High Net Worth Individual also known as HNWI is an expression used within certain segmented financial services industries that describes people whose wealth is greater than a given value. Generally, they have a total of more than 1 million dollars worth of assets.
The “VeryHNWI”, or VHNWI, is defined as a person with assets exceeding $5 million. The Capgemini worldwide wealth report 2020 defines an additional category of highly-rewarding individuals or UHNWIs. As of May 2019, it was estimated there would have been around 13 million HNWIs.
What makes a high net worth individual?
A high net worth individual is an individual with a value of assets in excess of $1 million.
HNWI is used interchangeably with the word millionaire. While it’s true that there is no official or legal definition that can be agreed upon, generally speaking, an individual with a networth of $1 million or more is considered an HNWI.
World Numbers
The number of HNWIs in the world grew by 1.6% to 19.6 million people, according to the Capgemini World Wealth Report. Almost 63% of the world’s HNWI population lives in the United States, Japan, Germany, and China. The U.S. had about 6.6 million HNWIs in 2020, up 11.3% from the year before.
In 2020, the HNWI population saw its assets grow by 7.6% reaching $79.6 trillion in wealth. That growth was driven by rising equity markets and strong performance in alternative investments, like real estate and private equity.
| HNWI Wealth In | |
| North America – $24.3 Trillion | |
| Asia – $24 Trillion | |
| Europe – $17.5 Trillion | |
| Latin America – $8.8 Trillion | |
| Middle East – $3.2 Trillion | |
| Africa – $1.7 Trillion |
How is high-net-worth determined?
In order to be classified as a high-net-worth individual, you need to have a financial net worth of at least $1 million. This includes your assets, such as real estate, stocks, bonds, and other investment accounts. It also includes your liabilities, such as car loans and student loans.
What counts in HNWI?
While a person’s first thought of high net worth might be their income, there are other factors that can contribute to the amount.
Income
The first and most obvious thing that contributes to a person’s net worth is their income. If a person has a large salary or business profits, they will have more money to put toward investments, savings or other assets. A person with a higher income will have more money to purchase luxurious items and larger real estate properties as well. Income is the primary factor in determining if a person has high net worth.
Assets
Other than income, the number of assets you have in your possession can lead to your being considered high net worth. Assets refer to the property someone owns that is valuable and can be turned into cash. Real estate properties, stocks, bonds, and art collections can increase someone’s net worth because these items are valuable and can be sold for a lump sum of cash at any time.
Debt
Debt plays an important role in determining if you’re high net worth. Debt refers to everything you owe money on, such as student loans, credit cards, mortgages, and car payments. The amount of debt you carry each month can reduce your ability to
Types of HNWI
Capgemini, a French consulting firm, defines HNWIs as those with investable assets of $1 million or more, excluding real estate and collectibles.
Types of HNWI – Capgemini separates the HNWI population into three wealth types:
Millionaires next door, who have $1 million to $5 million in investable wealth
Mid-tier millionaires with $5 million to $30 million
Ultra-HNWIs, which includes those with more than $30 million3
Globally, the ultra-HNWI population numbered 200,900 in 2020. Mid-tier millionaires numbered 1.89 million, while the millionaires next door category made up the largest group at 18.7 million.
Top 10 Countries for High Net Worth Individuals – 2020
| Country HNWI Population YoY Growth | |
| United States 6,575,000 11.2% | |
| Japan 3,537,000 6.2% | |
| Germany 1,535,000 6.9% | |
| China 1,461,000 11% | |
| France 714,000 1.7% | |
| UK 573,000 -3.0% | |
| Switzerland 459,000 4.9% | |
| Canada 403,000 2.9 % | |
| Italy 301,000 2.1% | |
| Netherlands 299,000 4.1% |
How to become a High Net Worth Individual
The first step to becoming a HNWI is to have an income that puts you in that category. You can work at home, work in a high-powered corporate position and anything in between. But of course, your financial situation doesn’t have to be defined by your job alone. Here are other ways you can increase your net worth:
Invest in stocks and bonds
Earn interest through CDs and high-yield savings accounts
Make money by investing in real estate
Own your own business
Pay off debt to increase cash flow
Monitor and maintain your wealth
Benefits of being a High Net Worth Individual
An HNWI is someone who has the financial security to take risks and invest, without fear that they’ll lose it all. They’re able to do things like start their own business, buy a home or travel the world — all without worrying about running out of money.
Being a high-net-worth individual isn’t just important in terms of taxes, though. Because of the nature of their assets, HNWIs can afford luxury goods, which could attract customers to your products and services.
Access to capital – There’s also no limit on how much an HNWI can save and invest in one year through the use of investment trusts and pooled investment vehicles.
Global Reach – Because they have access to liquid financial markets around the world, HNWIs are able to invest in all sorts of foreign markets and currencies that aren’t available to most U.S. citizens or residents.
One of the main benefits for HNWIs is that they get access to financial planning tools and advice that aren’t available to most people. And because their average net worth is so high, they often get special deals when they buy things like property or stocks and bonds.
Privileges of High Net Worth Individuals
High net worth individuals are afforded some benefits by virtue of their wealth. Here are some of the most common privileges they enjoy
Customized Credit Cards:
There are several credit cards that are designed for high net worth individuals and such cards typically have higher credit limits and cashback rates. Moreover, these custom credit cards allow the user to enjoy exclusive access to events, whereas they also provide luxury services such as concierge service, airport lounges and travel insurance.
Customer Service:
High net worth individuals usually get better customer service because they often get to use a VIP line or a special number dedicated to them. Moreover, they are also offered products with lower interest rates and better deals when it comes to various credit products. A high net worth individual is also provided with a personal banker who helps in managing their finances and offering them customized financial solutions.
Valuable Rewards:
Some premiums are given to high net worth individuals for using certain services or for spending up to a particular threshold every year. These rewards can be in the form of points that can be redeemed for various products or services that the issuer offers. In addition, there are certain.
Criticism of High Net Worth Individuals
The term “high net worth” is often mistakenly attributed to the amount of income or capital gains an individual earns. In fact, it refers to accumulated wealth – that which has been saved and not spent. Accumulated wealth is often perceived as a reflection of greed and exploitation.
As such, both the term and its definition have attracted criticism. Critics argue that wealth inequality should be measured by looking at the distribution of income rather than that of wealth (“The Rich List: financial worth vs human value”). Thus measuring inequality by reference to net worth will inevitably lead to skewed results with the top 1% of wealthy households owning 40% of the world’s wealth while only earning 13% of global income.
Conclusion
It is easy to be envious of the people who fall into this category, but being a high-net-worth individual doesn’t happen overnight. It takes discipline and hard work to acquire financial freedom. There are many things to consider when becoming an HNWI, such as financial education, spending habits, self-control, and career choices. But if you are looking for the “millionaire next door” way of life, a simple method is to start out by reading Rich Dad Poor Dad. This book is packed with fantastic information that will make anyone’s financial future better!