We have seen ordinary people becoming crorepatis by receiving sudden wealth be it through a game show, lottery, retirement corpus or inherited wealth. And like most people who receive wealth suddenly, they may be clueless about how to manage that wealth.
This calls for an able advisor who can guide them so that their wealth multiplies and gives them financial security and stability.
We spoke to a few financial advisors to understand how they have helped their clients in such a situation.
Nitesh Buddhadev, Nimit Wealth Management, Mumbai
One of my women clients received Rs.85 lakh when she took voluntary retirement. She sought my advice on allocating her retirement corpus in such a way that could help her take care of post retirement expenses.
After initial conversation, I learnt that she has not had a pleasant experience with equity markets. Since she did not want to take any risks, she was a keen to put a major portion of her retirement corpus in bank FDs.
However, I made her realize that allocating a large sum of money to bank FDs could not help her beat inflation post retirement. I explained to her how she might outlive her corpus if she did not factor in inflation.
Given her conservative outlook, I advised her to put 60% corpus in fixed income securities like bank FDs and ultra-short term funds and remaining portion in low risk funds such as aggressive hybrid funds and balanced advantage funds for growth of corpus. I suggested her to start SWP in these funds.
Following my advice, she has been successfully beating inflation by earning a CAGR of 9-10%.
Today, she is happily enjoying her retirement days and is able to fulfil all her needs. In fact, I am confident that her corpus will outlive her and she would easily bequeath some of her wealth.
Pradeep Jain, PMPK Wealth Advisors, Ranchi
What will you do if you get Rs.1 crore today? Like you, most people get excited after receiving such a huge amount of money. Though I am a financial adviser, I too will get excited if I get Rs.1 crore suddenly. Human beings have a tendency to take irrational decisions under the influence of friends and family members in such situations.
Hence, we should try to convince such clients to put a major chunk of this money in liquid funds for two to three months and let them spend some money. This is what I did with my client who had inherited Rs.1 crore.
Another advantage of this strategy was that I got enough time to understand his priorities.
With a couple of conversations, I came to know that his biggest priority was his children’s education and marriage.
Considering his conservative approach, I advised him to put 40% of his corpus in short term debt funds, 40% in balanced advantage funds and the rest in multi cap funds.
Today, the client has successfully funded his children’s higher education in US.
