My father’s single holder pension account had no nomination. This was 20 years ago when such things were not mandatory. He had post office deposits and a PPF account with a similar status. There were equity shares in paper format. Half a dozen bank accounts with FDs of various amounts. Some mutual fund holdings across multiple folios with the same fund house. An insurance policy that had matured but not claimed. He considered himself very organised with paperwork, and told me he had been focusing on his illness and cure to take care of these for the past few years. He did not see anything other than the matured insurance as problems or issues he failed to act on. Everything is fine, he assured me.
We were running out of time, literally. If the blood brain barrier is breached when the liver fails to filter chemicals anymore, he would turn encephalopathic. He would not be able to congruently speak or write but remain very confused. I closed most of his investments and brought them into my mother’s bank account. It took a few days and multiple trips, but knowing what needs to be done was my only tool and dad grudgingly signed every paper I presented to him. Trust me, dad, I had to assure him every time. My mother was upset too, but I kept the process simple and easy. I lost count of the number of times she later told me how helpful this process was for her.
I write this detailed account today because a friend called about an estate left behind by a very wealthy doctor, whose wife is struggling to figure out how to take charge, manage and control the wealth he has left behind. No, we are not talking about keeping records and lists, or involving family members in financial decisions, or even estate planning. We should talk about simplifying life as one ages. It is tough dealing with the consequences of a lifetime of earning and saving when the person who made these decisions is no more.
That is a life stage process that deserves attention. Not everyone needs to undergo the pain of rushed decision making that made my father uncomfortable. Retirement might be a good time to start simplifying the finances. We all know how it all piles up. Multiple bank accounts are opened as jobs are changed; tax saving urgencies lead to hurried investment decisions in the month of March; granting favours to various relationship managers creates folios and investments one does not even know exist somewhere; some stocks are bought because friends said so and not tracked thereafter; in many cases there are plots of land and property lying in distant suburbs because work pressures left no time to pursue their sale.
Not just for the spouse and the heirs, simplifying your finances helps you manage them more efficiently. Diversification requires that you hold different types of assets. Holding a large number of folios, accounts, and holdings does not contribute to that cause. In this age of digitalisation where the PAN and Aadhaar link all financial holdings across various service providers, it makes little sense to have too many holdings.
My aunt continues to keep her deposits and accounts with a local co-operative bank because she likes the higher interest they offer. She smiles when I tell her it is risky. They are nice to me; I don’t want to use an ATM and do transactions with a machine or computer, she says. Fair enough. There are many instances of senior citizens being scammed and phished out of their money because they are not technologically savvy. But every bank would still enable the very few personal transactions of seniors anyway, why choose a risky one?Simplifying finances does not have to mean one bank account and one folio of holdings. Choose two to three reputed names with a strong balance sheet, great credit rating and history. Bring all your holdings into a single sheet of paper with a list not running beyond say 20 lines. It is helpful to you as you age, apart from making it easy for the family after you go.
Begin with the difficult ones. Those paper-share certificates or those pieces of land you haven’t done anything with. If it was procedurally tough for you to streamline and operate them, it will be even more so for those that inherit it from you. Take the time now that you have some on hand, to clean up the myriad transactions that were earlier made in hurry. Complete the nominations, update the KYC with correct and complete details of address, email and phone, consolidate the folios, transfer the folios to a single or two relationships that will track them for you.
Age also makes hoarders out of many of us. There is a lot that lies around offering no incentive to revisit and evaluate. Regret is not an easy emotion. To pick up those shares we bought in an IPO and realise they are worthless today is not easy. That folio can be forgotten for lack of value. But there would be the burden of reckless or worthless financial decisions made with good intent that need attention. Don’t postpone that task too long.
(The author is CHAIRPERSON, CENTRE FOR INVESTMENT EDUCATION AND LEARNING.)