You might have heard of the term "high net worth individual", or HNWI (not confused with a JENRY).
- Define high net worth individuals
- Explain how HNWIs get determined
- Share personal finance tips to help you become one
Determining high net worth individuals
A person with a high net value is one who has more than the minimum amount of net worth. The net worth of an individual is calculated by subtracting all liabilities or debts from all assets or things owned.
Learn More: How To Calculate Your Net Worth
HNWI is a term used in the financial industry to identify clients who are eligible for exclusive services and benefits.
The closest thing to a standard definition of HNWI is the Securities and Exchange Commission (SEC), who defines HNWIs as those with at least $1.5million in net worth or $750,000 in liquid assets.
These assets include cash in checking, savings, or money market accounts; stocks & bonds; and shares of mutual fund and exchange traded funds. These assets don't usually include land or real estate, as they can't be easily converted into cash.
Accredited Investors and HNWI Levels
Annual reports must be submitted to the SEC by financial advisors detailing the number of clients who meet the HNWI criteria. Additionally, HNWIs are also referred to by the SEC as "accredited investor" because they must report annually to the SEC how many clients they have who meet the criteria.
To invest in certain securities, such as hedge funds or private equity, one must be an accredited investor.
The HNWI designation is not the only one. A very high-net worth individual can also be designated, but they must have at least $5,000,000 in liquid assets. The ultra-high-net-worth designation requires liquid assets of at least $30,000,000.
Individuals with high net worth statistics
Here are some statistics on high-net-worth individuals.
- According to the Capgemini Worth Wealth report, the United States has the highest number of HNWIs worldwide. The United States, Japan, Germany, and China account for 62% of all HNWIs worldwide.
- According to Spectrem Group in an increase of 5.5%, just over 11 million households in the United States met the criteria for high net worth individuals in 2020.
- Spectrum Group reports that nearly 2 million households in the United States met the criteria for very high net worth individuals in 2020.
Benefits of being a HNWI
Like frequent airline flyers, high net worth individuals enjoy perks. HNWIs often receive a customized, "white glove" approach from financial service providers. These might include accessing dedicated wealth managers, special services such as trust and estate planning and invitations to special conferences or events.
HNWIs might also be permitted to invest in investments not available to other investors, such as private equity and hedge funds. HNWIs may also be eligible to participate in the initial public offerings (IPOs) from the ground floor.
How to become a high-net-worth individual
HNWI is a lifestyle that requires financial discipline over a long time.
This means diligent savings, investing success and managing personal debt responsibly. You can start to save a percentage of your income each month to get started on your journey to becoming an HNWI. You can increase the amount and percentage of your savings as your income increases.
You can take advantage of compounding returns if you start saving and investing sooner. Compounding is a way to make money. Not only does it earn you the initial investment amount, but also the income from the investment. This can help you increase your net worth over time.
Keep your debt under control, especially high-interest consumer debt such as credit cards. Each dollar spent on debt repayment is not being saved or invested to increase your net worth.
Calculate your net worth
This free calculator will help you determine if you are a high-net worth individual.
Register for Personal Capital's secure and free online financial tools to track your net worth. This technology is used by more than 3 million households in the United States to:
- You can see their net worth and all their financial accounts in one place.
- Examine their investments to uncover hidden fees
- Long-term goals like purchasing a house or saving money for retirement should be considered.
Let's get started
Don Sadler ("Author") receives compensation from Personal Capital for the content in this blog post. The compensation does not exceed $500. Personal Capital Advisors Corporation is not the client of this author. This blog post is for informational purposes only. It does not constitute legal, tax or accounting advice. For specific questions, you should speak with a qualified tax or legal professional. Remember that investing comes with risk. Your investment's value will fluctuate over time, and you could lose or gain money.
By: Don Sadler
Title: High Net Worth Individual (HNWI)
Sourced From: www.personalcapital.com/blog/personal-finance/high-net-worth-individual/
Published Date: Fri, 16 Sep 2022 15:00:45 +0000