In today's fast-paced world, wealth is one of the measures of financial success. High-net-worth individuals (HNIs) are wealthy individuals occupying financially privileged positions in society. In India, HNIs are those with investable assets of over Rs. 5 crore.
HNIs need to invest and must have a long-term vision. Most HNIs are owners of big companies who are in positions of CEO, chairpersons, CTO, etc. Such wealthy individuals must be cautious and incorporate proper financial planning to keep up with their expensive lifestyle and ensure to preserve their capital.
That is why many private banks, financial advisors and firms play an important role in providing specialised services to help HNIs achieve their desired financial objectives. Continue reading this blog to learn more about high-net-worth individual meaning, investment options and the different challenges they face.
High net worth individuals (HNIs) are classified into three categories based on their total net worth. The three types of high-net-worth individuals are:
For Initial Public Offerings (IPOs), the Securities and Exchange Board of India (SEBI) has further categorised NIIs (HNIs) into two different categories based on the amount they are willing to invest. The two different types of NIIs are:
A high net-worth individual (HNI) falls under the category of investors in the Indian stock market. Individual investors exceeding its net worth value of Rs. 5 crore are categorised under high-net-worth individuals in India. These individuals are mostly business owners, corporate executives, entrepreneurs and more.
In the IPO application category, SEBI defines anyone investing an amount over Rs. 2 lakh as an HNI. Furthermore, there is a subcategory of investors bidding between Rs. 2 lakh and Rs. 10 lakh with one-third reservation of the HNI portion. The large HNIs are those investing above Rs. 10 lakh, and they have two-thirds reservation of the HNI portion.
In most cases, private wealth managers prefer working with high-net-worth individuals because of the complexity of managing wealth. HNIs demand personalised services in estate planning, planning of taxes and other financial areas. It is important to note though that the exact threshold for HNWIs varies across countries and financial institutions.
In recent times, HNI investors have opted for customised options of investment. Let’s take a look at different investment options for HNIs in India. HNIs however can choose the right options for investment from the list below, depending on their particular requirement and goals:
As per several studies and reports, the countries with the most high net-worth individuals are the United States, Japan, China and Germany.
The USA comprises the highest number of HNWIs in the world, with approximately 18 million individuals. China ranks second with approximately 4.4 million high-net-worth individuals. On the other hand, Japan constitutes around 3 million NHWIs and Germany around 1.5 million approximately.
In India, there were 7,97,714 HNI individuals with assets of over USD 1 million in 2022. The number is expected to grow considerably in the next few years.
The number of net-worth individuals varies depending on factors such as income inequality, economic growth, opportunities for investment and financial conditions. However, the distribution of HNWIs is likely to change in the upcoming years with the change in these factors over time.
Despite the various investment options available to HNIs, they face many risks and challenges. Here’s a glimpse of the key challenges HNIs had to face:
By now, you must have gained a detailed overview of high-net-worth individuals, the benefits they enjoy and their way of planning and managing financial investments. To conclude, high net-worth individuals occupy a significant portion of the economy globally. They hold a unique financial status and face various opportunities and challenges along with the risks involved.
As an HNI, you must know how to navigate opportunities and challenges to make the most out of your investments. With proper financial planning from an expert, you can maximise your wealth and achieve your desired goals.
High-net-worth individuals (HNIs) in India have investable assets over Rs. 5 crore and need to invest with a long-term vision. They face challenges like market, liquidity, regulatory, concentration, operational risks, complexity, and taxation. HNIs can opt for investment options like alternative investments, portfolio management schemes, market-linked debentures, real estate funds, and angel investing.