In personal finance, the term “net worth” means the financial position of an individual, and it is calculated by using the value of all of the individual’s assets, subtracting the total debt that the individual owes. For instance, if a person has got $10,000 U.S. Dollars (USD) in cash, and $2,000 USD in stock, and he owes $5,000 USD in debt on a vehicle, then that individual this means that the individual has a net worth of $7,000 USD. A person is known as a High Net Worth Individual (HNWI) when his net worth exceeds from a certain amount, usually defined at $1 million USD.
Calculation of net worth
Usually in the calculation of net worth the value or liability of a person’s primary residence is not included. However, a HNWI is defined by the U.S. Securities and Exchange Commission (SEC) by slightly different criteria for their own purposes. It is requirement of SEC that all investment advisers who are registered with the SEC have to file reports, periodically, stating how many of their clients are HNWIs by the SEC’s definition.
HNWI defined by SEC
For the purposes of filing this form, a HNWI is someone who is having at least $750,000 USD being managed by the investment adviser filing the report. If it is reasonably believed by the advisor that the individual’s net worth exceeds $1.5 million, then this individual is also defined as a HNWI by the SEC. Unlike the criteria that is accepted in the banking and financial trade, the SEC also includes the value of a person’s primary residence in determining net worth.
