Many people who receive inherited wealth have a tendency to take irrational decisions under the influence of friends and family members. Here is where an advisor can intervene and make investment easier for such people.
We interacted with a few advisors and understood how they have helped such clients manage inherited wealth.
Mumbai IFA Dhruv Mehta
About 7-8 years ago, I met a Parsi family with two sons, one daughter and a mother whose husband had just passed away. The family lived a very normal middle-class life.
The deceased had invested in stock market and mutual funds and the family sought my advice to liquidate this. The deceased had invested in shares but had them in a physical form. He had invested in mutual funds and about 150 stocks including many blue-chip stocks. The valuation of his investment was Rs.20 crore then.
I helped the family liquidate most of the assets and advised them to stay invested in quality stocks and mutual funds. I told them to invest the liquidated money in liquid funds for at least six months. The idea was to give them some time to think about the money.
After a few months, the family had clarity on their goals and priorities. While the family mainly wanted regular flow of money to take of their expenses, they listed a few other goals such as grandchildren education and wedding.
Since most of their goals were long term, I advised them to invest money in equity funds and continue to hold some stocks. I also advised them to invest in balanced advantage funds and start SWP to get a monthly income.
Today, the family’s investment has grown to Rs.80 crore. In addition, they have been receiving annual income of Rs.1.40 crore to meet expenses.
In my view, advisors should give some time to family members to think about inherited wealth before pushing them to invest.
Mumbai IFA Sadashiv Arvind Phene
A few years back, I met a woman whose mother-in-law passed away leaving Rs.4 crore of mutual funds.
She sought my view on gold as she intended to invest this corpus in gold. Since she was earning then, I told her to invest in gold with her own funds. I then made her realize the importance of preserving inherited wealth for future generations.
I recommended her to invest in a combination of hybrid funds and debt funds, as her risk appetite was moderate.
After a few years, she quit her job due to health reasons. Thanks to her investments, she has been withdrawing a healthy sum of money each month for her household expenses. She is also funding her son’s foreign education with this inherited wealth.
