Ultra High Net Worth vs High Net Worth in Canada: Understanding The Wealth Landscape

How much money does a high net worth individual or an ultra high net worth individual in Canada have? We all like to compare ourselves to others even though we don’t want to outwardly admit it. Net worth shouldn’t equate to self worth, but you might wonder if you would fall into this (what many would consider) ‘elite’ category as you saw your investment accounts increase dramatically in 2021. Being classified as high net worth in Canada is a complex landscape that requires a deeper understanding of wealth management, investment strategies, and tax planning. A Canada study shows that the average net worth of individuals in this category is significantly higher than the national median, indicating a wide wealth gap.

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The Definition of High Net Worth in Canada

When it comes to financial lingo, ‘High Net Worth’ is a term that gets thrown around quite often. But what does it mean in the Canadian context? It’s not about how much money you make, but rather, how much you have. In Canada, a high net worth individual is typically defined as someone with liquid financial assets of $1 million or more (technically it is $1 million USD in liquid financial assets).

Liquid assets are assets that can be quickly converted into cash without losing their value. These can include things like stocks, bonds, mutual funds, and savings accounts deposits. Basically liquid assets means anything that can be sold off quickly.

This is why I think liquid net worth is the ultimate measure of net worth and why I think liquid net worth trumps net worth. You can be house rich and cash poor (like many Vancouverites are- their house is worth $2 million dollars but they may struggle to pay for their $8,000 property tax bill).

Yet they might still be part of the top 1% of net worth in Canada.

Only 1% of Canadians have high net worth in Canada.

These HNWIs with $1,000,000 to $5,000,000 USD in financial assets are called millionaires next door, according to Investopedia.

What is a high net worth investor in Canada? Similarly, they are people who have over 7 figures in liquid assets, there are only about 400,000 Canadians who fall under this category, whereas in the United States, there are over 6.5 millionaires who are HNW.

Being Rich vs Being Wealthy

Rich doesn’t mean wealth according to the book Psychology of Money by Morgan Housel.

You can appear rich in Canada and carry a $2500 Louis Vuitton purse but your bank balance may show -$25,000.

People may look at your designer clothing and designer hand bags and expensive car and they may assume you are wealthy (and you very well may be) but they really don’t know how much is in your investment account.

Becoming a High Net Worth individual (HNWI) doesn’t happen overnight. It takes time, discipline, and a sound financial strategy. Even though it might seem like an exclusive club, the truth is, many Canadians are part of it (over 400,000). You might even be closer to joining than you think.

In a nutshell, High Net Worth in Canada is about more than just a number. It’s about financial security, growth potential, and the opportunities that come with it. So, whether you’re already there or working your way up, remember: it’s not just about the money. It’s about what you do with it.

Net Worth Does not Equal HNW

A Wealth of Common Sense blogger, Ben Carlson shares the net worth of Americans. These would include assets such as real estate and primary residences. Also, these numbers are difficult to compare to because there are people who live in HCOL cities and have higher salaries but also higher expenses. Nonetheless, this chart provides a rough estimate of the net worth of Americans by the top percentiles by age.

Related: How much should I Have saved by 40?

When you look at terms such as high net worth individuals or ultra high net worth individuals, it means something different.

HNW, VHNW, or UHNW do not account for your primary residence and real estate.

A Study of High Net Worth Individuals in Canada

High net worth individuals in Canada are a unique group, often with complex finances and investment strategies. They are a focus of interest for many, including economists, researchers, bankers, and those aspiring to increase their own wealth. As a personal finance enthusiast, I have spent a considerable time studying this exclusive club, and I’ve discovered some intriguing patterns and trends.

High Net Worth Demographics and Trends

Examining the demographics and trends among high net worth Canadians reveals some interesting insights.

According to Globaldata.com many of these HNWIs have amassed their wealth through earned income, and a growing proportion through entrepreneurship. A wide range of professions and industries are represented among Canada’s wealthy.

Geographical Distribution of High Net Worth Individuals in Canada

It’s not a surprise that high net worth individuals are not uniformly distributed across Canada.

