High net-worth individuals.

High Net-worth individuals are people who have a lot of personal assets and also have regular income. Rich people are known by their assets. Assets could be anything, but usually, it is symbolised as money. People with high net-worth will have assets equivalent to considerable amount of money. Though, there is no standard definition for high net-worth individuals, it is common to consider people in this category who own a luxury house, an expensive car, who have costly gadgets, who go on foreign tour and who have substantial income.

Who are High Net-worth Individuals?

High net-worth individuals could be anybody who earns enough money through decent means. This means that he makes wealth for himself through his legit occupation. He could be a businessman, a professional or an employee. If his earnings make him rich, he could well be an HNI. He need not be overwhelmingly rich though. He doesn't have to be a billionaire. Billionaires are in an entirely different league. They are many times wealthier than other rich people. High net-worth people are not always born rich. There are people who attain this position through hard work. There are people who were poor when they were young, but got rich later in life. HNI is just a reference for the status of an individual who is economically sound.

The use of the term: HNI.

HNI is used just to refer individuals who own a fortune either by birth or by their work. Usually the latter is more appropriate to consider, because, work is what makes fortune worthy. This term is used in Insurance, banking and in organisations which do the sale of financial products. It is used mainly to refer or to discuss about clients who have a capacity to pay money. So, an HNI client would be someone who can afford to buy premium products with ease. Even-though, this term is used frequently, it is usually limited to verbal use. There are very few instances (like this blog-post) where, this term is seen in the written form.

What determines HNI?

Net-worth is determined by the value of assets which an individual possesses after subtracting his debts and liabilities. Net-worth indicates financial health. True assessment of net-worth isn't difficult if the data is accurate. If the data is incomplete or is faulty, the assessment will be wrong as well.

The place value of HNI changes with time. Even though there are fixed parameters to determine HNI status, people who are referred by this term may or may not be the actual HNI. The disclosures are often incomplete. Income is a major criteria for judging HNI status, but often, it is not fully disclosed.

Parameters other then income, if stated incorrectly, also contribute to wrong HNI status. For example, a person who earns five lakh rupees in India in one year, can be considered financially stable. So, anybody who earns more is certainly better. However, since income is not the only determinant for financial well being, individual status cannot be judged on the basis of income alone. Important aspects such as gross expenditures, debts and liabilities, bank balances etc. are often hidden for such judgements.

Broadly, the economy of a country determines income and its classification. To make this clear, lets assume that the economy is upbeat with a surge in individual earnings across some sectors and industries. This would naturally boost income for the people in those industries. People in other industries may not be as good as those who are in the booming sectors. In such a scenario, any HNI status previously enjoyed by people could erode when they face slowdown. This is a phenomenon which occurs many times and it affects many rich people. In such times, curbing expenditure becomes the priority of people. People become more vigilant in such times. They don't buy expensive products; they shun investments. When this happens, their HNI status, which is a superficial gift by others is taken away. They no longer are referred to as HNI.

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