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

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 someone must 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.

A high-net-worth individual classification generally qualifies people 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 63% of the world's HNWI population resides in the United States, Japan, Germany, and China, according to the Caproasia World Wealth Report 2021. The U.S. had about 7.46 million HNWIs.

Globally, the HNWI population reached 22.5 million in 2021, with a total of $87 trillion in wealth. North America led the world's HNWI wealth with $7.9 million individuals, followed by the Asia-Pacific region with 7.2 million, Europe with 5.7 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 220,000 in 2021. That's an increase of 9.2%. Mid-tier millionaires numbered 2.05 million, while the millionaires next door category made up the largest group at 20.184 million.

Source: Capgemini World Wealth Report

Types of High-Net-Worth Individuals

An investor with less than $1 million but more than $100,000 is considered to be a sub-HNWI. The upper end of HNWI is around $5 million, at which point the client is referred to as a very-HNWI. More than $30 million in wealth classifies a person as an ultra-HNWI.

The very-high-net-worth individual (VHNWI) classification can refer to someone with a net worth of at least $5 million. Ultra-high-net-worth individuals (UHNWIs) are defined as people with investable assets of at least $30 million.

This, of course, excludes personal assets and property, collectibles, and consumer durables.

The Bottom Line

A high-net-worth individual (HNWI) is someone with liquid assets of at least $1 million. These individuals often seek the assistance of financial professionals to manage their money, and their high net worth qualifies them for additional benefits and investing opportunities that are closed to most.

HNWIs are in high demand by private wealth managers because it takes more work to maintain and preserve their assets. The United States boasts the most HNWIs in the world.

Correction—April 30, 2023: A previous version of this article stated that liquid assets might include a primary residence or works of art. Neither can quickly and easily be converted into cash and therefore are not liquid assets.