The financial services business largely uses the phrase "high-net-worth individual" to identify the sector's wealthiest customers as candidates for unique service offerings. For example, a credit card firm may provide high-net-worth individuals with an invitation-only card with privileges like limitless spending capacity, round-the-clock concierge service, and luxury hotel upgrades.
Financial advisers also classify their customers according to whether or not they have a high net worth. Advisors registered with the SEC must disclose yearly the number of high-net-worth individuals (HNWI) customers they serve. To do this, they classify them as having either $1.5 million in net worth or $750,000 in investable assets.
Naturally, financial advisers also identify their high-net-worth customers so that they may better serve the unique requirements of these clients. In fact, several wealth management companies cater specifically to the needs of HNWIs and offer them additional services. These companies can distribute their clients' assets over various model portfolios, including actively managed ones inaccessible to customers with a lower total investable asset level. Those considered to have a high net worth (HNW) can obtain individualized guidance about difficult aspects of financial planning, such as estate planning and charitable giving.
To be considered a high-net-worth individual, however, you do not need to have achieved a certain amount of wealth in more than one field. However, the common assumption is that one million dollars in liquid assets is required. This refers to money already in your possession and assets that can be quickly converted into cash with little to no loss in value. If you want to determine whether or not you have a high net worth, you may often count the following liquid assets toward that determination:
- Checking accounts
- Money market accounts
- Bonds, especially U.S. Treasuries
- Stocks
- Savings accounts
- Mutual fund shares
Types of High-Net-Worth Individuals
Being an HNWI is not the pinnacle of achievement in the financial world, despite the fact that possessing one million dollars in liquid assets would make most individuals happy. You would only be considered high-net-worth if you had a million dollars. To be considered a "very high-net-worth individual," you must have a minimum of $5 million in liquid assets. And if you want to be considered "ultra-high-net-worth," you must have at least $30 million in liquid assets. This is the highest tier of high-net-worth individuals.
In addition, the SEC considers the vast majority of HNWIs to be "accredited investors." According to the law, these people are characterized as investors who have had an annual income of at least $200,000 in each of the previous two years ($300,000 for combined income) or who have a net worth of at least $1 million, excluding the value of their dwelling. Accredited investors meet the requirements to purchase specialized securities like private equity and hedge funds.
High-Net-Worth Individual Statistics
Research conducted and released by Statista in 2022 found that the United States of North America is home to the greatest number of HNWIs in the whole globe. The figures increased from 6.3 million in 2019 to 6.98 million in 2020 and 7.9 million in 2021, respectively. Since 2010, the number of HNWIs in the United States has gradually increased. The number of very wealthy individuals in the United States was 3.39 million back then, which is less than half of what it is today.
During the last decade, the Pacific-Asia region's overall performance has been generally comparable to or somewhat better than North America's. The Middle East, Latin America, and Africa all finish far behind the top three, with Europe constantly holding the third slot. The United States of America is home to many wealthy people, including some of the wealthiest people in the whole world.
Bottom Line
Having the financial status of a "high-net-worth individual" may come with several advantages, but getting to that point can be challenging. To reiterate, you would often need to own at least one million dollars in cash or liquid assets to qualify as a high-net-worth individual. There are, however, categories that are more exclusive than HNWI, such as ultra-high-net-worth and very-high-net-worth individuals. If you can break into any of these groups, you will be granted access to a wide variety of options unavailable to most individuals.
