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Nivesh Jaagran Financial planning for joint families

Financial planning for joint families

Understanding and advising families with several members who are in different life stages
Team Cafemutual Mar 12, 2018

Joint families, unified families or HUFs (Hindu Undivided Families) have become a rarity. While most advisors understand the needs of a nuclear family, the needs of a joint family are still an enigma.

Joint families have special attraction for advisors. By on-boarding one member, an advisor gets the accounts of several other family members.

In this article, we explore the characteristics of joint families and the various challenges advisors face while advising them.

Key characteristics

One of the outstanding characteristics of a joint family is that all the decision-making is left to the head of the family. While the head is usually the oldest male member of the family, at times, the oldest female member might also take up the responsibility.

Another remarkable characteristic is that the income of various members of the family is pooled into a common account and all the expenses and investments of the family are carried out through the common account. Mumbai-based IFA Ritesh Sheth, of Tejas Consultants, believes that irrespective of the income difference, joint families invest equally for all their members.

Challenges

Time consuming: Unlike other families where a consensus can be reached immediately, decision making is time-consuming in a joint family. Though the head of the family is the final decision-making authority, he usually brainstorms with all the breadwinners of the family before taking a call. This usually takes a lot of time. Only when all the male members agree on a course of action, is it implemented.

Ritesh feels that the only way to overcome this problem is by meeting everyone at the same time. “Fix an appointment when the entire family is there. This way not only can you reach out to all of them at once, but also understand their individual concerns,” he says.

Multiple members at multiple life stages: Another challenge while advising joint families is that its members are at various stages of life. “Instead of saving for a single child plan or retirement plan, we need to think of the needs of the entire family at various stages,” says Ram Barcha of Vikalp Finvest.

He believes that advisors can overcome this challenge by discussing in detail with the head of the family on what the individual goals are of each of its members. “The patriarch of the family will help you with the time zone for each of the goals. He will also help you in understanding the priorities of the moment and how much money must go towards each individual’s goal,” he says.  

Attachment to traditional investment tools: Since the oldest members take all financial decisions in the joint family structure, these families tend to invest in instruments the head understands. Kartik Jhaveri, of Transcend Consultancy, says, “Advisors can gradually win over their trust by encouraging them to invest a small amount in mutual funds or other alternative investment products initially. Also, we need to continuously educate them on the advantages of investing in mutual funds, the difference in the interest rates, etc. Over time, the family will start trusting your judgement.”

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