Not to be confused with Ultra high-net-worth individual.

High-net-worth individual (HNWI) is a term used by some segments of the financial services
industry to designate persons whose investible assets (such as stocks and bonds) exceed a given
amount. Typically, these individuals are defined as holding financial assets (excluding their primary
residence) with a value greater than US$1 million. [1][2][3]

However, there are distinct classifications of HNWI and the exact dividing lines depend on how a
bank wishes to segment its market. For example, an investor with less than US$1 million but more
than US$100,000 is considered to be "affluent", or perhaps even "Sub-HNWI".[4] "Very-HNWI"
(VHNWI) can refer to someone with a net worth of at least US$5 million.[5]

By 2007, the expansion of HNWI assets led to the creation of a super class of HNWIs, known as
Ultra-high-net-worth individuals (UHNWIs), i.e. those with US$30 million in liquid financial assets
according to the Capgemini and Merrill Lynch World Wealth Report 2006[3][6] or with a disposable
income of more than US$20 million.[7]

At the end of 2015, there were just over 13 million HNWIs in the world. The United States of
America had the highest number of HNWIs (4,180,000) of any country, whilst London had the most
HNWIs (370,000) among cities as based on data from the Knight Frank Wealth Report [8]

United States: SEC regulations

See also: Accredited investor

The U.S. Securities and Exchange Commission requires all SEC-registered investment advisers to
periodically file a report known as Form ADV.[9] Among other things, Form ADV requires each
investment adviser to state how many of his clients are "high-net-worth individuals." The Form ADV
Glossary of Terms explains that a "high-net-worth individual" is an individual with at least
$1,000,000 managed by the reporting investment adviser, or whose net worth the investment
adviser reasonably believes exceeds $2,000,000 (or who is a "qualified purchaser" as defined in
section 2(a)(51)(A) of the Investment Company Act of 1940). The net worth of an individual for SEC
purposes may include assets held jointly with his or her spouse. Unlike the definitions used in the
financial and banking trade, the SEC's definition of HNWI would include the value of a person's
verifiable non-financial assets, such as a primary residence or art collection.

Annual World Wealth Report

The World Wealth Report was co-published by Merrill Lynch and Capgemini, previously known as
Cap Gemini Ernst & Young who worked together since c. 1993, investigating the "needs of high-net-
worth individuals (HNWIs are individuals with more than $1 million in financial assets)" in order to
"successfully serve this market segment." Their first annual World Wealth Report was published in
1996.[10] The World’s Wealth Report[11] defines HNWIs as those who hold at least US$1 million in
financial assets and ultra-HNWIs as those who hold at least US$30 million in financial assets, with
both excluding collectibles, consumables, consumer durables and primary residences. The report
states that in 2008 there were 8.6 million HNWIs worldwide, a decline of 14.9% from 2007. The total
HNWI wealth worldwide totaled US$32.8 trillion, a 19.5% decrease from 2007. The ultra-HNWIs
experienced the greater loss, losing 24.6% in population size and 23.9% in accumulated wealth. The
report revised its 2007 projections that HNWI financial wealth would reach US$59.1 trillion by 2012
and revised this downward to a 2013 HNWI wealth valued at $48.5 trillion advancing at an annual
rate of 8.1%.[11]

The 2013 World Wealth Report[12] was jointly produced by Capgemini and RBC Wealth
Management and included, for the first time, the Global HNW Insights Survey produced in
collaboration with Scorpio Partnership . The inaugural survey represented one of the largest and
most in-depth surveys of high-net-worth individuals ever conducted, surveying more than 4,400
HNWIs across 21 major wealth markets in North America, Latin America, Europe, Asia-Pacific,
Middle East, and Africa. Scorpio Partnership have established themselves as a market leader in the
supply of HNW insight having spent over 15 years conducting private client interviews, collecting
business intelligence and working with over 100 clients who range from universal banks, domestic
retail banks, specialist private banks and fund managers, to family offices, high-net-worth clients
and regulatory bodies. The partnership is independently owned and managed by Sebastian Dovey
and Cath Tillotson and carries out global assignment overseen from its base in London's West End.

