The term "High Net Worth Investor" or "High Net Worth Individual" is frequently used, but rarely defined. As an advisory that caters exclusively to High Net Worth Individuals (HNWI), Very High Net Worth Individuals (Very HNWI), and Ultra High Net Worth Individuals (Ultra HNWI), our firm at Paragon Capital Management, LLC knows more about these individuals & classes of investors than most.
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With many lifetimes' worth of experience working with ultra-affluent clients, our team and experts at Paragon Capital Management, LLC understand that there is far more required to work with these exclusive investors than simply knowing how much money they have in their bank or investment accounts.
These investors will have access to investments that may not be understood by other firms but can offer a variety of incentives that benefit their unique needs. Their investment goal may not be to make as much money as possible before they retire, but instead to preserve their legacy while growing it for future generations.
When you've worked as hard as our clients have for their money, you want to know that it is in good hands, with a firm that understands your needs, risk tolerance, and unique situation.
This is why our team is so proud to have so many multi-generational clients, with whom multiple generations of their families have trusted us with their fortunes and investable assets. From our initial consultations to the personal, custom-made investment plans and newsletters letting them know what is going on in the global markets, they know that we understand them, their needs, their families, and most importantly, their investments.
Large asset gatherers and financial institutions that focus on bundling money into pre-determined investment vehicles often follow a "one-size-fits-all" approach, that is impersonal and may only offer solutions that don't perfectly fit their clients.
At Paragon Capital Management, LLC, we custom-build each portfolio and strategy according to each client. Our founder Howard Jacobson left Big Finance with a dream to start a firm that could focus on the clients instead of their dollar signs. Over the decade we've followed his dream, continuing our tradition of providing our clients the personal touch of a small family office with the financial access of the largest investment banks.
Whether you are looking for your first capital management firm or feel that you've outgrown your current advisor, our team is here if you would like a no-pressure consultation with our Chief Investment Officer (CIO) Craig Novorr. The Paragon difference is the personal touch, and we'd love to show you why so many of our clients trust us with their investments for multiple generations.
While black-and-white definitions never fully explain who someone truly is, these are defined terms for which there are specific meanings. In the US, many people count their primary residence as their largest investment, but that is not calculated in the net worth of these investors.
To be considered a part of any of these exclusive classes, your net worth must be calculated using your liquid assets and investable wealth. Personal assets and others like a primary home, fine art, or classic cars can be a significant part of someone's wealth, but they are not considered highly liquid assets because there is a smaller market for them, and they each take considerable effort to sell.
Highly liquid assets would be cash or cash equivalents, highly-liquid equities (high-volume stocks), US treasuries or bonds, mutual funds, or money market funds. These can each be quickly liquidated or traded and used to fund investments or to settle financial obligations.
Accredited investors are defined as an individual or business entity that is allowed to trade securities that are not registered with financial authorities or conducted through typical financial institutions. These may include things like hedge funds, angel investing, venture capital, private equity, private credit, investment banks, and many other types of investments.
Some of these regulations are in place to protect the average investor. Most High Net Worth Individuals can afford to invest in different financial institutions and instruments that are not traded in the open market. Some of them may have family offices that handle their investible assets for them. These types of investments have a much longer timeline and may be much more sophisticated, difficult to understand, and less regulated than the stock market or mutual funds.
Trade unregistered securities; may include hedge funds, venture capital, etc.
Individuals with substantial wealth; diverse investments
Subject to fewer regulations; invest in riskier assets
Invest in regulated and unregulated assets; diverse portfolio
Variable wealth; no specific wealth requirement
Typically possess high net worth
Annual income over $200,000 (or $300,000) jointly or meet other criteria
No specific income threshold
Net worth requirement
Net worth exceeding $1,000,000 (excluding primary residence)
High net worth often including primary residence
Access to less regulated, riskier securities
Access to diverse investment services and instruments
Assumed higher risk tolerance and financial discipline
Varies; different risk profiles and strategies
May have a longer investment horizon
Investment horizon varies
While the definition of a sophisticated investor is far less stringent than that of an accredited investor, it is still required that they be a High Net Worth Individual. These individuals are defined as someone who has sufficient capital, net worth, and experience that allows them to engage in more advanced investment management and wealth management opportunities.
A sophisticated investor does not have access to as many non-traditional wealth management services or investments as an accredited investor, but they do have access to more services than the traditional one. Financial professionals and wealth management firms can provide their sophisticated investor clients with access to pre-IPO securities and in some cases investing with hedge funds.
"Private offerings" are these non-registered and less-regulated types of investments that are available to accredited or sophisticated investors. In rule 506(b) of Regulation D, the SEC allows private offerings to be sold to an unlimited number of accredited investors, and a limited number of non-accredited but sophisticated investors.
Is a high-net-worth individual automatically a sophisticated investor? Financial institutions and financial advisors may offer HNWIs access to private placements if they meet the defined threshold to be High Net Worth Individuals. As the requirements are more stringent to be defined as accredited over the non-accredited sophisticated investor, then yes: a high-net-worth individual (HNWI) would also be a sophisticated investor.
An individual with capital, net worth, and experience for advanced investment and wealth management opportunities.
An individual with a high level of wealth, typically measured by a substantial net worth.
Access to Non-traditional Services
Limited access compared to accredited investors but more than traditional investors. May access pre-IPO securities and sometimes invest in hedge funds.
