Using Financial Assets to Measure Wealth

Deposits are one form of financial assets.
Nick M. Do/E+/Getty Images

Financial Assets include cash and bank accounts plus securities and investment accounts that can be readily converted into cash. The are also known as Investable Assets or Wealth. Excluded are Liquid Physical Assets (not easily converted to cash) such as real estate, automobiles, art, jewelry, furniture, collectibles, etc., which are included in calculations of one's Net Worth.

Financial service firms typically prefer to use Financial Assets to measure the wealth of an individual or a household, rather than Net Worth, when they evaluate (and categorize) clients because this calculation reflects what the client has at their disposal to invest.

Of course, the sale of liquid assets can increase one's Financial Assets, while purchases of liquid assets will decrease one's Financial Assets.

However, loan officers at banks and other lending institutions often focus on Liquid Net Worth (follow link to Net Worth above) when making lending decisions because this calculation best reflects the applicant's ability to take on new debt.

Here's an example of our company's private banking division that serves clients with financial assets of $10 million or more.