HNWI – High Net Worth Individuals

hnwiHNWI (High Net Worth Individual) is a term used by some segments of the financial services industry to designate persons whose investable assets (such as stocks and bonds) exceed a given amount. Although there is no precise definition of how rich someone must be to fit into this category, high net worth is generally quoted in terms of having liquid assets of a particular number. The exact amount differs by financial institution and region.

A high net worth individual classification generally qualifies for separately managed investment accounts instead of regular mutual funds. This is where the fact that different financial institutions maintain varying standards for HNWI classification comes into play. Most banks require that a customer have a certain amount in liquid assets and/or a certain amount in depository accounts with the bank to qualify for special HNWI treatment.

Most global banks, such as Barclays, BNP Paribas, Citibank, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase, and UBS, have a separate business unit with designated teams consisting of client advisors and product specialists exclusively for UHNWI. Because of their extreme high net worth and the way their assets were generated, these clients are often considered to have characteristics similar to institutional investors.

Ultra high-net-worth individuals (UHNWI) are defined as having a net worth of at least US$30 million in constant 2018 dollars. It is the wealth segment above very-high-net-worth individuals (>5 million) and high-net-worth-individuals (>1 million). Although they constitute only 0.003% of the world’s population, they hold 13% of the world’s total wealth. By 2017 there were 226,450 individuals designated as UHNWI representing an increase of 3.5% with their combined total wealth increasing to $27 trillion.

Brands in various sectors, such as Bentley, Maybach, and Rolls-Royce in motoring, actively target UHNWI and HNWI to sell their products. In 2006, Rolls-Royce researchers suggested there were 80,000 people in ultra-high-net-worth category around the world. UHNW individuals “have, on average, eight cars and three or four homes. Three-quarters own a jet aircraft and most have a yacht.

What Makes a High Net Worth Individual?

The most commonly quoted figure for membership in the high net worth club is $1 million in liquid financial assets. An investor with less than $1 million but more than $100,000 is considered to be affluent or perhaps sub-HNWI. The upper end of HNWI is around $5 million, at which point the client is then referred to as very HNWI.

HNWIs are in high demand by private wealth managers. 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, tax planning and so on.

Where do HNWIs live?

The Capgemini World Wealth Report reveals that as of 2017, the United States had the most HNWIs in the world, at more than 5.28 million, and seeing 10% growth in its HNWI population from 2016. The entire HWNI population globally grew by 11.2% in 2017.

Moreover, 61.2% of the global HNWI population reside in four countries: the United States, Japan, Germany and China. The major country with the largest increase in HNWI population for 2017 was India, growing 20% from 2016. South Korea had the second best growth, with a 17% increase. North America had 31.3% of the HNWI population, and Asia-Pacific had 34.1%. Of the HNWI population in North America, the U.S. made up 96% of the continent’s HNWI population.

Europe saw a 7.3% growth in HNWI population for 2017, with Germany growing by 7.6%. Ireland posted the highest HNWI population growth in Europe, coming in at 15.3%. Meanwhile, HNWI population for the U.K. was just 1.2%. Sweden was the only market to jump two places in the HNWI population ranking, coming in at 23rd, and posting 14% HNWI population growth.

 


 

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