According to Henley and Partners, as of 2022 the highest concentration of wealthy individuals is in Canada’s largest cities: Toronto, then Vancouver, and then Calgary. In fact, Toronto was ranked 12th amongst 99 cities globally in this study.

These cities are hotspots for high-net-worth individuals due to the opportunities they offer in terms of business and investment. That being said, there are also pockets of wealth in other parts of the country, which reflects the diversity of Canada’s economic landscape.

Very High Net Worth Individual Definition

Then there’s the middle term for someone who falls between high net worth and ultra high net worth. It’s called VHNW.

For lack of a better descriptor, a VHNW individual has between USD $5 million to $30 million in liquid assets.

VHNWI are also called mid-tier millionaires, many of them are decamillionaires. There are 1.89 million mid-tier millionaires globally, according to Investopedia.

There are under 2 million decamillionaires in the world.

Very-HNW would qualify for free private banking in Canada and lots of private wealth managers or bankers trying to sell you whole life insurance and pawn it off as a tax saving strategy.

What does Ultra High Net Worth in Canada mean?

What is considered ultra high net worth Canada? Ultra high net worth Canadians have over USD $30 million in investable assets. There are about 11,000 Canadians who are ultrahigh net worth individuals.

Not surprisingly, usually the older you are the more financial assets you accumulate.

According to Wealthprofessional.ca, the average age of UHNW individuals is 64.

Around the world, there are only over 200,000 UHNW individuals (Source: Investopedia).

Wealth-X has an ultra high net worth global report on the world’s wealthiest. In 2020, UHNW individuals in the United States actually increased by 8%. In Canada, the year-over-year number of UHNW individuals actually shrunk by 2.4%.

What do Warren Buffett, Lebron James, and Will Ferrell have in common other than being ultra rich? They share frugal habits of the super rich.

Investment Strategies Common Among High Net Worth Individuals

High net worth individuals in Canada typically follow certain investment strategies to maintain and increase their wealth. One popular strategy is investing in equities and bonds or index funds. As mentioned earlier, these can be easily converted to cash, providing liquidity when needed.

Many HNWIs also invest in real estate, which can provide a steady rental income stream and potential capital appreciation.

Other high net worth individuals prefer to keep a sizeable portion of their assets in liquid form, with at least 1 million in liquid financial assets.

Such strategies are popular across North America and are often recommended by financial advisors. However, each person’s investment strategy can differ based on their financial goals and risk tolerance.

Accessing HNW investment programs requires a comprehensive understanding of investment strategies and a considerable amount of wealth.

These programs are typically targeted towards HNW investors and offer a variety of alternative assets, including venture capital and private equity (you can become an accredited investor).

Financial institutions often facilitate the process of investing in these programs. However, eligibility usually depends on your net worth and investment experience: do your own due diligence.

Perks of Being a HNW Investor in Canada

When you are a HNW investor in Canada or you have more than 7 figures in liquid assets, bankers and advisors will want to get to know you.

Here are some of the perks of being a HNW investor in Canada

Financial Advisors Want your Attention. You merely glance at the private wealth managers and you can see the dollar signs in their eyes. If they can sell you their funds or charge you their (at minimum) 1% management fee they will be golden.

1% management fee on $1,000,000 is $10,000. Of course advisors wouldn’t get the full 1% but gather a few HNW investors and HNW clients here and there, and boom, that’s a lot of money for taking clients out for coffee and socializing. 😉

Private Banking. In addition, as a high net worth investor in Canada, you’ll qualify for Canadian private banking status. You’ll be able to have a private banker and skip the line up at the bank teller, you’ll get faster service on the phone when you call in, and when you go to the bank and withdraw money and they see your bank balance, they will treat you like gold even though you have a hole in your 12 year old winter jacket.

Also, with private banking, you’ll get preferential exchange rates, preferred rates for loans, free succession and trust and estate planning, and access to important events where you can hob nob with other HNW Canadians. You’ll still have to pay the private banking fees, but once you hit a minimum of $3-$5 million in investable assets with certain financial institutions, these fees will be waived.

