High Net Worth Individuals
Table of Contents
- What Are High-Net-Worth Individuals (HNWIs)?
- How to Calculate Your Net Worth
- Benefits of Having a High Net Worth
- How Do I Become a High Net Worth Individual
- Types of HNWIs
- HNWI Statistics
- Who Are High Net Worth Individuals?
- What Is The Net Worth of the Top 5% Ultra-high Net Worth Individuals?
- Where Do High Net Worth Individuals Hang Out?
- What Do High Net Worth Individuals Need to Keep In Mind for Wealth Management?
What Are High-Net-Worth Individuals (HNWIs)?
There is no official or legal definition of high net worth, but the consensus is that individuals who own at least $1 million in investable assets are considered to have a high net worth. Investable assets, or liquid assets, do not include a home or other real estate; rather, they include assets that can be fairly easily converted to cash, such as stocks, bonds, and money market accounts.
Because financial advisors are paid a percentage of the value of the client’s assets, they appreciate having customers with a high level of liquidity in their portfolios.
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How to Calculate Your Net Worth
To calculate your net worth, simply subtract the total value of your liabilities from the value of your assets. Liabilities are any kind of debt, loan, or mortgage. Assets include cash, gold, bank accounts, investments, and real property (home, cars, and collectibles).
Benefits of Having a High Net Worth
Having a high net worth means not having to worry about money. If you have a high net worth, you can live off your investments—assuming you aren’t too greedy and careless about expenses. Even with the safest investments, you can earn enough to live on without spending your capital.
If you want more luxury, you can invest in more profitable, albeit riskier, investments while keeping your retirement income secure.
Having a high net worth can give you access to investments not otherwise available. These are investments that require a large minimum placement. Investment firms may offer other perks, such as reduced fees and tickets to various events.
How Do I Become a High Net Worth Individual
With a high-paying job and a frugal lifestyle, where you save a lot of your income every month, you could accumulate $1 million over time. For example, if you earn $100,000 per year and save $25,000, you will have $1 million saved in 40 years—without earning any interest! If you invest that $25,000, you could have a lot more than $1 million.
Many high net worth individuals have built a business from scratch and then sold it, which can be done in less than 40 years if the business is highly successful.
Investing for the long term can yield astonishing results due to compounding (earning on your earnings), but it’s best to start accumulating savings early in life.
Saving something from every paycheck and controlling expenses will go a long way to accumulating wealth.
Types of HNWIs
Beyond high net worth, very high net worth individuals are those who have between $5 million and $30 million in liquid assets, whereas ultra-high net worth individuals have over $30 million in liquid assets.
Then, there are accredited investors, defined as individuals with income exceeding $200,000 in each of the two most recent years and a reasonable expectation of the same income level in the current year, or individuals with a net worth that exceeds $1 million or with assets under management of $1 million, excluding their primary residence.
Accredited investors have the legal right to buy securities that are not registered with regulatory bodies such as the SEC. They also have privileged access to venture capital, hedge funds, and transactions involving complex and riskier investments and instruments.
Recently, Bernard Arnault and Elon Musk were jostling for the position of richest man in the world, each with around $200 billion (depending on the performance of Tesla stock).
The richest woman in the world is Françoise Bettencourt Meyers, with over $90 billion.
The 2022 World Wealth Report states that there are 22.5 million HNWIs and 220,000 UHNWIs, with $87 trillion in wealth.
The top five countries with the most HNWIs are the US, Japan, Germany, China, and France. The top five countries with the most UHNWIs are the US, China, Germany, Canada, and India, with each individual having a net worth of at least $50 million.
In 2022, the number of HNWI grew by 1.7 million (7.8%), and global wealth increased by $6.4 trillion (8%).
Frequently Asked Questions
An affluent individual is simply wealthy, rich, or well-off and lives a comfortable lifestyle, whereas a high-net-worth individual has at least $1 million in liquid assets.
In 2021, there were 7.4 million HNWI in the United States, according to Statista.com, including such people as Alice Walton ($65 billion) and Jeff Bezos ($171 billion).
There are more high net worth individuals in the United States than in any other country, followed by China, Germany, France, Canada, Japan, and India.
A rule of thumb is to take your age, divide it by 10, and multiply that by your gross annual income. So, if you’re 60 years old and your income is $75,000, your net worth should be $450,000.
The average net worth for US households is $750,000, with a median of $121,000. The median for American households where the head of household is over 75 years old is $250,000.
In the US, the net worth of the top 1% is $10,815,000.
To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.
We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.