It’s Time You Met ‘The High Net Worker’

It’s Sunday, and I’m curious about something. Will you be working or going in to the office today? Or maybe just planning for a busy workweek ahead?

If you answered yes to either question, then there’s a chance that you might just qualify as a High Net Worker or HNW. So, you may be asking yourself, “What exactly makes one a HNW? And where in the world did the HNW term come from?”

We’ll get to those answers in a minute, but first, let’s take a quick look back at our recent conversation on defining “rich” in America, as it’s highly relevant to this week’s discussion. In that article, as well as others in the Daily Pfennig® newsletter over the years, we’ve written and examined in great detail how the distribution of income and wealth in the U.S. and varying earning power can impact such things as economic growth, consumer confidence, and risk in the event of a slowdown.

With this in mind, I arrived at my own personal definition of “rich,” which I did not define as a specific income or net worth figure, but rather “the sustainable ability to reasonably buy what you want without regard to budget – whether retired or not.”

Enter The HNW
Through a recent research study, EverBank has pinpointed this new and growing socio-demographic of people across the country. The HNW, named for the group’s earning power, dogged work ethic and aversion to traditional ideas about retirement, has emerged as a key player in the spending and savings landscape in the U.S. Here’s a quick profile view of the HNW subset:

• Average Age: 41–63 Years
• Average Household Income: $374,000
• Median Investable Assets: $750,000 – $1,000,000

And, as the HNW name reveals, they are professionally motivated, hard working and possess lofty career ambitions. They most certainly lead busy lives at work – and likely at home, too. The commitment and dedication to their craft is no doubt impressive.

However, as the official HNW report suggests, they appear to be so focused on the present that they might actually be undermining their full financial potential.

The Time To Pause Is Now
HNWs are indeed well off, so much so that the average household probably qualifies as the top 1% in most states.1 Yet, as they push forward in their demanding careers and play catch-up with their busy lifestyles, they may be missing out on key opportunities to expand and grow their success. Here are more key findings from the report:

• Approximately one in eight say they will never retire
• Sixty-nine percent of respondents described themselves as conservative investors
• Nearly a third have never used a financial advisor, yet 91% believe an advisor would add value to their investment program

HNWs are at a critical time in their lives, as their finances are more complex and their goals are loftier. With such a focus on career and little time for anything else, we see a red flag regarding holistic financial planning.

For the HNW, the job, the income and the assets are all there. An even more prosperous future, including retirement, is within their grasp. They just need to pause for a moment and channel a small amount of that daily work energy into their long-term financial planning.

Making Their Mark On The Real Estate Market
HNWs are definitely movers and shakers. Historically, adults nearing retirement have downsized their homes. HNWs, however, are doing the opposite. Thirty-three percent plan to make a real estate purchase over the next two years, with many of these expected to be second or third homes.

As EverBank Home Lending EVP Tom Wind told me, “High Net Workers have money to spend, are investing in real estate and tapping into the equity of their existing homes to expand their residential footprint. Within our own business, we are seeing HNWs use home equity lines of credit to take advantage of low interest rates and a rising real estate market. Even more interesting than that though, is the trend of these High Net Workers helping their adult children with down payments. It’s helping bolster certain parts of the market.”

Onward & Upward
There’s a lot to be optimistic about here, and for the HNW, some planning and diversification actions appear warranted. For all of us, regardless of our socio-demographic, this is a good reminder to slow down from time to time, smell the roses and give a bit more thought to the future and how best to maximize our financial potential.

I’ve only touched on a portion of the results, as I know you’ve probably got a lot more to get to today, but you can download the full report here.

Until the next Daily Pfennig® edition…

Frank Trotter
EVP & Chairman
EverBank Global Markets Group