Aligning Wealth to Life

September 26, 2015, Chennai

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Last week I received an unexpected call from my best friend’s father – Mr.

Sundaram. Mr. Sundaram’s  father had passed away seven years back leaving behind the ancestral property to the male heir of the family that happened to be Mr. Sundaram’s only son - Harish( my friend’s only brother). Harish lives in USA and could finally sell that property one and a half years back. 
Harish gifted Rs.1.25 crore from the sale proceeds of the house to his mother (Mrs. Sundaram). Mrs. Sundaram is 72 years old and a home maker and has never handled the money independently. She is suddenly surrounded by a lot of advice from all family members about what to do with that money. She is unsure about what to do. 
She was confused. She wanted to distribute her estate to her grand-children, at the same time enjoy the comforts of servants with the money she finally had in her hands. This situation is not women specific, men find it equally confusing. 
Mrs. Sundaram is not alone. There are a lot of women who have not dealt with money in their lives and are not sure about the advice given by their kith and kin. The past and the happenings in the society make them suspicious of all the advice. More over the lack of knowledge creates a bigger sense of insecurity. Unaware of different tools and techniques that are available in the market, they are able to think only of real estate and FDs and gold. The mis-selling of past makes them suspicious of the service providers and the advice from friends and family can be equally bad.
The answer to Mrs. Sundaram’s problem lies in consulting an adviser who can design a portfolio according to her needs and her emotional status. The money that has come to her at this later stage of life should be able to add happiness to her life, rather than increasing her anxiety and stress. 
We first ascertained what Mrs. Sundaram wants from her money. She needed liquidity for her daily needs. An additional servant, a driver to take her around and some cash to be able to gift at her own will. She did not want to take too much risk with her capital and finally wanted to divide the corpus equally amongst her grand-children. Buying an apartment down OMR and creating FDs will solve neither this nor that. An apartment cannot be divided and she was worried about inflation and the ability of FDs to be able to provide for her till her last days.
We ascertained the corpus needed for her to take care of her daily needs (after accounting for inflation) and the falling interest rate cycle. We created a conservative portfolio for this goal, with regular coupons and a very small portion in equity to take care of inflation. The debt portion was laddered to take advantage of falling interest rates. We also mixed differently rated papers to balance the risk and return for this very critical portfolio.
The balance was divided into five individual portfolios for wealth creation. We created  hybrid portfolios, with a  bigger portion in equity and a small portion in debt. Equity would give the required growth and create wealth for the next generation at the same time giving Mrs. Sundaram the comfort of having the funds at her disposal in case she needs them for emergency or if she changes her mind. Debt portion allows for the rejigging of portfolio when the markets turn around. We also helped her nominate and assign the funds to her grand-children, so the estate can be passed to her grand-children without any additional cost.
The cost of doing this whole exercise was much less than the cost involved in buying / selling of house and then dividing the proceeds between the heirs. It has given her peace of mind, the grand children are happy and aware that Patti is gifting them, my friend and her sister is happy that there is fund available to dip into for higher education.
A typical day of my life in office – Aligning Your Wealth to Your Life!!
*Names changed to protect privacy
Author – Renu Maheshwari is a SEBI Registered Investment Adviser and provides non commission based, holistic, personal financial planning and portfolio management services. Creator of WoW – Women Only Workshop on Personal Finance, she  has 20 + years of experience in the world of finance. She can be reached at enquire@finscholarz.in

Last week I received an unexpected call from my best friend’s father – Mr. Sundaram. Mr. Sundaram’s  father had passed away seven years back leaving behind the ancestral property to the male heir of the family that happened to be Mr. Sundaram’s only son - Harish( my friend’s only brother). Harish lives in USA and could finally sell that property one and a half years back. 

Harish gifted Rs.1.25 crore from the sale proceeds of the house to his mother (Mrs. Sundaram). Mrs. Sundaram is 72 years old and a home maker and has never handled the money independently. She is suddenly surrounded by a lot of advice from all family members about what to do with that money. She is unsure about what to do. 

She was confused. She wanted to distribute her estate to her grand-children, at the same time enjoy the comforts of servants with the money she finally had in her hands. This situation is not women specific, men find it equally confusing. 

Mrs. Sundaram is not alone. There are a lot of women who have not dealt with money in their lives and are not sure about the advice given by their kith and kin. The past and the happenings in the society make them suspicious of all the advice. More over the lack of knowledge creates a bigger sense of insecurity. Unaware of different tools and techniques that are available in the market, they are able to think only of real estate and FDs and gold. The mis-selling of past makes them suspicious of the service providers and the advice from friends and family can be equally bad.

The answer to Mrs. Sundaram’s problem lies in consulting an adviser who can design a portfolio according to her needs and her emotional status. The money that has come to her at this later stage of life should be able to add happiness to her life, rather than increasing her anxiety and stress. 

We first ascertained what Mrs. Sundaram wants from her money. She needed liquidity for her daily needs. An additional servant, a driver to take her around and some cash to be able to gift at her own will. She did not want to take too much risk with her capital and finally wanted to divide the corpus equally amongst her grand-children. Buying an apartment down OMR and creating FDs will solve neither this nor that. An apartment cannot be divided and she was worried about inflation and the ability of FDs to be able to provide for her till her last days.

We ascertained the corpus needed for her to take care of her daily needs (after accounting for inflation) and the falling interest rate cycle. We created a conservative portfolio for this goal, with regular coupons and a very small portion in equity to take care of inflation. The debt portion was laddered to take advantage of falling interest rates. We also mixed differently rated papers to balance the risk and return for this very critical portfolio.

The balance was divided into five individual portfolios for wealth creation. We created  hybrid portfolios, with a  bigger portion in equity and a small portion in debt. Equity would give the required growth and create wealth for the next generation at the same time giving Mrs. Sundaram the comfort of having the funds at her disposal in case she needs them for emergency or if she changes her mind. Debt portion allows for the rejigging of portfolio when the markets turn around. We also helped her nominate and assign the funds to her grand-children, so the estate can be passed to her grand-children without any additional cost.

The cost of doing this whole exercise was much less than the cost involved in buying / selling of house and then dividing the proceeds between the heirs. It has given her peace of mind, the grand children are happy and aware that Patti is gifting them, my friend and her sister is happy that there is fund available to dip into for higher education.

A typical day of my life in office – Aligning Your Wealth to Your Life!!

*Names changed to protect privacy

 

 

Author – Renu Maheshwari is a SEBI Registered Investment Adviser and provides non commission based, holistic, personal financial planning and portfolio management services. Creator of WoW – Women Only Workshop on Personal Finance, she  has 20 + years of experience in the world of finance. She can be reached at enquire@finscholarz.in