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High-Net-Worth Individuals: Investing and Shareholder Recoveries

High-Net-Worth Individuals: Understanding the Ways of the Wealthy

“High-Net-Worth Individual”- A common term in the world of finance. But what makes a High-Net-Worth-Individual (“HNWI”)?   According to Forbes, a high-net-worth individual (“HNWI”) is a person who owns liquid assets valued at $1 million or more.[1] There is actually no legal or official definition for HNWI, but across the board the general concept remains the same:  The term encompasses individuals with high financial assets and is generally understood to include only liquid assets-excluding assets like goods and collectibles.

What are Liquid Assets?

For reference, liquid assets include things like cash and other assets that can be turned into cash quickly without losing value: liquidity describes the ability to exchange an asset for cash. The easier it is to convert a specific asset into cash, the more “liquid” it is. Cash itself is normally considered to be the most liquid asset, and you always want some of your assets to be liquid: Because of the quick conversion to cash, liquid assets are vital in allowing you to pay for basic living expenses and emergencies as they arise.

Are You an HNWI? Here’s How to Calculate Your Net Worth

If you are curious to know whether you fall within the high-net-worth category, you must first calculate your net worth. Doing so is fairly simple and can be accomplished by using the following formula:

Net Worth = Assets – Liabilities.

Your net worth is the total value of your assets minus all of your liabilities. The final figure at the end is your net worth. Remember, when considering your assets, typically only liquid assets should be factored in when determining if one is an HNWI and in completing the above formula.

Why Does Classification Matter?

Given the substantial assets possessed, high-net-worth individuals and households require additional services and assistance from professionals such as financial advisors and wealth managers. The more money one has, the more effort it takes to preserve and maintain those valuable assets. Because more work is required, individuals with large financial assets generally demand personalized services in management, estate and tax planning, and so forth. These individuals are also in high demand by private wealth managers, who work on behalf of their clients to protect and maintain their bounties of wealth. HNWIs are also very appealing to wealth managers because they can count on these individuals to keep them busy and well-funded, as wealth managers usually earn fees equal to a percentage of the total assets that they manage.

 

High Net Worth Individuals Pensions and Investments blog with Atara Twersky

 

 

Going Beyond $1 Million: Three Classifications of Wealth within the HNWI Spectrum

The title of “high-net-worth” doesn’t just end as a generic classification for all those who possess over $1 million in liquid assets, rather financial professionals break down the HNWI category into three classifications of wealth:

  • High-net-worth individuals (HNWIs): People or households that possess liquid assets valued between $1 million and $5 million.
  • Very-high-net-worth individuals (VHNWIs): People or households that possess liquid assets valued between $5 million and $30 million.
  • Ultra-high-net-worth individuals (UHNWIs): This term refers to the wealthiest of the wealthy. These are the people or households that possess more than $30 million in liquid assets.

 

Concerns for the Ultra-Wealthy: When Money Can’t Solve All Problems

As discussed above, ultra-high-net-worth individuals and households are among the top 1-5% of society that possess more than $30 million in liquid assets. One may think that being so wealthy rids one of all potential problems, but UHNWIs face problems and complications on their own when managing their wealth. It would take a large amount of financial irresponsibility for a person this wealthy to develop the typical money struggles that plague the average person, such as paying one’s mortgage, saving for college, fear of foreclosure, or the inability to pay bills or put food on the table. Thus, these are not the usual problems UHNWIs face. Rather, challenges for this class include the ever-changing tax codes, estate planning, and protecting their current levels of wealth.

Tax treatment of the ultra-wealthy has become a political game and is an issue that comes with a completely different impact on the wealthy depending on what side of the political spectrum is in power. On one side, leaders proclaim that keeping taxes low for the rich frees up money for them to invest in ways that create jobs and grow the economy. This line of thinking is often known as “trickle-down economics” and advocates cutting taxes for all, including the rich. This is not just for the benefit of the wealthy who have worked hard for their large financial success, but also because their prosperity then trickles down to the rest of society.

On the other side is the idea that the middle and lower class are the only ones who should experience tax breaks and that those with excess wealth, such as HNWIs, should “pay their fair share.” Supporters of taxing the wealthy at a higher rate point to long-term capital gains. The Trump administration’s Tax Cuts and Jobs Act, which was signed into law in December of 2017, made the largest overhaul to the tax code in nearly 30 years. It retained the seven tax bracket structure, keeping two at the same rate and changing five including the top bracket. The new code dropped that rate from 39.6% to 37%.[2] These changes are temporary and are expected to expire in 2025.[3] At the current rate, taxing ultra-high-net-worth individuals has been much higher. Current President Joe Biden is planning to implement a new tax policy aimed at taxing the wealthy more than they are being taxed right now. There will be a new top income tax rate of 39.6%, which is targeted at those making more than $452,700 a year and married couples filing jointly making more than $509,300.[4] The goal is for these taxes to take effect in 2022. Biden intends to also increase the capital gains tax to 39.6% for those earning $1,000,000 or more.[5] If you were a HNWI, which of the two routes of taxation would you prefer?

