The profile of a high net worth individual (HNWI) is different from someone who is not wealthy. These people also have a stable income stream and a high income growth potential.
There are numerous books, blogs and articles written about how to accumulate a large amount of wealth. However, the challenges of building a fortune vary as much as the number of millionaires that exist in this world. There are certain characteristics have emerged as being true among high net worth individuals (HNWI).
So lets discuss some of the interesting chcateristics of High Net Worth Individuals
Knowledge of Investment Options
High net worth investors are more likely than the average investor to say they know three or more types of investments, including mutual funds, stocks, bonds and certificates of deposit (CDs). They are also more likely to know three or more types of retirement accounts, including IRAs and Roth IRAs.
Understanding basic investing concepts – High net worth investors are significantly more likely than the average investor to understand various investment terms, such as risk tolerance, asset allocation and diversification. This may indicate that they have a better understanding of how their investments work than other investors do.
A Network of Trusted Advisors
High net worth individuals (HNWIs) and wealthy families have a network of trusted advisors who help them navigate and manage their wealth. Most HNWIs are comfortable with financial and investment topics, but they want to work with professionals who understand their unique needs.
HNWI’s also have a network of trusted advisors such as attorneys, accountants, investment managers, and insurance professionals to help plan their finances and protect their assets.
Knowledge of Financial Markets and Trends
It’s not uncommon for high-networth individuals to possess a broad range of knowledge about financial markets and trends. Many high net worth individuals have a background in finance, banking, or business.
These individuals are often highly educated and practice good money management skills. They have knowledge of financial markets and trends, which can help them understand how to invest their money and grow it over time.
They may have had an interest in finance from an early age or gained experience through work, education, and personal relationships. In some cases, they may have matured into their wealth by working their way up the corporate ladder.
Knowledge of Tax laws, Strategies and Incentives
Because they have more income than most people, wealthy individuals pay more taxes. They also have a greater incentive to learn about tax laws and use them to their advantage.
Wealthy individuals typically have multiple streams of income. Some may come from investments that generate passive income or from real estate rentals or other businesses that don’t require daily attention. Wealthy people often earn a salary, but it’s rarely their only source of income
High net worth individuals know how to leverage their money by investing in assets that will increase in value over time. This is how they make their wealth grow
Use of debt to build wealth – If there is one thing you should take away from this list, it’s this concept: Borrowing isn’t bad; using debt unwisely is bad
Self-education about finance and investing – Most wealthy people are financial literate because they take the time to learn about personal finance and investing.
Aspiration to meet goals and Improvements
Many high net worth individuals are aspirational, wanting to meet goals and continually improve their investments. They have a compelling reason to invest and are motivated to learn how to do so.
They also share certain characteristics that are worth noting, such as:
- They work hard for their money
- They tend to be aggressive investors
- High net worth individuals want to protect their assets and grow wealth
- They want to maximize their financial goals and status, both now and in the future.
They have a written Savings Plan
They know exactly how much they can afford to spend each year, and they know for sure that their annual spending won’t deplete their savings
They diversify their investments. They don’t put all of their money in just one type of asset class but instead spread it out over several different types of investments including stocks, bonds, and real estate.
They only invest in what they know. They’re not going to buy stock in a company they haven’t researched thoroughly. Instead, they are going to take the time to learn about a company’s financial health before investing in it.
They set goals for themselves and monitor their progress toward those goals regularly. They don’t make assumptions about how their investments will perform — instead, they look at the numbers regularly and adjust their strategies accordingly if necessary.
They are willing to make sacrifices
The first, and most important, attribute of all high-net-worth individuals is that they are willing to make sacrifices. The fact is that most people will not become a millionaire during their lifetime. If you want to be one of the few people that do become wealthy, you must be willing to make sacrifices.
HNWI tend to make more sacrifices in order to be successful, this applies especially to personal lives – they work longer hours and spend less time with their friends and family.
They Choose their friends wisely
High net worth individuals don’t just want to make money. They want to spend it, and they want to spend it with people they like. And I’m not just talking about buying expensive wine and dinners.
High net worth investors value their relationships and the time they spend with their friends. They’re looking for a partner that they trust, who has a proven track record, and who makes them feel comfortable.
If you want to be successful, you need to surround yourself with people who will push you to be better and do better. HNWIs realize this and typically have a small group of friends with whom they spend most of their time and energy.
This is because they know that having one bad apple in their circle can cause them to lose millions by making bad investment decisions or getting caught up in other destructive behaviors.
They Invest in Themselves
The wealthiest people spend a lot of time and money on personal development — education, coaching, therapy, and so forth. This is how they learn to think differently about money and success than the average person.
They want to be better at what they do and know how to succeed. They also seek out education from other successful people and coaches to help them along the way.
They Invest in Real Estate
Investment properties are often a key source of wealth for high net worth individuals. Some buy investment properties as a way to earn rental income and reinvest their profits into more properties, while others use the equity in their homes to invest in other ventures.
Many high net worth individuals prefer to put their money into real estate because it is tangible and can be used as an investment vehicle for other investments.
Owning real estate also provides a stable cash flow when renting out space and gives owners tax advantages by deducting depreciation from their taxes.
High net worth investors not only provide financing for large commercial developments but also act as developers themselves on individual projects such as apartment buildings and shopping centers.
They know how to Network
Many high net worth individuals are able to network successfully with other people. They know how to connect with others on a professional level and can get the information that they need to get ahead in life.
They tend to associate with other wealthy people; it’s part of how they maintain their status. As a result, they have strong networks that include other successful individuals. This can help them get ahead professionally and personally.
They Invest for the Future
Invest for the future, not for today: High net worth individuals are significantly more likely than non-high net worth investors to say their primary objective is long-term investing
HNWIs tend to invest for the long term because they understand that this investment strategy is most likely pay off in the long term when compared to short term.
Conclusion
HNWIs are not one monolithic group, but rather individuals with different ways of thinking and lots of varying goals. There will always be people who don’t fit into the average HNWI profile, and that’s okay.
It’s more important to understand the general characteristics of HNWIs as a whole and if you can do that, you’re more likely to know what makes an HNWI tick. Keep that in mind as you work with them, and you might be able to make some deals happen that otherwise would never have been on the table.