns over regulations since the financial crisis of 2008 may have been what caused investors to be cautious.

"You just didn't know how somebody was going to try to attack your investment and make it unprofitable," he said. "You had this regulatory environment that was attacking most people in America."

"The quality, the innovation, the law, the consistency of the United States, the system; we should be a 3-percent-plus grower," he said. "And that's a lot of money."

Clarification: This article has been updated to clarify that Moelis estimated his firm would generate more than $20 million in additional cash as a result of the tax cuts.