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What is a high net worth individual?

High-net-worth individual is a term used in some segments of the financial services industry to designate people who have liquid assets (assets such as stocks and bonds) that exceed a predetermined amount. Typically, these individuals are defined as holding investable financial assets with a value greater than US$1 million.


"Very-HNWI" (VHNWI) can refer to someone with a net worth of at least US$5 million.

an additional class of ultra-high-net-worth individuals (UHNWIs), those with US$30 million in investible assets.


Assets held by high-net-individuals have to be easily liquidated, these exclude assets like land and real estate investments. Individuals with this high-net-worth status qualify for additional benefits and opportunities, for that reason there is a market for financial professionals who can manage their money.


Understanding Net Wealth of High-Net-Worth Individuals (HNWIs)


Individuals are categorized using their net worth in the financial services industry. There is no specific definition on how wealthy an individual needs to be to qualify as a high-net-worth-individual. The exact amount is determined from institution to institution, however generally known to be a net-worth of 7 figures or more. high net worth is generally quoted in terms of having liquid assets of over 1 million USD including cash and cash equivalents.

These individuals are in high demand from private wealth managers, they advise private, high-net worth individuals and affluent families on how to invest their portfolios and plan their finances to meet their financial goals, and they typically offer a range of services, including portfolio management, estate and retirement planning, and tax services.

As mentioned above, a high-net-worth individual grouping generally qualifies these people for separately managed investment accounts instead of regular mutual funds. The treatment for this service will be different for each institution. Most banks require that a customer have a certain amount in liquid assets and/or a certain amount in depository accounts with the bank to qualify for special HNWI treatment.


What is a separately managed investment account?


A separately managed account (SMA) is a portfolio of securities you can invest in. It’s similar to an ETF or mutual fund. However, when you invest in a SMA, you own all the securities within your portfolio. This gives you a bit more flexibility as to how those funds are invested and managed, as well as the transparency to monitor trades in real-time. A separately managed account can will allow you greater transparency and control of your investments, while under the guidance of a financial professional.



Benefits of high-net-worth-individuals


high-net-worth individuals, qualify for banking, investment, and other financial services with reduced fees, discounts, and special rates, along with access to special events or allowances. Other financial institutions can offer customized services in investment management, estate management, and tax services, and other things. Your wealth may also allow you to take part in initial public offerings and invest in startups that portray financial potential. High net worth individuals may also have access to private equity (PE) and venture capital (VC) funds, which are typically not available to the general public.

These benefits and opportunities may vary depending on the financial institution and region.


What else to consider


Most of the world’s billionaires are from the united states. And by extension majority of high net worth individuals reside there as well, Almost 63% of the world's HNWI population lives in the United States, Japan, Germany, and China, according to the Capgemini World Wealth Report.


Capgemini separates the HNWI population into three wealth bands:

- Millionaires next door, who have $1 million to $5 million in investable wealth

- Mid-tier millionaires with $5 million to $30 million

- Ultra-HNWIs, which includes those with more than $30 million


Types of High-Net-Worth Individuals


An investor with less than a million dollars but more than hundred thousand dollars is considered to be a sub high net worth individual. The upper end of high net worth individual is around 5 million dollars, at which point the client is then referred to as a very high net worth individuals. More than 30 million dollars in wealth classifies a person as an ultra-high net worth individual.


How Are HNWIs Categorized?


The most commonly quoted figure for qualification as a high-net-worth individual is at least $1 million in liquid financial assets, excluding personal assets such as a primary residence. Investors with less than $1 million but more than $100,000 liquid assets are considered sub-HNWIs. Very-high-net-worth individuals have a net worth of at least $5 million, while ultra-high-net-worth individuals are worth at least $30 million.


What Benefits Do HNWIs Get?


HNWIs generally qualify for separately managed investment accounts instead of regular mutual funds. They are also in high demand by private wealth managers. These individuals generally require personalized services in investment management, estate planning, tax planning, and other areas.


Which Countries Have the Most High-Net-Worth Individuals?


The countries with the most HNWIs are the United States, Japan, Germany, then China, in that order. These countries make up approximately 64% of the world's HNWI population. In 2021, the U.S. had roughly 7.46 million HNWIs; Japan had 3.65 million; Germany, 1.63 million; and China, 1.54 million.


The Bottom Line


A high-net-worth individual (HNWI) is someone with liquid assets of at least $1 million. These individuals often seek the assistance of financial professionals to manage their money, and their high net worth often qualifies them for additional benefits and opportunities. HNWIs are in high demand by private wealth managers because it takes more work to maintain and preserve their assets, and they may have access to unique investment opportunities. The United States boasts the most HNWIs in the world.

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