High-net-worth individuals (HNWIs) are typically people with liquid financial assets exceeding $1 million. They are in demand by private wealth managers because their wealth requires more complex and personalized financial services. The United States has the highest number of HNWIs, with over 7.4 million people classified as such as of 2021. Individuals with a net worth of at least $5 million are classified as very-high-net-worth (VHNW). HNWIs receive special benefits, including reduced fees and access to special rates on banking and investment services. They can also invest in alternative assets like real estate and exclusive investment options like hedge funds and private equity (PE). These benefits vary depending on the financial institution and region.
High-net-worth individuals (HNWIs) are individuals with at least $1 million in liquid financial assets. They are in demand by private wealth managers due to the need for more complex and tailored financial services. HNWIs have access to exclusive benefits like reduced fees, discounts, and special rates on banking and investment services, as well as access to special events or perks.
As of 2021, the US has the highest number of HNWIs at over 7.4 million. However, the availability and specifics of these benefits and opportunities may vary depending on the financial institution and region.
High-net-worth individuals: who are they and what makes them different?
High-net-worth individuals (HNWIs) is a classification used to describe individuals with liquid assets surpassing a certain threshold that is much higher than average. To qualify, an HNWI typically has at least $1 million in liquid financial assets, including their primary residence or fine art.
HNWIs are a unique group with access to additional benefits and opportunities due to their financial status. They often enlist the help of financial professionals to manage their assets and make informed investment decisions.
Discover the net wealth of high-net-worth individuals (HNWIs)
When it comes to measuring the wealth of individuals in the financial industry, net worth is the key metric used. However, there is no set standard for how much wealth one must have to be considered high net worth. It typically depends on liquid assets and varies across financial institutions and regions. Generally, high-net-worth individuals are those with a net wealth of seven figures or more, meaning they have at least $1 million in liquid assets that include cash and cash equivalents.
Liquid assets are what count towards an individual’s net worth, not personal assets like primary residences or collectibles. Due to the challenges involved in preserving and managing their wealth, private wealth managers value high-net-worth individuals. As of 2021, the US has the highest number of HNWIs at over 7.4 million. Individuals with a net worth of at least $5 million and $30 million are classified as very-high-net-worth and ultra-high-net-worth, respectively.
Why high-net-worth individuals are in demand
Private wealth managers are constantly vying for the attention of high-net-worth individuals (HNWIs). With increasing wealth comes the need for more complex and tailored financial services. HNWIs often demand personalized investment management, estate planning, tax planning, and more.
One benefit of being classified as an HNWI is the opportunity for separately managed investment accounts. This means that the client’s portfolio is managed individually rather than as part of a mutual fund. However, the specific criteria for HNWI classification vary by financial institution. Typically, banks require a minimum amount in liquid assets or a certain level of depository accounts with the institution to qualify for these exclusive perks.
For HNWIs, it’s not just about the numbers on their balance sheet, it’s about the exclusive access to specialized services and opportunities that come with their high net worth.
HNWIs demand personalized services from private wealth managers to maintain and preserve their large sums of money. In addition to investment and tax planning, HNWIs also gain access to exclusive benefits like reduced fees and special rates, as well as exclusive events. With their financial means, HNWIs can also invest in promising IPOs and startups, highlighting the perks of being part of this exclusive club.
Exclusive benefits available to High-Net-Worth Individuals
As a high-net-worth individual (HNWI), you may receive exclusive benefits and opportunities that are not available to those with lower net worth. These benefits can include reduced fees, discounts, and special rates on banking and investment services, as well as access to special events or perks. Financial institutions may also provide you with personalized services in investment management, estate planning, and tax planning.
HNWIs enjoy investment options that are exclusive to accredited investors, such as hedge funds, PE, and VC funds. These investments offer diversification and higher returns. HNWIs can also access real estate and other alternative assets that are not easily available to the general public.
However, the availability and specifics of these benefits and opportunities may vary depending on the financial institution and region.
