HNI Investors In India: Types, Strategies & Challenges

Introduction:

HNI Full form: High net worth individuals. What is wealth? In financial terms, it is the primary measurement of financial success, something all of us are striving to achieve. Getting there is tough, but there are a set of individuals that have sorted out this equation with precision- HNIs. HNIs or High net worth individuals in India can be defined as a set of individuals who possess investable assets over Rs.5 crores. In 2017, India had nearly 270,000 High Net Worth Individuals (HNIs) and projections suggest this figure will reach 950,000 by 2027.

HNI Meaning: HNIs are typically entrepreneurs, founders, CEOs or the owners of big companies that lead an expensive lifestyle. Being in such a position requires proper financial planning to ensure the sustainability and stability in the revenue they generate. In this article, we will dive deeper into the benefits, challenges and key investment strategies that can be followed to ensure proper management of the wealth of an HNI.

Types of HNI Investors

HNIs are broadly classified into 3 types based on their net wealth; High net worth individuals(HNIs), Very high net worth individuals(VHNIs), Ultra high net worth individuals(UHNIs). 

• HNIs: Individuals holding liquid assets of up to 5 crore are classified as High net worth individuals.
• VHNIs: Individual investors with net worth of anything over 5 crore and under 25 crore falls under the category of very high net worth individuals.
• UHNIs: Individuals with a net worth over 25 crore comes under the category of Ultra high net worth individuals.

All of the three categories possess unique needs and priorities in regard with their finance, hence, in this case, crafting a one for all plan is almost impossible. For example, VHNWIs may require more sophisticated investment strategies and planning, while UHNWIs may need assistance with managing complex business interests and philanthropic endeavors.

• For IPOs, SEBI has further categorised HNIs into two different categories based on their investment amount. They are:
• Small HNI: Individual investors investing anywhere between Rs. 2 lakh to Rs. 10 lakh into IPOs are categorised under this category.
• Big HNI: Individual investors investing more than Rs. 10 lakh are considered big HNIs.

Investing options for HNI Investors In India

With an ever evolving investment landscape, HNIs are offered with a diverse range of options to effectively invest and manage their money. They are able to invest by crafting a plan that suits their needs and long term goals to maximise stability and efficiency. Here are some of the best investment options for HNIs in India.

• Equity markets

With the Indian market being the best performing market among all the others in the past 25 years, equity is an ideal option to incorporate into an HNI’s portfolio. Either as direct investments into stocks or hedged equity products, equity investments are fundamental for any large investor.

• Private debt 

Private debt includes funding companies in return for regular interest payment, benefiting both the company and the investor. This is a great way to invest for an HNI for stable returns for lumpsum amounts.

• Real estate

The oldest investment method in the book, real estate, still stands as the foundation of every HNI’s investment portfolio. Indians have been partial to these investments for a larger part of the past century due to its immense scope for sustainable returns. 

• Mutual funds

If you want a share in leading stocks but don’t want the hassle of the stock market rush to worry you, mutual funds investment is the way to go. However, mutual funds are also subjected to market risks, therefore, do proper research before opting one.

• Angel investing

HNIs can invest in start-up companies, referred to as Angel investing. HNIs could diversify such investments across several companies to successfully manage the risks that comes with it.

Challenges faced by HNI Investors

• Market risks

Ofcourse, risks are part of the game, however, market fluctuation is a risk that needs to be seriously considered by an HNI before investing. Market linked investments such as hedge funds and other structured products are prone to fluctuations with the volatility that exist in the market.

• Liquidity 

Since the majority of the investments in an HNIs portfolio such as real estate and private equity are illiquid, they are hard to sell off immediately, hindering the use of quick access of these funds.

• Risk of concentration 

With a very high amount of investment capital, a significant investment amount of HNIs may be concentrated on a single asset. This might lead to high risks in cases of poor performance of the asset or the occurrence of unexpected events.

• Taxes

With the amount of investment capital an HNIs possess, taxation becomes complex. With taxes such as capital gains taxes, estate taxes, gift taxes and more, an HNI should seek the help of financial experts to better manage their taxes.

• Complex investing landscape

With several complex and difficult to understand investing options for HNIs, evaluating the risks and potential returns becomes a complicated job in hand.

Benefits for HNI Investors

HNIs enjoy several benefits in India compared to people on the comparatively lower end of the wealth scale. Access to specialised financial services and reduced prices on financial services are some among the many benefits that are enjoyed by an HNI. HNIs are able to get valuable financial advice from experts in the field that allow them to plan and manage their investments to full effect. They are also exposed to services such as customised investment portfolios, tax planning, and risk management. They avail benefits in the cost end as well with lower fees on services such as banking and management.

Conclusion 

With great wealth, comes greater challenges. HNIs stand as the foundation of wealth in the global market and in India, they have a combined wealth of almost $ 1.5 trillion, forming somewhere near 60% of the country’s GDP. However, most HNIs get stuck in the complex investing landscape with immense financial resources and diverse investing options. 

Hence, if you are an HNI looking for risk-free returns for your investments in shorter periods of time than conventional methods, Tapinvest is here to make it easier for you. With diverse investing options such as assert leasing, invoice discounting and bonds, Tap into our space of worry-free investing.

FAQs On HNI Investors In India:

1. Who qualifies as HNI?

In India, an HNI (High Net Worth Individual) typically refers to someone with over Rs. 5 crore in investible assets, excluding things like their house. These individuals often receive specialized financial services due to their complex financial needs.

2. What kind of investments does an HNI generally make?

HNIs often invest in a wide range of asset types, including equities, bonds, real estate, private equity, hedge funds, venture capital, art, collectibles, and luxury assets. 

3. What are the risks to keep in mind when investing as an HNI?

Considering the amount of capital involved, challenges for HNIs in investing include market volatility, regulatory changes, succession planning, managing, cybersecurity threats, etc.

4. How do I become a High Net Worth Individual?

Becoming an HNI isn’t easy as it sounds, however, individuals can work towards this goal by focusing on financial discipline, investing wisely, pursuing higher education, entrepreneurship, and risk-taking by seeking professional financial advice. 

5. What are HNI Investors?

HNI investors are individuals with a lot of money to invest. They typically have significant assets and may require specialized financial services tailored to their needs. They can increase their riches through various investment channels like equities, real estate, and venture capital.

6. How to get HNI clients?

Become an HNI expert: Deepen your knowledge in wealth management for HNWIs and showcase experience.

Network strategically: Build relationships with professionals serving HNWIs and attend relevant industry events.

Targeted content marketing: Create content addressing HNWIs’ financial challenges and establish thought leadership.

Prioritize exceptional service: Provide personalized financial plans, premium service, and leverage technology for secure communication and reporting.