Wait, $5 million is “ultra” high net worth? Interesting. So if I own a 3br in Tribeca, I’m ultra rich… hmmm…
Say the person who bought that $5M condo in tribeca got a loan of $1.5M (30% loan). That is annual mortgage payment of $96,627 and $110,000 in prop taxes and HOA fees no less than $30,000/year equals this person is coughing up $236,600 per year just on the upkeep. So, yes, this person probably has other means of money (liquid assets in the few millions) and/or makes 7 figures or at minimum high 6 figures per year.
So, yeah safe to say any family or couple who own a $5M home anywhere in the country is considered high net worth…Although really depends on “ultra” part.
Only if you count your home equity in your net worth equation.
Edit: To make an actual contribution to this discussion, by most advisors (and especially multi-family offices) UHNW is defined using investable assets.
In my opinion…as I wrote above…if someone owns a $5M house, he or she either makes crap ton of money or in most cases, has a sizable liquid assets to help pay for all its expenses, which is probably is close to $300k that includes mortgage, prop taxes, HOA.
Many people put almost all or all of their savings into down payment of a house but this is the case for sub $1M homes. People buying +$5M homes are on a different league. Either all cash or leverage - lender knowing the owner has millions in liquid assets to back it up - to make some money and get some fat tax breaks. Not to mention people with $5M homes has one or two other homes around the country that costs a few $M.
I’m no financial advisor or planner or client portfolio manager or whatever they call themselves…but to me this family is high net worth and maybe even UHNW.
IN my very limited experience…I know only a very few people who have houses that cost over $1m. Most of them make really good money, but they are dead broke, because they have a high-consumption lifestyle that eats up all their money. Between their $3m house (which is a really, really high dollar house in West Texas), their fleet of leased luxury cars, their trips to NYC and SF to shop at Neiman Marcus and Saks, and their $25k wristwatches, there’s just not a lot of room in the budget for saving money.
I’ve mostly seen “ultra high net worth” defined as investable assets of about $20 million.
As a CPA/financial advisor, I very loosely define the terms as:
100k - 1m - “mass affluent”
1m-10m - “high net worth”
10-25m - “very high net worth”
25m+ - “ultra high net worth”
This is your total assets, not including your personal residence or other personal effects. I don’t like the term “investable assets” because many individuals have a lot of assets that they can’t invest into securities, such as closely held businesses, oil and gas mineral interests, commercial real estate, etc.
How would you classify Nery’s bitcoin (pron) friend (8m) who owns about $1 million himself, but whose parents own $8 million of pron shops and pay him $40k a year in allowance?
Not all worth is calculated in dollars, young grasshopper
gotta run my own company someday in order to jump couple levels up that ladder Greenman posted
in 5 years, i’m gonna start one. Then 10 years later, I’ll check back on that net worth ladder.
I should mention that the pron friend (8m) has a sibling, so he might have to be considered 4m. Hopefully, that does not complicate the analysis.
To clarify my comment above, I see the UHNW crowd as those having access to concierge financial services. For example, on the low end I’d put JPM Private Bank. Last I checked their minimum was $5mm in investable assets so that’s where I pulled that amount from. Then you have Morgan Stanley/Graystone Consulting and UBS’ private bank. I don’t recall their minimums but I think it’s more in the $10-15mm range.
What I would consider truly UHNW would be those that qualify for (multi) family office services. Just about anyone can call themselves a family office so there’s no standard minimum, but generally I see $50mm as the minimum to get in the door. Other family offices, especially those focusing on fewer families, require much higher minimums. One of my friends’ family uses one and their minimum was $500mm. That’s solidly UHNW, I’d say.
i think thats a proper way to do it. he’ll make money the old fashioned way. by receiving an inheritance. at the end of the day. all our hard work will be for our children. its kind of funny. we work hard so our future kids can be rich shitholes. my buddy actually just finished his music vid. lol im thinking of whether i should post it. its pretty shitty imo. lol with his gf in lingerie and a bikini doing stripper things.
also on investable assets. that measure is used on how much assets the clients have where we can charge money. whats interesting i’ve seen a new advisor model where they charge as a percent of net worth. something like 10 or 25 bps and its all inclusive. pretty interesting.
Nery, please post link. Tanks.
hey Nerdy, “10 or 20 bps all inclusive”…Where is this at?
I’m with US Trust and every year, I have a nice sit down talk with them to go over all fixed and variable fees they charge me. Of course, it irritates my advisor that most of my assets are in index funds and very small amount in MLP.
why do you pay them? you can do it urself no?
whats their added value?
^Wow, that guy is hacksaw. $120mm on total “net worth” and charging 1.4%? Plus an up-front $2,200 evaluation fee? That’s one of the worst RIA models I’ve seen.
The investing part, Yes, I can do it myself through TD or whatever - just jam em into a few index funds and hold. This is what they’re doing at US Trust although they’re not thrilled with it. They want my money in their fat fee charging SMA and other active and discretionary portfolios.
To answer your question as to WHY, for trust and estate planning and family office services aka concierge services. Plus I get several K-1s from MLP holdings and from my previous fund I’ve worked at…All these go straight to US Trust and they reconcile and then contact my CPA directly every year. And every year, I file extensions because these K-1s never arrive on time for the April tax deadline. I just don’t want to deal with that nonsense…
Plus, I come from equity research world not asset mgmt, estate planning world. Leave it to the pros and don’t be cheap but be frugal…is my motto.
OP: do the CFP then the TEP.
Yeah you know me!
#NaughtyByNature