Largest HNWI Population, 2012[13][14]

Country HNWI Population

United States 3.44 million

Japan 1.9 million

Germany 1.0 million

China 643,000

United Kingdom 465,000

 HNWI Wealth Distribution (by Region)[14]

Region HNWI Population HNWI Wealth

Global 12 million $46.2 trillion

North America 3.73 million $12.7 trillion

Asia-Pacific 3.68 million $12.0 trillion

Europe 3.41 million $10.9 trillion

Latin America 0.52 million $7.5 trillion

Middle East 0.49 million $1.8 trillion

Africa 0.14 million $1.3 trillion

Capgemini figures

The "World Wealth Report" published Capgemini has estimated the number and combined
investable wealth of high-net-worth individuals as follows,[15][16][17] using the United States
Consumer Price Index (CPI) Inflation Calculator.[18]
 Number of HNWIs HNWI Wealth In 2012 USD
Year
(millions) (trillions USD) (trillions USD)

1998[15]  ? 17.4 24.3

1999[19] 6.0 21.6 29.5

2000[20] 7.0 25.5 33.7

2001[21] 7.2 27.0 34.7

2002[22] 7.1 26.2 33.2

2003[23] 7.3 27.2 33.7

2004[24] 7.7 28.8 34.7

2005[25] 8.3 30.8 35.9

2006[6] 8.7 33.3 37.6

2007[26] 9.5 37.2 40.9

2008[27] 10.1 40.7 43.1

2009[11] 8.6 32.8 34.8

2010[16] 10.0 39.0 40.7

2011[17] 10.9 42.7 43.2

2012[14] 12.0 46.2 46.2

Banking and finance

Main articles: Private banking and Wealth management

Most global banks, such as Credit Suisse, Barclays, BNP Paribas, Citibank, 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.

By 2006, asset managers working for HNW individuals invested more than £300 billion on behalf of
their clients. These wealth managers are bankers who in 2006, earned multimillion-pound salaries
and owned their own companies and equity funds.[28] In 2006, a list of the 50 top investment
bankers was published by the Spear's Wealth Management Survey.
Retail

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."[7]

Academic studies of asset management trends

The Wharton Global Family Alliance whitepaper was released in 2008 to study the investment
strategies of single family offices in the United States and in Europe.[29] The research was
segregated into sub-groups representing those with less than $1 billion in assets and those with
assets above $1 billion. The study found that U.S. families reported a more aggressive attitude
toward investment objectives than their counterparts in Europe. One recommendation of the WGFA
study advised the advisors and family offices serving this niche to avoid complexity in the structure
of portfolios.

The authors cite that the more complex the portfolio and number of holdings, the more difficult the
job of performing adequate governance, reporting, and education. The Institute for Private
Investors, a peer networking organization for wealthy families and their advisors, suggested a
similar theme to its membership in 2008 with a conference themed, "The Return to Simplicity".[30]
Kotak Wealth Management and CRISIL Research, published a report on the Ultra High Net Worth
Individuals in India titled "Top of the Pyramid Report".[31]

High-net-worth individual's taxable portfolios

Since 2009, the Gannon Group has managed wealth exclusively for HNW and UHNW individuals and
families at Morgan Stanley's Portfolio Management Group.[32][33] In his book entitled Investing
Strategies for the High Net Worth Investor: Maximize Returns on Taxable Portfolios ,[34] Gannon
Group's executive director Niall Gannon investigated asset management strategies for high tax
bracket investors on taxable portfolios. Gannon advises taxable investors in terms of long-range
estate planning decisions and assists them in making more accurate estimates of their expected
total portfolio value. He studied the S&P 500 index on an after-tax basis and found the return to be
6.63% after paying taxes at the top prevailing federal tax rate and a constant average of 6% for state
taxes from January 1, 1957, through December 31, 2010.[34]

Additional results from Gannon's research found that a portfolio of municipal bonds out-performed
the re-invested S&P 500 index in 17% of the rolling 20-year periods since the inception of the index.
Gannon rejects the use of historical returns for future asset allocation modelling for high-net-worth
investors. He argues that an observation of stock portfolio earnings yields (the inverse of the p/e
ratio) are more indicative of the future return potential of the portfolio when modelled with the
impact of taxation on performance.[34]

Liability insurance
Main article: Umbrella insurance

High-net worth individuals have unique risks to their wealth through legal liability and tort law.
Therefore, they commonly purchase umbrella insurance policies which further protect them from
expensive lawsuits. These "umbrella" policies are designed in an open-ended way to cover risks
which fall through the "gaps" of other insurance policies. They are also commonly specifically
designed to have higher limits for covering lawsuits resulting from expensive vehicle accidents,
home accidents, defamation, and fiduciary liability arising from nonprofit board volunteering.[35] In
the United States, a trade group called the Council for Insuring Private Clients was formed in 2012
to focus on this market.[36] Companies known to focus on the market include Chubb,[37] ACE
Limited and Privilege Underwriters Reciprocal Exchange (Pure).[38]

As a cheaper alternative, a "personal excess" policy may be purchased instead, which is not
designed to cover the gaps in coverage the way that an umbrella policy does.[35]

See also

Ultra high-net-worth individual

Millionaire

Billionaire

Plutonomy

Swiss bank

Wealth

Global assets under management

Politically exposed person

References
1. ^ Investopedia Definition of "High Net Worth Individual (HNWI)"

2. ^ "Capgemini 2007 World Wealth Report" (PDF). Capgemini. 2006-06-12. Retrieved 2007-07-08.
“World Wealth Grows to $33.3 trillion Says Merrill Lynch” Check date values in: |year= / |date=
mismatch(help)

3. ^ a b Nivedita Chakravartty (18 Jan 2007). "For A Few Dollars More" . The Times of India.

