High-Net-Worth Individual (HNWI): Criteria and Example (2024)

What Is a High-Net-Worth Individual (HNWI)?

The term high-net-worth individual (HWNI) is a financial industry classification denoting an individual with liquid assets above a certain figure. People who fall into this category generally have at least $1 million in liquid financial assets.

Liquid assets are, by definition, cash or money in investments that can be converted to cash relatively easily at any time. That excludes the person's primary residence as well as possessions like fine art and antiques that are relatively difficult to sell and volatile in value.

High-net-worth individuals have at least $1 million in cash in hand and assets that can be converted to cash such as certificates of deposit and government bonds. Lists of liquid assets often exclude stocks and bonds because they can result in losses if sold at the wrong time. However, high-net-worth individuals tend to have investment portfolios that include stocks and bonds, and these contribute to their wealth.

This is the demographic that most often hires financial professionals to manage their money.

Understanding Net Wealth of High-Net-Worth Individuals (HNWIs)

The financial industry measures people by their net worth. Although there is no precise definition of how wealthy someonemust be to fit into this category, high net worth is generally defined as having liquid assets of a million dollars. The exact amount differs by financial institution and region.

The more money a person has, the more work it takes to maintain and preserve those assets. These individuals generally demand and can justify personalized services in investment management, estate planning, and tax planning.

Ahigh-net-worth individual classificationgenerally qualifiespeople for separately managed investment accounts rather than mutual funds. Most banks require that a customer have a certain amount of liquid assets, a certain amount in depository accounts with the bank, or both, to qualify for special HNWI treatment.

HNWIs usually get more benefits than those whose net worth falls under $1 million. They may qualify for services with reduced fees, special rates, and access to investor events that are closed to most.

Benefits Afforded to HNWIs

As a high-net-worth individual (HNWI), you may qualify for banking, investment, and other financial services with reduced fees, discounts, and special rates, along with access to special events and perks.

HNWIs are able to invest in hedge funds, which are generally open only to accredited investors who meet certain criteria, including a minimum net worth. HNWIs may also invest in private equity (PE) and venture capital (VC) funds, which are not available to the general public. They are able to invest in real estate and other alternative assets that are not often accessible to the general public.

These benefits and opportunities vary depending on the financial institution and region.

Special Considerations

Almost 64% of the world's HNWI population resides in the United States, Japan, Germany, and China, according to the Capgemini World Wealth Report. North America had about 7.4 million HNWIs in 2022.

Globally, the HNWI population reached 21.7 million in 2022, with a total of $83 trillion in wealth. North America led the world's HNWI wealth with 7.4 million individuals, followed by the Asia-Pacific region with 7.1 million, Europe with 5.6 million, and Latin America with 600,000. The Middle East had 900,000 HNWIs while Africa had 200,000.

The management consulting firm Capgemini separates the HNWI population into three wealth bands:

• Millionaires next door, who have $1 million to $5 million in investable wealth
• Mid-tier millionaires with $5 million to $30 million to invest
• Ultra-HNWIs, those with more than $30 million

Globally, the ultra-HNWI population numbered 210,000 in 2022. That's decrease of 4.6%. Mid-tier millionaires numbered 1.98 million, while the millionaires next door category made up the largest group at 19.52 million.