HNWIs typically receive special treatment and custom services from financial institutions.
What Is a High-Net-Worth Individual (HNWI)?
A high-net-worth individual (or HNWI) is a designation used in the finance industry for a person with a large amount of investable wealth. Here, investable wealth includes only liquid assets like cash, cash equivalents, and easily traded securities like stocks and bonds. Less-liquid assets like real estate, art, and collectables are not considered when determining the value of an individual’s investable assets.
High-net-worth individuals have access to exclusive services, benefits, and investment opportunities at financial institutions, and many are eligible for special accounts with lower-than-usual fees. Most HNWIs require the services of a financial advisor or wealth manager, and some of these sorts of professionals serve high-net-worth clients exclusively.
Most HNWIs also meet the SEC’s requirements for accredited investors, meaning they are allowed to invest in securities that are not regulated to the same degree (or subject to the same disclosure requirements) as typical investments like publicly traded stocks and bonds.
What Qualifies Someone as a High-Net-Worth Individual?
The exact definition of a high-net-worth individual varies between financial institutions, but most commonly, the term refers to those with over $1,000,000 worth of liquid, investable assets.
The SEC’s definition is less stringent, however—according to the commission, either liquid assets of over $750,000 or a net worth (which includes less-liquid assets) of over $1.5 million can qualify someone as an HNWI.
How Are HNWIs Categorized? How Many Types Are There?
As mentioned above, individuals with over $1 million in liquid wealth are typically considered HNWIs, but other, similar categories are also used by financial institutions to group clients by wealth. Those with more than $100,000 but less than $1 million are considered sub-HNWIs. Those with more than $5 million are called very-high-net-worth individuals, and people whose wealth exceeds $30 million are known as ultra-high-net-worth individuals.
Types of High-Net-Worth Individuals
What Perks & Privileges Do High-Net-Worth Individuals Get?
Financial institutions and wealth-management firms vie for the business of HNWIs due to the sheer volume of cash they need managed. The more cash an individual has, the more work their bank can do on their behalf, and the more work a bank does, the more money it can make. Additionally, the money an HNWI holds in accounts with a financial institution increases that institution’s assets under management (AUM), which can make it more attractive to investors and other wealthy customers.
In other words, HNWIs are extremely valuable customers—financial institutions can make a lot of money by working for them. Because of this, many institutions offer special perks to HNWIs who choose to work with them.
These privileges vary between institutions, but lower account fees and specialized tax and estate-planning services are common. Additional perks often include automatic hotel upgrades, invitations to exclusive private events, and 24-hour concierge service.
What Can HNWIs Invest in that Ordinary Investors Can’t?
Most high-net-worth individuals also qualify as accredited investors and thus have access to a suite of exclusive investment opportunities that most ordinary investors are unable to access, including:
Hedge fundsPrivate equityPrivate and corporate real estatePre-IPO placementsICOs (initial coin offerings) Angel investing (early-stage startup investing)
What Do HNWIs Invest In?
According to a 2021 study by Statista, the average HNWI portfolio contains 29.6% equities, 23.7% cash and equivalents, 17.6% fixed-income investments, 14.8% real estate, and 14.2% alternative investments.
Average HNWI Asset Allocation
Equities represent the largest portion of a typical high-net-worth individual’s portfolio.
Giorgio Trovato via Unsplash; Canva
How Many HNWIs Are There in the U.S.? The World?
According to the Global Citizens Report by Henley & Partners, there were over 15 million HNWIs worldwide as of 2021. Of these, over 5.5 million were located in the U.S. In terms of individual cities, New York boasts the most HNWIs with nearly 1 million as of 2018, followed by Tokyo and Los Angeles, both of which boasted nearly 600,000 as of the same year.