4. ^ Investopedia Definition of "High Net Worth Individual (HNWI)"

5. ^ Stefano Caselli; Stefano Gatti (2005). Banking for Family Business: A New Challenge for Wealth
Management . Springer. ISBN 3-540-22798-9.

6. ^ a b 2006 World Wealth Report (PDF) (Report). Capgemini. 2006. Archived from the original
(PDF) on January 2, 2010. Retrieved 11 September 2013.

7. ^ a b Ray Hutton (5 November 2006). "Rich spurn ultra-luxury cars" . UK: The Sunday Times.
Retrieved 10 September 2013.

8. ^ http://www.knightfrank.com/wealthreport

9. ^ SEC Form ADV

10. ^ 2003 World Wealth Report (PDF) (Report). Capgemini. 2003. Archived from the original
(PDF) on January 2, 2010. Retrieved 10 September 2013.

11. ^ a b c 2009 World Wealth Report (Report). Thought Leadership. Capgemini. 2009. Cite error:
Invalid <ref> tag; name "Capgemini2009" defined multiple times with different content (see the
help page).

12. ^ 2013 World Wealth Report (PDF) (Report). Capgemini. 2013. Retrieved 10 September 2013.

13. ^ World Wealth Report 2013 . capgemini.com

14. ^ a b c "World Wealth Report 2013" . Capgemini.

15. ^ a b 1998 World Wealth Report (PDF) (Report). Capgemini. 1998. Retrieved 10 September
2013.

16. ^ a b 2010 World Wealth Report (PDF) (Report). Capgemini. 2010. Retrieved 11 September
2013.

17. ^ a b 2011 World Wealth Report (PDF) (Report). Capgemini. 2011. Retrieved 11 September
2013.

18. ^ "Consumer Price Index (CPI) Inflation Calculator" . U.S. Bureau of Labor Statistics.

19. ^ http://www.capgemini.com/m/en/doc/WWR99.pdf
20. ^ http://www.capgemini.com/m/en/doc/WWR00.pdf

21. ^ http://www.in.capgemini.com/m/in/tl/pdf_2001_World_Wealth_Report.pdf

22. ^ http://www.capgemini.com/m/en/tl/pdf_2002_World_Wealth_Report.pdf

23. ^ http://web.archive.org/web/20100102085510/http://ml.com/media/14076.pdf

24. ^ http://www.hr.capgemini.com/m/hr/tl/World_Wealth_Report_2004.pdf

25. ^ http://www.hr.capgemini.com/m/hr/tl/World_Wealth_Report_2005.pdf

26. ^ http://web.archive.org/web/20100102074059/http://ml.com/media/79882.pdf

27. ^ 2008 World Wealth Report (PDF) (Report). Capgemini. 2008. Archived from the original
(PDF) on November 23, 2008. Retrieved 11 September 2013.

28. ^ Rivkin, Annabel (12 December 2006). "How I make the rich richer" . London: The Times.
Retrieved 10 September 2013.

29. ^ Wharton Global Family Alliance. "Benchmarking the Single Family Office: Identifying the
Performance Drivers" .

30. ^ Institute for Private Investors. [1] .

31. ^ Ultra HNI segment set to treble: Report . Indian Express (2011-06-07). Retrieved on 2013-07-
18.

32. ^ "The Gannon Group at Morgan Stanley Portfolio Management Group" . Morgan Stanley.

33. ^ Paul Sullivan (22 February 2013). "Reasons to Avoid Buying Stocks, and Why You Should
Ignore Them" . New York Times. Retrieved 9 September 2013.

34. ^ a b c Gannon, Niall Joseph (December 2009). Investing Strategies for the High Net Worth
Investor . New York: McGraw Hill. ISBN 978-0-07-162820-4.

35. ^ a b "Comparing Stand-Alone Personal Umbrella Policies | IRMI.com" . www.irmi.com.

Retrieved 2016-01-16.

36. ^ "New Trade Group to Focus on High-Net-Worth Segment" . Retrieved 2016-01-16.

37. ^ Ruquet, Mark E. (5 March 2007). "High-Net-Worth Clients In An Insurance World All Their
Own" . Retrieved 2016-01-06.

38. ^ "Feature Story: Big Fish, Bigger Pond" . PropertyCasualty360.com. Retrieved 2016-01-16.

External links

2013 World Wealth Report (WWR) (PDF) (Report). Capgemini. 2013.