merlin
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Post by merlin on Dec 20, 2014 10:23:31 GMT
High Net Worth (HNW) seems to be cropping up regularly on threads but what does it really imply. I have been described as HNW by others although I don't see myself as qualifying for this sobriquet. This is simply because given the wrong circumstances my apparent wealth could be a case of "here today gone tomorrow".
On AC there was an individual seeking a loan to expand a business who was described as HNW as though this strengthened his/her Personal Guarantee given as security for the loan. However while doing your DD how to you validate such a statement and what weight to you give to HNW?
There have been other lenders on various threads claiming that they are themselves HNW or suggesting that perhaps Underwriters must be HNW but what does this actually tell you. There are of course various sources that you can refer to which provide definitions but these vary according to the source. So does HNW have no value, or is meaningless or is it in some cases just perhaps self aggrandisement or just plain bullsh*t?
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Post by tybalt on Dec 20, 2014 13:48:56 GMT
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shimself
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Post by shimself on Dec 20, 2014 14:21:05 GMT
The idea is someone who can afford to lose their investment without being forced onto social security. I think the definitions I've seen are ~£250K not counting the equity in the house.
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jonno
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nil satis nisi optimum
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Post by jonno on Dec 20, 2014 14:44:25 GMT
The idea is someone who can afford to lose their investment without being forced onto social security. I think the definitions I've seen are ~£250K not counting the equity in the house. The quantum of HNW was debated on CNBC recently and they came to the conclusion it equated to $1 million of liquid assets over and above the value of main residential property.
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Dec 20, 2014 15:14:01 GMT
Many thanks for the steer, tybalt. It certainly shows what the then FSA demanded of a HNW individual back in 2005. At that time it states a person of HNW should be earning in excess of £100k p.a. and have net assets in excess of £250k excluding your main property and a number of other caveats. Now nearly a decade later these figures may have changed as a result of inflation and other factors but it is at least a good starting point. I must admit that my expectation was for much higher than these figures.
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shimself
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Post by shimself on Dec 20, 2014 15:17:24 GMT
The idea is someone who can afford to lose their investment without being forced onto social security. I think the definitions I've seen are ~£250K not counting the equity in the house. The quantum of HNW was debated on CNBC recently and they came to the conclusion it equated to $1 million of liquid assets over and above the value of main residential property. I don't know exactly but in UK the idea is that someone selling you investments which have some risk to them must establish that you are HNW or an experienced professional investor or erm something. I'm sure I've seen £250k in the questionnaire, yes here you go certified high net worth individuals within the meaning of Article 21 of the Promotion of CIS Order (being an individual who has signed a statement, within twelve months prior to the communication being made, to confirm that they satisfy at least one of the following minimum thresholds:
• have had, during the financial year immediately preceding the date of signature, an annual income to the value of £100,000 or more;
• have held, during the financial year immediately preceding the date of signature, net assets to the value of £250,000 or more. (Net assets for these purposes do not include a primary residence, rights under certain types of insurance contracts, or certain other benefits yadda yadda. I suspect it's a good thing.
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adrianc
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Post by adrianc on Dec 20, 2014 16:03:25 GMT
Whilst I can certainly see the point in defining HNW by assets without reference to income, defining HNW by income without reference to assets would seem to invite all those who are having to run to stand still, with their high incomes more than balanced by massive mortgages, car finance, credit card bills, etc etc etc.
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mikes1531
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Post by mikes1531 on Dec 20, 2014 20:43:49 GMT
Whilst I can certainly see the point in defining HNW by assets without reference to income, defining HNW by income without reference to assets would seem to invite all those who are having to run to stand still, with their high incomes more than balanced by massive mortgages, car finance, credit card bills, etc etc etc. Qualifying as HNW by income alone is a bit of an oxymoron. The 'NW' of HNW refers to net worth, so it ought to be based solely on assets rather than income. If someone spends all their income and therefore has little or no -- or negative -- net worth then they shouldn't be classified as HNW, no matter how big an income they have.