For a discount brokerage like Questrade, once you have over $250,000 invested you have access to Questrade Platinum. In theory you should have less wait time when you contact them via Questrade Chat and faster access via email.

Accredited investor. Finally, if you (and your spouse) are a HNW investor in Canada with over $1,000,000 in investable financial assets, you could be considered an accredited investor. Either that, or you have over $5 million in net worth total (including real estate like a primary residence), or you have over $200,000 in annual income in the past two years (or combined with your spouse you have over $300,000 in annual income). When you are an accredited investor, you will have access to invest your money in alternative investments like hedge funds, venture capital, and angel investments.

Tracking your Net Worth to HNW Status

If you have already reached HNW or UHNW status, congratulations. You may already have a financial advisor working with you to take you out for coffee (on your dime but you just don’t know it).

If not, and you want to take matters into your own hands and keep track of your liquid financial assets until you hit the HNW investor number, I recommend a net worth and investment portfolio tracking tool called Wealthica.

Wealthica Net Worth Tracker

It tracks your investment portfolio and cash holdings over a number of investments, even if you have two different brokerage accounts or multiple no fee bank accounts.

You can also add non-liquid assets such as real estate but you will have to update these numbers manually.

Here’s my review of Wealthica.

A Deeper Dive into the High Net Worth Landscape in Canada

Let’s look more closely at the high net worth landscape in Canada. Understanding this landscape can give you insights into the strategies used by the financially successful, and may inspire your own journey to financial freedom.

Analysis of Household Net Worth Trends

When it comes to the trends in household net worth in Canada, Statistics Canada is a resource to consider. A closer look at the data reveals that there are quite a few disparities based on demographic factors such as the type of family, age, and employment status.

The Lower Net Worth Among Single Parent Families

It’s not entirely surprising that single-parent families often have a lower net worth compared to other family structures. This could be because of the financial challenges of raising children single-handedly, with as high childcare costs and the difficulty of maintaining a high income while balancing parenting responsibilities to blame.

The Comparatively Lower Net Worth of Renters Approaching Retirement

Looking at the net worth of individuals who are nearing retirement, those who are renters often have a lower net worth compared to homeowners. This is likely due to the fact that homeownership is a significant form of wealth accumulation (despite not being counted as part of liquid net worth). As renters, these individuals miss out on the opportunity to build equity over time, which can be a crucial contributor of one’s retirement nest egg.

A picture is worth a thousand words. This visual from Visual Capitalist shows where the Ultra High Net Worth Individuals (over $30M USD in assets) invest their money.

The Higher Net Worth of Families with an Employer Pension Plan

Families with an employer pension plan often have a higher net worth. This is because these plans not only provide a regular income stream in retirement, but they also often come with employer contributions, which can significantly boost one’s savings (forced savings is what I call it). It’s a stark reminder of the significant role employer-sponsored retirement plans can play in wealth accumulation. Defined benefit pensions are becoming more rare unfortunately.

Conclusion of High Net Worth in Canada

With the median household net worth in Canada reaching new heights, the journey to HNW status has become interesting. The highest median net worth is seen within Canadian families with ages between 55 and 64, possibly due to accumulated savings and investments (or maybe transfer of wealth from inheritance!). These individuals often have a unique mix of assets and liabilities, with the primary residence and stock market investments being significant contributors to their net worth.

It’s interesting how the average household in Canada manages to increase its net worth. High net worth investors often diversify their portfolios by investing with investment accounts, and moving beyond traditional savings accounts towards more passive income. The TFSA, in particular, has been a game-changer for many, even though it is still very much under utilized.

You may also be interested in:

Do you know any HNWI or ultra high net worth Canadians?

What are their lifestyles like?

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4 thoughts on “Ultra High Net Worth vs High Net Worth in Canada: Understanding The Wealth Landscape”

  1. So many of the investors we know are into real estate. It’s interesting that it’s not included as so many people have made their fortunes in real estate. I guess they could eventually cash out in order to be more liquid.

    I can say that we are not part of this exclusive club and don’t know if we ever will be. And that’s totally okay with me.

    Reply

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