Access to various financial services and investment opportunities, including private placements.
Private Offerings Eligibility
Eligible for certain private offerings alongside accredited investors, depending on SEC rules (e.g., Rule 506(b) of Regulation D).
Eligible for private offerings if they meet specified financial thresholds set by financial institutions or advisors.
Accredited Investor Relationship
Less stringent requirements than an accredited investor.
HNWIs may also qualify as sophisticated investors, but accreditation requirements are more rigorous.
Subject to some regulations, but less stringent than accredited investors.
Subject to general financial regulations but may have additional access to private placements.
No specific wealth threshold defined, but generally requires a substantial net worth.
Generally requires a high level of wealth, typically exceeding a million dollars in net worth.
Institutional Investors are large organizations or entities such as commercial banks or investment banking, pension funds, labor unions, or insurance companies that make sizeable investments in securities (the stock market), real property & and other investments, or they originate loans.
The term institutional investor is typically meant to denote an organization making large block investments rather than a person. As private wealth managers whose clients sometimes have greater investible assets than financial institutions, we at Paragon Capital Management, LLC have clients who often set up their investment management through organizations for tax planning and security reasons.
These investors may prefer their wealth management be conducted through family offices, corporate structures, and even trusts set up to protect their family's legacy. They may have investment accounts with private banking and entrust our firm to act as their private wealth manager.
Having a lot of money in the bank or in your investment accounts does not automatically make one an institutional investor. Doing so through an organization that then works to manage your wealth may.
Thomas J. Stanley wrote a book called The Millionaire Next Door: the surprising secrets of America's wealthy that helped many people better understand that the typical millionaire acts very differently than what most expect. One thing that private wealth managers learn from spending a lot of time around those who have more assets and money than most is that they learn to value far more than just their bank account.
Just because High Net Worth Individuals have more money than most doesn't mean that they flaunt or spend their lives in splurges of unlimited spending. To begin with, many within a certain financial class have frequent access to additional services like luxury hotel upgrades, reduced fees for services or private banking, and discounts for using certain products.
The High Net Worth Individuals who we call clients come from a variety of backgrounds, professions, and of course, personal assets. Our client list is made up of CEOs, self-made entrepreneurs, engineers, celebrities, generational wealth "old money," retirees, and plenty of the "millionaire next door" types.
Additionally, many High Net Worth Individuals don't spend their lives working to convince strangers of their status. Many of our clients are highly successful, highly intelligent, and self-made people who worked for every single penny that they have in their checking accounts and investment banks. You may pass them on the street and have no idea that their net worths, excluding personal assets, are higher than most companies.
The United States of America has the largest number of High Net Worth Individuals in the world, with more than 7.5 million as residents in 2021. Outside of the USA, the largest number of High Net Worth individuals live in Japan, Germany, and China, as per the 2021 Capgemini World Wealth Report.
The Top 10 countries for High Net Worth Individuals are (for 2021 data):
As of 2021, the High Net Worth Individual population controlled approximately $86 trillion of the world's wealth. As a High Net Worth Individual is often very data-driven, we should break that down by the regions that seem to be havens for HNWIs:
There is a reason that a wealth management firm must be more sophisticated and have access to different sets of tools, insights, and investment classes than the typical financial advisor. When you cater to clients with a certain amount of money or your firm has account minimums that are only open to High Net Worth Individuals, you have to understand how to invest according to their unique needs.
A person with more than a million in liquid assets will have different tax implications and require more sophisticated tax planning than the average investor. They may have a need for investments that are easily converted into cash equivalents quickly, or have a need arise for cash flow for one of their businesses.
Those who built their wealth from the ground up put an immense value on that money kept in their bank accounts, as it is a sign of their success and hard work. This has a tendency to make some extremely risk-averse, with a preference for investing in consumer durables or staples likely to hold value over time. Many of our strategies for clients include a significant number of fixed-income investments, to mitigate the risks that equities and the stock market may hold.
Many financial institutions today are asset gatherers rather than investors. They bundle their clients' money into pre-determined plans or investments, with no real attention paid to the individual client. At Paragon Capital Management, LLC, we custom-build each portfolio to the individual, their goals, and their risk tolerance. We understand that the amount of money a person has in the bank does not automatically mean they are willing to risk their money more than a retail investor.
From careers spent working exclusively with these individuals, we have learned that our ultra-affluent clients expect - and appreciate - that we handle their money with care.
Along with additional types of investment opportunities that the average retail investor can't access, a High Net Worth Individual (HNWI) may also enjoy a certain amount of benefits due to their financial status. These can be with investment banks or financial institutions that offer them lucrative deals, exclusive services not afforded to others, and even luxury brands or luxury hotel upgrades that want others to see them using their products or frequenting their establishments.
For the financial institutions and private banks or private wealth managers who offer lower fees or additional services, it's pretty easy to understand why these offers are made. Financial institutions make money using other people's money for their activities, and all classes of High Net Worth Individuals have a lot of it to put into their investments.
For luxury hotels and luxury brands, it offers the companies a branding opportunity. When someone who can afford to stay anywhere or use any product they like chooses one specifically, it sends a message to those watching that the place or product is exclusive and worth the money.
Whether you feel as if you’ve outgrown your advisor or you just want a fresh perspective on portfolio strategies in our current market, our team of experts is here for you.