 

High-Net-Worth Individuals Here at Home in the United States and Across the Globe

In 2019, the United States had the most high-net-worth individuals in the world at more than 5.9 million people holding this title. This number is more than double what it was less than ten years prior in 2008, where the number of HNWIs in the United States hovered around 2.46 million.[6] Despite the Covid-19 uproar in 2020, HNWI wealth great 12.3% according to the 2021 Capgemini World Wealth Report.[7] This was largely driven by “unprecedented stock market gains.”[8] The report cites both the passing of the $2 trillion stimulus package and the Federal Reserve’s announcement of unlimited quantitative easing, where the central bank bought up treasury bonds and mortgage-backed securities to inject money into the economy and support the market during the Covid-19 crisis, as reasons for this growth.[9] Additionally, in 2019 there were approximately 513,244 UHNWIs worldwide, with 240,575 of them residing in the United States.[10] These individuals include people like Jeff Bezos, Mark Zuckerberg, Warren Buffet, and Bill Gates-aka people considered to be among some of the wealthiest in the world.

 

The Importance of Portfolio Monitoring and Professional Assistance for HNWIs

As detailed earlier in this article, the more assets one possesses the more oversight and monitoring is required.  At Twersky Law Group we work on behalf of high-net-worth individuals in portfolio monitoring, and wealth management, and also in securities litigation in cases where one’s securities and investments are at issue. We recognize that investors have limited time and resources to dedicate to monitoring and securities litigation cases. Our portfolio monitoring services allows you to hand off that hard work of managing your investments to professionals who are trained to work and provide oversight on your behalf. Regarding litigation, our innovative response is to assist our clients in developing securities fraud litigation strategies, policies and protocols that allow board members to assess all claims efficiently. We advise our clients to pursue only those lawsuits that represent opportunities for substantial economic recovery or that would preserve or enforce an important right or claim. Our analysis is always fair and objective, and if a client decides to pursue legal action, we act on a contingency fee basis. Be sure that your hard-earned assets are protected and are being managed properly by trained professionals- Atara Twersky today.

More About Atara Twersky and Twersky Law Group

As a securities class action attorney, my goal is to assist you in maximizing claim recoveries related to your investment portfolio, including direct claims, class action claims, class action settlement claims, derivative claims, tax recovery claims, and where appropriate to pursue whistleblower claims and more that help to protect the integrity of the securities markets.  My podcast provides the legal and investment community to which my private investor, public fund, and union fund clients belong, with up-to date- information relevant to their investment portfolios. I want to assure my clients that while we may not have seen one another in person these past months, I have been working diligently on your behalf to continue to provide our practice leading services while maintaining my high level of personal attention that I believe is essential to an authentic and long lasting relationship with my clients.

For more information on ways to join cases and to increase your investment portfolio recoveries read my blogs and listen to my Pensions and Investments podcast.  Providing information and creative ways to ensure my clients recover all monies due to them in the simplest ways is my overarching goal.

 

More About Atara Twersky

Atara Twersky, is of counsel at AF&T.  Atara is also the bestselling author of the children’s book series, Curlee Girlee, inspired by her own young curly haired daughter and written for all curly girls in an effort to ensure they love themselves and their hair exactly as it is, understanding that their hair is part of a greater legacy they share with those who came before them.  You can find out more about Atara here. Listen to other podcast episodes Pensions and Investments podcast with Atara Twersky here  or wherever you listen to your favorite podcasts!

 

[1] “High-Net-Worth Individual.” https://www.forbes.com/advisor/investing/high-net-worth-individual-hwni/. Accessed July 7, 2021.

[2] “Public Law 115-97—Dec. 22, 2017.” https://www.congress.gov/115/plaws/publ97/PLAW-115publ97.pdf. Accessed July 8, 2021.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] “Number of high net worth individuals in the United States from 2008 to 2019.” https://www.statista.com/statistics/300464/us-high-net-worth-individuals/. Accessed July 8, 2021.

[7] “World Wealth Report 2021.” https://worldwealthreport.com/wp-content/uploads/sites/7/2021/06/orld-Wealth-Report-2021.pdf. Accessed July 8, 2021.

[8] “In the US, high net worth individuals’ wealth great 12.3%. Here’s what drove it.” https://www.cnbc.com/2021/06/30/how-much-high-net-worth-individuals-wealth-grew-in-us-in-2020.html. Accessed July 8, 2021.

[9] Ibid.

[10] “Problems Ultra-High-Net-Worth Individuals Face.” https://www.investopedia.com/articles/personal-finance/111915/worst-financial-problems-ultrahighnetworthindividuals-uhnwis-face.asp. Accessed July 8, 2021.


As a securities class action attorney, my goal is to assist you in maximizing claim recoveries related to your investment portfolio, including direct claims, class action claims, class action settlement claims, derivative claims, tax recovery claims, and where appropriate to pursue whistleblower claims and more that help to protect the integrity of the securities markets.  My blog provides the legal and investment community to which my private investor, public fund, and union fund clients belong, with up-to date- information relevant to their investment portfolios. I want to assure my clients that while we may not have seen one another in person these past months, I have been working diligently on your behalf to continue to provide our practice leading services while maintaining my high level of personal attention that I believe is essential to an authentic and long lasting relationship with my clients. Let’s continue the work we have been doing with the knowledge that we can get through tough times and come out stronger and more financially robust. 

 

For more information on ways to join cases and to increase your investment portfolio recoveries read my blogs and listen to my podcast.  Providing information and creative ways to ensure my clients recover all monies due to them in the simplest ways is my overarching goal.

 

This blog is sponsored by its creator, Atara Twersky, Esq. The blog may be considered a form of attorney advertising in accordance with New York’s Rules of Professional Conduct.

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