What is a High Net Worth Individual (HNWI)?
A high net worth individual possesses liquid assets worth $1 million to $5 million. They are also referred to as HNWIs. In order to qualify for HNWI status, the individual’s liquid assets must be readily available in their bank or brokerage accounts. The assets must be accessible and easily converted into cash.
Residence, real estate, land, or other capital assets like gold, jewelry, and collectibles are not considered for the HNWI classification. HNWIs employ financial advisors and firms to manage their finances. In return, HNWIs get exclusive benefits like reduced fees, access to special events, special rates, and discounts.
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Key Takeaways
- A high net worth individual is simply a wealthy individual who possesses liquid assets worth $1 million or more. They are highly sought after by financial firms—in return, they get discounts and special access to services.
- In addition to HNWIs, financial opulence is classified into very high net worth individuals (VHNWIs) and ultra-high net worth individuals (UHNWIs).
- Statistically, countries like the US, China, Germany, France, and Japan have the most number of HNWIs, VHNWIs, and UNHWIs. Forecasts suggest a rapid rise in this number—especially in the US.
- It is also estimated that by 2026, Asia will become the second-largest wealth hub—surpassing Europe.
HNWI Explained
In addition to investments, assets, and savings, a high net worth individual (HNWI) has liquid assets worth $1 million to $5 million in their bank or brokerage account. These liquid assets can easily be converted into cash—qualifying the individual as an HNWI.
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Most HNWIs are business owners, entrepreneurs, innovators, or long-term investors. Individuals with a successful business model are more likely to become HNWIs. It could be a CEO, chairman, or a board of directors position.
Strictly speaking, if we consider the HNWI definition, it is not really necessary for an individual to be a business owner to become a successful HNWI. By investing diligently and having a long-term vision, anyone can become an HNWI. These investors are very disciplined when it comes to decision-making—they take advantage of time and the power of compoundingCompoundingCompounding is a method of investing in which the income generated by an investment is reinvested, and the new principal amount is increased by the amount of income reinvested. Depending on the time period of deposit, interest is added to the principal amount.read more.
In addition to HNWIs, two other types of individuals accumulate wealthWealthWealth refers to the overall value of assets, including tangible, intangible, and financial, accumulated by an individual, business, organization, or nation.read more:
- Very high net worth individuals (VHNWIs) – Individuals or households possessing liquid assets worth $5 million to $30 million.
- Ultra-high net worth individuals (UHNWIs) – Individuals possessing more than $30 million in liquid assets.
Countries with many HNWIs, VHNWIs, and UHNWIs have a strong economy—individual growth directly reflects in growth of the national economy. Certain products cater exclusively to HNWIs—whose display of wealth includes mansions, yachts, private jets, paintings, precious stones, NFTs, and customized insurance plans.
Also, global banks like Santander, Barclays, BNP Paribas, Citibank, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase, and UBS have dedicated units for UHNWI business—with dedicated client advisors and product specialists.
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Top HNWI Countries
The following countries have a greater number of HNWIs:
- In 2019, 62% of HNWIs in the world resided in the US—topping the list of most high net worth individuals by country. The US is closely followed by Japan, China, France, and Germany.
- In 2020, approximately 11.6 million American families held a net worthNet WorthThe company's net worth can be calculated using two methods: the first is to subtract total liabilities from total assets, and the second is to add the company's share capital (both equity and preference) as well as reserves and surplus.read more of $1 million to $5 million (not including primary residence). Meanwhile, UHNWIs possessed between $5 million and $25 million.
- In 2020, Japan recognized around 3.45 million HNWI—with a net worth of $1 to $5 million US dollars.
- Given the prospects for wealth growth and creation between 2021 and 2026, forecasts predict a worldwide UHNWI population growth of 28%—from 348,355 to 783,671.
- It is also estimated that by 2026, Asia will become the second-largest wealth hub—surpassing Europe. Singapore is likely to witness a 268% growth in UHNWI numbers.
HNWI Privileges
HNWIs enjoy the following privileges:
- HNWI are treated like royalty—they enjoy a certain sense of importance.
- A commoner is unaware of many financial products and services that are customized for HNWIs.
- HNWIs are in demand—financial firms and professionals are always racing each other to acquire wealth management opportunities.
- HNWIs invest in company stakes, private equities, and large hedge fundsHedge FundsA hedge fund is an aggressively invested portfolio made through pooling of various investors and institutional investor’s fund. It supports various assets providing high returns in exchange for higher risk through multiple risk management and hedging techniques.read more.
- Many HNWIs enjoy participating in pre-IPO placements and pre-ICO sales ventures.
- Another key benefit of being an HNWI is that they can choose to become high-stakes investors in promising startups.
- HNWIs stand out—differentiating themselves from other individuals with substantial monetary prowess.
- HNWIs enjoy privileges like reduced fees, access to special events, special rates, and discounts.
- Most HNWIs own big companies or are in positions of power like CEO, CTO, chairpersons, etc. HNWI’s firms also enjoy direct and indirect benefits of HNWI status.
Frequently Asked Questions (FAQs)
An individual must possess at least $1 million in liquid assets (that can easily be converted into cash) to be labeled an HNWI. They are in high demand—wealth managers are always chasing them to let them manage their accounts—signing them as a client.
HNWIs invest their money in different assets and financial products —stocks, bonds, real estate properties, and mutual fund schemes. They also have readily available liquid assets of $1 million or more in their bank and brokerage accounts—with easy access.
Usually, HNWIs are either business owners, entrepreneurs, innovators, or long-term investors. But strictly speaking, it is not necessary for an individual to be a business owner to become a successful HNWI. By investing diligently and having a long-term vision, anyone can become an HNWI. Investors must be very disciplined in decision-making—taking advantage of time and compound interest.
HNWIs enjoy the following benefits:
1. Customized financial services.
2. Royal treatment at financial firms.
3. Exclusive client benefits.
4. Access to discrete financial products and services (not available to the public).
5. Many HNWIs get to participate in pre-IPO placements and pre-ICO sales ventures.
6. HNWIs distinguish themselves from other well-to-do individuals.
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