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How do you define/differentiate a high net worth individual versus an individual client?

Mar 31, 2014 by Dennis from Chicago, IL in  |  Flag
4 Answers  |  6 Followers
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3 votes
Rich Winer Level 20

There is no definitive definition of a high-net-worth individual. However, it is generally considered to be an individual with $1,000,000 or more in liquid investable assets, excluding the value of any homes or illiquid investments.

Comment   |  Flag   |  Mar 31, 2014 from Woodland Hills, CA

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2 votes

Hello Dennis,

You'll find a variety of definitions and uses of the term "High Net Worth" in the financial industry. And frankly, there are a lot of advisors who misuse the term...which is why there are so many firms with "wealth management" in their name that don't actually provide genuine wealth management.

I hate "categorizing" people but here's one set of definitions:

Mass Affluent -- $100,000 to $1 million (of investable assets) High Net Worth -- $1 million to $5 million Very High Net Worth -- $5 million to $50 million Ultra High Net Worth -- over $50 million

Some have raised the bar for their definition of High Net Worth to the $2 to $3 million range.

Most such definitions focus on investable assets. However, someone who has little in investable assets but owns a business or multiple income properties worth $3 million, for example, actually has High Net Worth under the term's original (accounting) definition.

Hope that helps. All the best!

2 Comments   |  Flag   |  Mar 31, 2014 from Clackamas, OR
Larry McClanahan, CFP®, ChFC, CLU, CASL

Sorry, BrightScope's formatting didn't cooperate with my categories, but I think you can catch the gist of it.

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Flag |  Mar 31, 2014 near Clackamas, OR
Prateek Mehrotra, MBA, CFA®, CAIA®

I agree with Larry's general classification. It varies widely, but you can refer to some of the wealth reports put out by Cap Gemini, WealthX, etc. for a more standard definition as broken out by these consulting organizations.

Flag |  Mar 31, 2014 near Appleton, WI

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1 vote

Perhaps your questions is motivated by the "Advisor Client Types" pie chart in our profiles. That is driven by regulatory filings with the SEC or State regulator. Section 205-3 of the Advisers Act defines High Net Worth for filing purposes as a client with at least $1mm of assets under management with the advisor or a net worth excluding primary residence of $2mm. These values were increased recently from $750k and $1.5mm respectively.

Comment   |  Flag   |  Mar 31, 2014 from Western Springs, IL

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Peter Cacioppo Level 16

In our firm we serve high income and or high net worth individuals. Notice the words and or. We will take on as clients who do not have a high net worth but do have a high income. High income may mean $200,000 a year for a couple; a lot depends on their age, type of jobs they have, type of industry they are in. High net worth includes the idea that to justify our annual fee-only fee we need to be advising on a fair amount of investments, around $1,000,000.

1 Comment   |  Flag   |  Sep 01, 2014 from La Jolla, CA
Peter Cacioppo

Setting up a plan is just one aspect. I have found that if the planner does not meet with the client a few times a year for a number of years the plan is not implemented 100% and thus the initial charge is wasted. My clients are either high income from salaries or have over 1 million in investments, or both. We base our fees on the complexity of the situation but start at $5,000 a year. Just getting our clients to maximize their tax deferred savings each year "pays for" our fees!

Flag |  Sep 24, 2014 near La Jolla, CA

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