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Dec 21, 2014 10:17:58 GMT
Whilst I can certainly see the point in defining HNW by assets without reference to income, defining HNW by income without reference to assets would seem to invite all those who are having to run to stand still, with their high incomes more than balanced by massive mortgages, car finance, credit card bills, etc etc etc. Qualifying as HNW by income alone is a bit of an oxymoron. The 'NW' of HNW refers to net worth, so it ought to be based solely on assets rather than income. If someone spends all their income and therefore has little or no -- or negative -- net worth then they shouldn't be classified as HNW, no matter how big an income they have. This is precisely why I asked the question. In a lot of instances HNW can be merely transient as in mikes1531 contribution above. Secondly no account seems to be made for debt which in many cases can be difficult to discover. So in any submission for a loan where a PG is the only security, the stating that the borrower is a person of HNW adds no real value at all. Further more most people of HNW can usually borrow money at a much more favourable rate than is typically available in the P2P market. So perhaps the use of the term HNW when associated with a loan in the P2P world should ring a few alarm bells, or am I missing something?
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mikes1531
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Post by mikes1531 on Dec 21, 2014 20:40:50 GMT
Secondly no account seems to be made for debt which in many cases can be difficult to discover. So in any submission for a loan where a PG is the only security, the stating that the borrower is a person of HNW adds no real value at all. I think it all depends on whether the the HNW reference is based on the 'official' definition, or simply is an abbreviation for high net worth. If the former, then it's probably meaningless. If the latter, then the fact that it's 'net' worth should mean debt has been taken into account, and in that case it would be a lot more useful. Unfortunately, it's probably impossible to tell exactly what was meant by the HNW reference so it may not be helpful at all. And, of course, there's no guarantee that the situation won't change a few months down the road. Further more most people of HNW can usually borrow money at a much more favourable rate than is typically available in the P2P market. So perhaps the use of the term HNW when associated with a loan in the P2P world should ring a few alarm bells, or am I missing something? The ability to borrow often depends on being employed, so a genuine HNW individual may have more difficulty borrowing than might be expected. (IIRC, I was turned down the last time I applied for a credit card. I have what I thought should have been sufficient income, but not a job, and I think that's why my application was rejected.) This is particularly true if the individual's assets are not particularly liquid or are of not easily determinable value, such as unique property, or a business interest. And that may be what brings such people to P2P lenders who might not be as concerned about such details as mainstream lenders appear to be. Whether the P2P lenders are making an appropriate judgement regarding the likelihood of the loan being repaid is debatable.
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bugs4me
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Post by bugs4me on Dec 21, 2014 22:43:34 GMT
Secondly no account seems to be made for debt which in many cases can be difficult to discover. So in any submission for a loan where a PG is the only security, the stating that the borrower is a person of HNW adds no real value at all. I think it all depends on whether the the HNW reference is based on the 'official' definition, or simply is an abbreviation for high net worth. If the former, then it's probably meaningless. If the latter, then the fact that it's 'net' worth should mean debt has been taken into account, and in that case it would be a lot more useful. Unfortunately, it's probably impossible to tell exactly what was meant by the HNW reference so it may not be helpful at all. And, of course, there's no guarantee that the situation won't change a few months down the road. Further more most people of HNW can usually borrow money at a much more favourable rate than is typically available in the P2P market. So perhaps the use of the term HNW when associated with a loan in the P2P world should ring a few alarm bells, or am I missing something? The ability to borrow often depends on being employed, so a genuine HNW individual may have more difficulty borrowing than might be expected. (IIRC, I was turned down the last time I applied for a credit card. I have what I thought should have been sufficient income, but not a job, and I think that's why my application was rejected.) This is particularly true if the individual's assets are not particularly liquid or are of not easily determinable value, such as unique property, or a business interest. And that may be what brings such people to P2P lenders who might not be as concerned about such details as mainstream lenders appear to be. Whether the P2P lenders are making an appropriate judgement regarding the likelihood of the loan being repaid is debatable. IIRC correctly the 'definition' of HNW or UHNW originated from the banking related sector who to be perfectly frank were only interested in getting your liquid funds on board for their investment plans. Fixed assets they couldn't touch - it was the paper stuff they were after. And yes, I am cynical towards their (the banks) motives.
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