Considerations with HNWIs
The United States, Japan, Germany, and China are home to nearly two-thirds of the world’s high-net-worth individuals (HNWIs), according to the Capgemini World Wealth Report. The U.S. alone boasted 7.5 million HNWIs in 2021, up 13.5% from the previous year. As a group, HNWIs worldwide saw their assets grow by 8.0%, reaching a combined wealth of $86 trillion. North America led the world’s HNWI wealth with $27.7 trillion, followed closely by Asia with $25.3 trillion. HNWI wealth in Europe reached $18.8 trillion, while Latin America and the Middle East each had over $3 trillion in HNWI wealth. Africa lagged behind with $1.8 trillion.
Capgemini, a global consulting firm, categorizes the HNWI population into three distinct wealth bands based on their investable wealth.
- The first group, known as “millionaires next door,” consists of individuals with investable wealth between $1 million and $5 million.
- The second group, called mid-tier millionaires, includes individuals with investable wealth ranging from $5 million to $30 million.
- Finally, the ultra-high-net-worth individuals (Ultra-HNWIs) are those with more than $30 million in investable wealth.
In terms of global population, there were 200,100 ultra-high-net-worth individuals (UHNWIs) in 2021, while the mid-tier millionaires numbered 2.05 million. The largest group, however, was the “millionaires next door” category, which comprised 20.1 million individuals.
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Source: Capgemini World Wealth Report
There are different classifications of high-net-worth individuals (HNWIs) based on their investable wealth. Those with less than $1 million but more than $100,000 are considered sub-HNWIs, while those with $1 million to $5 million are referred to as HNWIs. The upper end of HNWIs is around $5 million, at which point the client is then referred to as a very-HNWI. Those with a net worth of at least $5 million are categorized as very-high-net-worth individuals (VHNWIs), while ultra-high-net-worth individuals (UHNWIs) are those with investable assets of at least $30 million. It’s important to note that personal assets, property, collectibles, and consumer durables are not included in this calculation.
The different types of HNWIs
To be classified as a high-net-worth individual, one is generally required to have at least $1 million in liquid financial assets, which does not include personal assets like their primary residence. Those with liquid assets between $100,000 and $1 million are considered sub-HNWIs. Individuals with a net worth of at least $5 million are classified as very-high-net-worth individuals (VHNWIs), while those worth at least $30 million are ultra-high-net-worth individuals (UHNWIs).
Benefits unique to HNWIs
Private wealth managers are attracted to HNWIs because of the bespoke services they require, such as investment management, tax planning, and estate planning. HNWIs are typically offered separately managed investment accounts rather than regular mutual funds.
Where in the world has the most high-net-worth Individuals?
Reports indicate that the US, Japan, Germany, and China are the top countries with the most HNWIs, making up about 64% of the global HNWI population. The US has approximately 7.46 million HNWIs, followed by Japan with 3.65 million, Germany with 1.63 million, and China with 1.54 million.
An individual who has liquid assets of $1 million or more is commonly referred to as a high-net-worth individual (HNWI). Due to their high net worth, they often seek the assistance of financial professionals to manage their wealth and may be eligible for exclusive benefits and opportunities. Private wealth managers often seek to serve HNWIs because preserving and growing their assets requires specialized attention and they may have access to unique investment opportunities. The U.S. has the largest population of HNWIs in the world.
- High-net-worth individuals (HNWIs) are the elite class of the financial world, with at least $1 million in liquid financial assets to their name.
- With such significant wealth at their disposal, HNWIs are in high demand by private wealth managers because their assets require more attention to maintain and preserve.
- The good news for HNWIs is that their wealth can also qualify them for increased and better benefits.
- As of 2021, the United States is home to the most HNWIs in the world, with over 7.4 million people having achieved this prestigious status.
- However, for those with even greater wealth, there are further distinctions to be made. A very-high-net-worth individual has a net worth of at least $5 million, while an ultra-high-net-worth individual is defined as having at least $30 million in assets.
- HNWIs are capable of accruing substantial economic power and influence.
View Article Sources
- High Net Worth Individuals and Philanthropy – Oxford University Press
- Review of Literature on Giving and High Net Worth Individuals – Indiana University-Purdue University Indianapolis
- High Net Worth Individuals – Indiana University-Purdue University Indianapolis
- Understanding Ultra High Net Worth Clients – University of Pennsylvania Wharton School