HNW: a definition
Typically, holding at least $1 million in net investable assets is considered high net worth (HNW). But there are variations. If this definition generally applies to individuals, it sometimes refers to the entire household’s net investable assets.
Some Canadian financial institutions and research firms have lower net assets thresholds such as $500,000 or $250,000. And there are also ultra-high-net-worth individuals (UHNWIs), who are characterized as having more than $10 million in investable assets.
HNW individuals: significant growth in Canada
Between 2023 and 2028, the number of Canadian HNW individuals is forecast to increase by at least 25%1. And, this could be a conservative estimate, as the global source of this data defines HNW individuals as investors with investable assets of at least USD 1 million.
In Canada, the HNW population has traditionally been dominated by men, entrepreneurs and retirees. By 2026, at least 50% of HNW Canadian households will be classified as retired2. Other traditional segments include corporate executives as well as health and investment professionals, and business owners.
That said, a demographic shift includes new groups that are contributing to this significant growth :
Women
Overall, they nowadays earn higher incomes and an increasing number of them are becoming entrepreneurs and reaching senior management and executive positions.
Aging population
This key market segment has accumulated good assets over the last decades.
Younger generations
Today’s millennials are expected to grow their penetration of affluent households and financial wealth the fastest in Canada thanks to inheritance, higher revenues or entrepreneurship.
HNW migration
Thanks to its good reputation and attractive programs, Canada ranks among the top 10 countries in the world welcoming HNW newcomers.
Understanding their concerns and needs
Like all investors, HNW individuals want to invest their money to generate returns and grow their wealth. Their best investing strategy is also based on their goals, investor profile and risk tolerance.
But there are nuances. HNW investors will often:
- Seek income generation: A large number of retirees and entrepreneurs without regular income would need a solution that would provide an additional source of income.
- Seek to minimize fees: Due to the scale of HNW portfolios, it’s even more important to minimize fees since the smallest percentage difference can translate into significant savings.
- Seek limited volatility: Slight market fluctuations can have a significant impact on the total value of their assets.
- Seek specialized expert services: Minimizing the tax implications related to succession planning, estate planning or philanthropy are concerns frequently raised by HNW investors with their advisors.
Advising HNW clients: a family affair
Given their diversified, sophisticated and sometimes complex needs, HNW investors require specialized expert advice. And when serving them, advisors must focus on the financial and lifestyle needs of their whole family.
One of the key reasons for this holistic approach is wealth transfer. In Canada alone, an estimated $620 billion2 is expected to flow from HNW individuals to their families from 2016 to 2026. Given the desire to transfer the assets in a manner that does not make governments a major beneficiary, the importance of estate planning to HNW clients is crucial.
What’s more, advising the whole family allows the advisor to grow this key market segment of the market organically.
A multidisciplinary approach
To provide a tailored and holistic approach, HNW advisors must offer a range of expertise. Their multidisciplinary approach typically covers the 7 areas of financial planning. Leveraging and pooling complementary expertise ensures you have a sound, value-added solution, devoid of potential blind spots, to provide at your next client meeting.
If you or your advisor firm does not cover this array of services in-house, consider building a network of expert partners, such as legal advisors, tax specialists and CPAs. This strategic collaboration enhances the holistic approach necessary for providing HNW clients with the tailored solutions they seek.
Want to learn more? Take our free “Advising high-net-worth (HNW) Canadians” online training and earn 1 CE Credit/PDU. For more information, contact your NBI Sales Representative .