HNWI: High-Net-Worth Individuals (2024)

Once upon a time, being called a millionaire meant you were rich. Today, millionaire sounds almost quaint. The new term for wealthy is high-net-worth individual.

Most often referred to as HNWIs, this clinical-sounding acronym is thrown around frequently in the financial industry to denote a person or a household with a substantial amount of wealth.

What Are High-Net-Worth Individuals?

An HNWI is a person who owns liquid assets valued at $1 million or more. There is no official or legal definition of the term, and the threshold for high net worth is generally understood to include liquid assets only—money held in bank or brokerage accounts—excluding assets like a primary residence, collectibles or durable goods.

Financial professionals break down the category into three classifications of wealth:

• High-net-worth individuals. HNWIs are people or households who own liquid assets valued between $1 million and $5 million.
• Very-high-net-worth individuals. VHNWIs are people or households who hold liquid assets valued between $5 million and $30 million.
• Ultra-high-net-worth individuals. UHNWIs are people or households who own more than $30 million in liquid assets.

Given their substantial assets, high-net-worth households require additional services from financial advisors and wealth managers. Financial services for HNWIs include investment management and tax advice as well as help with trusts and estates and access to hedge funds and private equity firms.

The more liquid assets held by an individual or household, the more appealing the HNWI becomes to wealth managers, given they usually earn fees equal to a percentage of the total assets they manage. In addition, banks and investment management firms typically specify account minimums that make HNWIs eligible for more personal, specialized client services.

How to Calculate Net Worth

Want to see if you fall into the high-net-worth category? Calculating your net worth is pretty simple. The formula is simply the total value of your assets minus all of your liabilities. The figure you end up with is your net worth.

Net Worth = Assets – Liabilities

For example, consider a household with assets totalling $1 million, including home equity, vehicles, bank account balances, collectibles and investment accounts. The household’s liabilities include its unpaid mortgage balance, outstanding vehicle loan balances, student loan debt, credit card debt and alimony, totalling $250,000. Our example household’s net worth, then, is $750,000.

Just remember, when determining if someone is a high-net-worth individual, generally only their liquid assets are considered.

Benefits of High Net Worth

The number one benefit of being a high-net-worth individual is the advantages that come from being wealthy.

You’re treated like royalty by different types of financial advisors. The larger the amount of wealth that is being managed, the more complicated the situation—and thus the more attention the HNWI receives.

“Additional concierge-level services can be justified for a higher-net-worth investor that would not be price effective or relevant at lower levels of wealth,” says Mark Bonnett, chief executive officer at Core Path Wealth, in Scottsdale, Ariz.

Valuable client benefits. Many financial investment firms take a page out of airlines’ book and “tier” their customers based on assets under management, instead of flight activity. While perks vary, money managers may offer HNWIs a dedicated wealth advisor, reduced fees, access to conferences and events, and tickets to sporting, theatrical and entertainment events, in addition to other benefits.

High net worth opens doors. HNWI individuals get more account attention, but they also have access to many opportunities that Main Street investors do not.

“For example, when Morgan Stanley began offering clients the opportunity to invest in new Bitcoin funds, only high-net-worth clients with over $2 million in assets under management were given access to the offering.”” says Richard Gardner, CEO at Modulus, a financial technology services company in Scottsdale, Ariz.

HNWI Statistics at a Glance

There’s no doubt that the HNWI trend is in full swing as Americans continue to grow their assets. These statistics bear that sentiment out.

In 2019, the U.S., Japan, Germany, China and France were the top five countries by total HNWIs, according to CapGemini’s World Wealth Report. The U.S. claims the most HWNIs, and 62% of the world’s HWNIs live in the U.S., Japan, Germany and China.

According to Spectrem Group, in 2020 11.6 million American households held a net worth between $1 million and $5 million (excluding the value of their primary residence). That figure was up 5.5% over the prior year.

Spectrum also found that the number of U.S. ultra-high-net-worth individuals—they count UHNWIs as owning between $5 million and $25 million (excluding the value of their primary residence)—grew 21.3% in 2020 to a total of 1.8 million households.

How to Become a High Net Worth Individual

The formula for becoming an HNWI requires a hearty dose of financial discipline. By and large, an individual attains high-net-worth status due primarily to continuously investing and minimizing household debt.

“Most clients that I see that are in the high or ultra-high category have sold a business and had a large liquid event in their life,” says McClain Culver, a wealth strategy specialist at UBS in Atlanta.

If you haven’t had a large liquid event in your life, don’t worry. With discipline and the right investing strategy, you can build a high net worth even if you don’t have significant resources right now. The key is following these two approaches:

Use Time to Your Advantage

The sooner you start investing and the longer you remain invested, the higher the potential for return—thanks to the magic of compounding returns.

This phenomenon, more commonly called compound interest, enables you to grow exponentially larger sums over long periods of time. That’s because each time you earn interest or returns, it raises the base amount your future interest or returns are calculated from. This results in an ever larger engine of wealth creation.

While the stock market may look pretty volatile over the near term, it has consistently delivered impressive returns on investment over the long haul. Take the benchmark , which has provided average annual returns of about 10% over the past 100 years, despite wars, pandemics, recessions and the Great Depression.

Become a Disciplined Investor

Setting up a systematic investment strategy and putting in money every month can provide a highly positive investment outcome over time.

For example, a 25-year-old needs only save $158 per month to have $1 million at age 65—assuming a 10% annual return on investment.

“At 35 the number is $442 per month, so the benefits of investing early matters,” says Bonnett. “Saving in a 401(k) or Roth IRA each and every month is a perfect example of achieving HNWI status slowly and steadily.”