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We often hear the term HNIs or High Net-worth Individuals mentioned in a wide variety of contexts.
Whether it is bankers launching a new product aimed at these individuals, media outlets reporting on their private lives and covering the weddings and other events, or for that matter, activists’ railing against increasing inequality, the topic of HNIs is never far from our attention.
So, who exactly are HNIs and why they matter in both positive and negative ways. To start with, the definition of HNIs varies from country to country and from corporate to corporate.
While in the United States, HNIs are defined as those individuals having more than a Million Dollars in net worth, in India and elsewhere, a Crore of net worth is enough to classify them as HNIs.
In addition, Credit Card issuers have their own basis for classifying individuals as HNIs and relationship managers in all corporates have their own yardstick for designating HNIs.
Whatever be the basis for classification and categorization, it is undeniable that HNIs are valuable customers and this is the reason why corporates flock to them to woo them and to make them invest in their firm.
One need not look beyond what has been happening to the India’s richest person and most valuable HNI, Mukesh Ambani, in recent months.
Whether it is his children’s mega weddings or their star studded receptions or his forays into Telecom and other sectors, Ambani is never away from the spotlight.
Apart from the gossip and the voyeuristic thrills of reading about HNIs and their lives, what makes them valuable is the very real aspect of the humungous wealth and the potential for business that they bring to the table.
Imagine a relationship manager who instead of chasing many clients worth a Million apiece and instead, netting an HNI who is worth a Billion.
In one shot, he or she is then able to garner as much business as all the other clients provide and this means that he or she can both scale up and at the same time derive synergies from managing the wealth of one individual and the diversified portfolio.
Apart from that, the other benefit that corporates get is that having HNI clients act as a multiplier with other HNIs too investing and this magnifies the scale and helps them derive more gains.
Thus, whether for good or bad, HNIs have the power to Crowd Out less wealthier individuals and instead, lead to concentrated investments and wealth management.
Having said that, this same concentration of wealth in the hands of a few individuals can have deleterious consequences for the rest of society.
Indeed, if a few individuals aggregate wealth that the entire bottom 50% own, it means that there is a serious problem with the way that society is sharing the benefits of economic growth.
In other words, the gains from the economic growth are simply going to the top leaving the bottom poorer and worse off than before.
This is the reason why many economists in recent years have been calling on governments to do more to reduce the stark inequality and to lessen the gap between the rich and the poor.
Moreover, the obsession with HNIs is leading to neglect of the serious and important aspects of pressing issues such as Infrastructure, Education, and Health for the public which are no longer deemed important since there is the private sector to take care of these issues.
Thus, it is indeed the case that while HNIs make for good Page 3 reading, there is also the added consequence of the impact they are having on the wider society.
On the other hand, HNIs matter because they contribute much needed taxes to the government’s kitty.
Indeed, if not anything, some amount of concentration of wealth is needed in any country since that is the nature of capitalism that thrives on encouraging people to aspire to become richer and reach the pinnacle.
Moreover, the criticism that HNIs dodge taxes can be addressed by the governments through plugging the loopholes in the taxation systems.
In addition, HNIs also contribute to charity and given the immense power of their Trusts and Foundations; there is a definite positive contribution to society.
Apart from this, HNIs also help a country’s profile to be beefed up in global terms and they can serve as Brand Ambassadors for various causes which given their name recall and recognition can magnify the profile and serve as a shining illustration of the country’s success.
Thus, while there are some downsides to concentration of wealth, there are some positives as well as it is up to the governmental and other stakeholders to multiply the positives and improve on the negatives.
Last, typically students in Business Schools daydream about making it big and becoming HNIs themselves.
We hope that the arguments presented here would help those who are on their way to the corporate ladder to discern how they can make a contribution to society while enriching themselves.
After all, HNIs are as much part of the solution as they are of the problem and hence, it is up to collective choices that we make as a nation and as actors in a worldwide web of humanity to ensure that the positives outnumber the negatives.
To conclude, to borrow a line from a famous Hollywood movie, Greed is good and to which we add, as long as it benefits society as well.
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