Having a high net worth does come with its own set of challenges, one of which is the effective management of your money. While there are basic principles to help guide your high-net-worth wealth management strategy, there are specific actions you might want to take to try to grow your fortune.A financial advisor can also help you create a financial plan for your future.
High Net Worth Definition
A high-net-worth individual must have liquid financial assets of at least $1 million. Liquid in this case means able to be accessed – relatively quickly – as cash. Owning a home with a value of $1 million, for instance, would not qualify someone as a high-net-worth individual by itself, because that can’t be easily converted to cash and used for investment.
There are two levels above this: a very-high-net-worth individual has at least $5 million in liquid assets, while an ultra-high-net-worth individual has at least $30 million.
At an individual level, becoming a high-net-worth individual doesn’t impact you that much. To a potential financial advisor, though, you will be counted separately for the purpose of SEC filings.
Common Services for High-Net-Worth Individuals
There are some financial planning services that everyone needs, regardless of your financial situation. That said, there are some things that are especially important for those with a high-net-worth. Here are four services to look for in an advisor if you’re a high-net-worth investor:
Estate planning:Estate planning is important for everyone, but it takes on a special resonance for those with a lot of money because they’ll likely end up with a sizable estate that they want dealt with efficiently after they pass. This financial planning servicecan help you take the right steps now so that your money and assets are divided up as you see fit after you’re gone. And in a way, that minimizes the tax burden and the work needed from your family.
Charitable giving:Giving money to charity is great no matter how much you can give. Even donating $10 to a cause you believe in can give you a solid rush of endorphins and help out people who need it. When you have a high net worth, though, charitable giving grows in both scope and importance. You have more money to give, so it becomes important to be intentional and careful how and when you give it. Furthermore, charitable giving can be deducted on your tax return, so making sure you keep diligent records is important.
Tax planning: Everyone has to deal with taxes. But for those with a high net worth to manage, tax planning is also a crucial part of investing. This financial planning servicecan help high-net-worth individuals save money on their tax bill by maximizing deductions, selling investments for the purpose of tax-loss-harvesting and other engaging in other tax-saving strategies for high-income earners.
Succession planning:If you’re a small business owner or have a successful family business, succession planning is an important part of financial planning. This is a contingencyplan that can replace your leadership and maintain the right balance of experience and institutional knowledge for the success of the business and your family.
Bottom Line
A financial advisor can be useful for all people, but it is especially important for those who need high-net-worth wealth management. If you have a high net worth, an advisor can help you with investments, obviously, but also with taxes, estate planning and other concerns especially relevant to those with a lot of money.
High-Net-Worth Wealth Management Tips
- A financial advisor can be helpful for those with a high net worth, and finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you canhave a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- No matter how much money you have, it’s important to make sure you have a strong portfolio. Use SmartAsset’s asset allocation calculator to start planning.
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FAQs
A high-net-worth individual must have liquid financial assets of at least $1 million. Liquid in this case means able to be accessed – relatively quickly – as cash.
What is a respectable net worth? ›
Determining what your net worth should be at any age can be a bit tricky, and it depends on your income. Say you're 30 years old and your income is $50,000 per year. Your net worth should be $150,000, according to this formula. A $25,000 salary at age 30 would mean an ideal net worth of $75,000.
How much money makes you a high-net-worth individual? ›
In today's society, high-net-worth individuals are generally defined as those with a net worth of between $1 million and $5 million, and often have access to financial services beyond traditional banking and investing services at commercial banks and credit unions.
How much money should you have to get a wealth manager? ›
Any minimums in terms of investable assets, net worth or other metrics will be set by individual wealth managers and their firms. That said, a minimum of $2 million to $5 million in assets is the range where it makes sense to consider the services of a wealth management firm.
Where does 3 million net worth rank? ›
The 95th percentile, with a net worth of $3.2 million, is considered wealthy, facilitating estate planning and possibly owning multiple homes. The top 1%, or the 99th percentile, has a net worth of $16.7 million and represents the very wealthy, who enjoy considerable financial freedom and luxury.
What net worth is considered ultra rich? ›
While there's no legal standard when it comes to defining who is an ultra-high-net-worth individual (UHNWI), they're often defined as those who have $30 million or more in assets. These funds must be in investable assets, which is an important distinction to make.
What percentage of Americans have a net worth of over $1,000,000? ›
Additionally, statistics show that the top 2% of the United States population has a net worth of about $2.4 million. On the other hand, the top 5% wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current definition of being rich.
What net worth is upper middle class? ›
Upper-Middle Class (Next 20%): The median net worth is $201,800. This group often enjoys more discretionary income and benefits from long-term investments. Wealthy (Top 20%): The median net worth is $608,900. This group often represents older individuals who have accumulated significant savings and investments.
What is the top 5% net worth? ›
The most recent data from the Fed's Survey of Consumer Finances took a snapshot of the American public at the end of 2022. At that point, a net worth of $3,795,000 was enough to put you in the top 5% of all American households.
What net worth puts you in top 1%? ›
In the U.S., it may take you $5.81 million to be in the top 1%, but it takes a minimum net worth of $30 million to be considered among the ultra-high net worth crowd. As of the end of 2023, this ultra-high net worth population is on the rise, reaching 626,000 globally, up from just over 600,000 a year earlier.
In the United States, the concept of being rich is often a subject of discussion, curiosity and, sometimes, aspiration. Charles Schwab's 2023 Modern Wealth Survey provides insights into this topic, revealing that the average American equates being wealthy with a net worth of approximately $2.2 million.
What is considered high net worth in 2024? ›
For example, individuals with $1 million in liquid assets are generally classified as having a high net worth. To be considered very high net worth, one might need assets ranging from $5 million to $10 million, while an ultra-high net worth status could require $30 million or more.
At what net worth should I get a financial advisor? ›
Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.
What are the disadvantages of wealth management? ›
Cons of Private Wealth Management
Wealth managers typically charge a percentage of assets under management or fees for specific services. These costs can eat into your investment returns, particularly if your portfolio is actively managed and you have a high net worth.
What does a typical wealth manager charge? ›
On average, you can expect to pay between 0.5% and 2% of your total assets under management annually, $150 to $400 per hour, or a flat fee ranging from $1,000 to $3,000 for a comprehensive financial plan.
At what net worth are you considered wealthy? ›
Upper-Middle Class (Next 20%): The median net worth is $201,800. This group often enjoys more discretionary income and benefits from long-term investments. Wealthy (Top 20%): The median net worth is $608,900. This group often represents older individuals who have accumulated significant savings and investments.
What does Fidelity consider high-net-worth? ›
Relatively few embrace working with multiple advisors (13%) or any individual advisor managing other advisors (quarterback approach, 5%). those with $1 million to $5 million in investable, non-retirement assets, and ultra-high-net-worth are investors with over $5 million in investable assets.
What net worth is considered upper class? ›
The upper class has an average net worth of $793,120 to $2.65 million, while the lower class has $16,900. The middle class ranges from $58,550 to $300,800. You can grow your net worth by saving and investing consistently, investing in the stock market, and being careful about taking on debt.
Where does a net worth of 6 million rank? ›
Americans need a net worth just south of $6 million to break into the richest 1%.
