Financial planners and wealth managers say legacy investments are a huge problem, as old-timers believed in buying (investing) and holding for ever.
After her father passed away, Mumbai-based interior design Utpala Mishra found herself with tons of documents and did not know what to do with these.
These were investments/financial records of both her parents.
She had always known that her parents had many investments but having to deal with these was a different experience.
"They had investments worth Rs 1.50 crore (Rs 15 million) in stocks, bank fixed deposits, mutual funds, debentures, Public Provident Fund (PPF) and so on.
And, five to six bank accounts each. I didn't know where to start," Mishra recalls.
Last year, she started with sifting wheat from the chaff.
Going through the tons of documents she found many were bills that were of no use.
She found it difficult to understand the rest - the investments records, instruments in which investments were made, what all needs to be done to collate these and so on.
While Mishra had sorted quite a lot, there was still a lot to be done.
Mishra's one such example. Financial planners and wealth managers say legacy investments are a huge problem, as old-timers believed in buying (investing) and holding for ever.
One fine day, they or their children realised the investments were near-junk and getting a status update was difficult.
Take the example of Kolkata-based certified financial planner Malhar Majumder's.
Around four years earlier, a middle-aged lady walked into his office.
She had returned from Oman after her husband passed away in a car crash there; he was working there.
She knew of his investments as she had found a small notebook where he had recorded all the details.
Most of which was in India. But the lady did not know how to get the money back.
"The good part: We did not have to run around for his investment details as his demat, bank account details, mutual fund investments and so on were mentioned in his notepad.
Getting the rest of the things sorted was a tough job," recalls Majumder.
He started with contacting the mutual fund houses. At first, all they said was the investor had encashed all his holding.
Majumder went back to the person's bank statements and saw credit from fund houses but it showed the amount was reinvested.
Majumder wrote back to each fund house, giving the person's name, Permanent Account Number (PAN) and death certificate, translated from Arabic to English.
Majumder added he was writing on behalf of the person's wife. That is when each company came back with the actual, correct details.
There was another catch in this story.
The person's PPF account was in Jalpaiguri in West Bengal. When Majumder's team member reached there, he found out the nominee for the account was the deceased's mother, who was no more. "This meant we needed the succession certificate for the wife to claim the money, as there was no 'will'.
So, we applied in the district court. The entire recovery process took one and a half years," he says. The wife got back Rs 1.50 crore from mutual fund and stock investment.
Where does one start?
That depends on various factors. For instance, it is easier to sort mutual fund problems as none have shut shop till now; at best, some have been acquired.
So, if one holds units of a Morgan Stanley fund, he will be diverted to the back office of the HDFC fund, on contacting the former's corporate office.
So, too, for any other fund. A little search online can help sort a lot of issues in the case of mutual funds.
But it can be trickier with stock investments, as companies might have shut shop or changed their name, after being taken over or otherwise.
How do you get the status update?
You can either contact the company registrar or the company secretary with a photocopy of the existing share certificate or you could check the stock exchanges.
Websites of both National Stock Exchange and BSE have a provision to check the new names of companies. Then, get in touch with the company secretary; he can guide you.
Financial planners say some investors of Unit Trust of India's mutual fund scheme, Unit Scheme 1964 (US 64) and its monthly income plans (MIPs) are yet to redeem their investments.
As both these instruments come under SUUTI (Specified Undertaking Unit Trust of India) now, one will need to write to SUUTI. US-64 issued bonds against the fund units, redeemed in 2008.
"Such investors will get the principal and interest amount back. However, typically if interest or dividend is unclaimed for seven years or more these are transferred to the Investor Education and Protection Fund. And no claim for payment for any sum, from any person shall be entertained by the Fund," says Majumder.
Shares issued or not?
If the company has changed the name due to an acquisition or otherwise, the company secretary will check if new shares were issued to you or not (based on the old share certificates' photocopies you provide).
If not, they will update their database with your new address proofs and issue new share certificates.
"However, this is the case only if the original investor or his legal heir (proved by a will) is wanting a new share certificate. Additionally, ensure there is a demat account in place, as all share certificates come in demat form these days," warns Kartik Jhaveri of Transcend Consulting.
The retrieval process gets longer if the new company (after acquisition) had not issued new share certificates or these were issued and not received or are now lost.
In this case, the investor (if he is alive) will have to file for indemnity, an undertaking on stamp paper that the investor has lost share certificates and if someone finds it, they should return these.
Then, give an advertisement in the newspapers, at least one vernacular and one English daily, and also file a police complaint.
Shares delisted or company shut shop?
Typically, when a company decides to de-list, it announces an open offer through which promoters buy out the minority shareholders.
So, if the open offer is going on when you contact the company, the company secretary will guide you accordingly and you can offer your shares and exit.
For, you never know when the company will re-list on the exchanges and your investment will be junk.
If the open offer period is over, then you are stuck with the shares, as there is no exit route for de-listed ones.
So, too, with shares of companies that have shut shop. You can't trace such firms and have to consider your money wasted.
Original investor no more?
This can get a little messy. Majumder says if the investment is less than Rs 1 lakh and there is no nominee or joint holder, then the survivor/heir (children or wife) of the investor should follow the indemnity process.
And, as in the Hindu Succesion Law, give a declaration that you are the successor.
"But if the investment is more than Rs 1 lakh, a succession certificate from court is needed and this takes longer -- up to one year and for a cost.
The successor/heir needs to tell the court, in writing, about claimants to the investment, who are sent summons by the court.
The successor needs to give an advertisement in the newspaper about the same. The court waits for any claims coming up for one year and then issues a succession certificate," Majumder explains.
And, if the succession is contested, the process gets into a loop and is very long-drawn.
Legacy investment management
On a friend's suggestion Mishra approached Jhaveri for help. She says professional help ensured things moved faster and Mishra felt more in control of all the documents and investments.
While you can always sort the documents yourself and take a company at a time approach but the process can be long and frustrating.
Professionals who are used to the process can help you faster, of course for a fee.
Typically for investments worth Rs 8-8.50 lakh, professionals charge Rs 50,000 plus court fee (if any), around 5-10 per cent of the investment amount.
However, if the investment amount is smaller this fee could start from 10 per cent on the lower side, as the money involved is smaller compared to the amount of running around required.
Be in control of your investments
While it’s good to be a very long-term investor, always keep a regular check on your investments
Keep a record of all the instruments invested in and the amounts involved
Record keeping need not always mean saving investment receipts / certificates. Also keep entries in a diary / notepad
Go back regularly and update the record as some investments may be automatically redeemed on maturity
Ensure you make additions for new investments in the record
Additionally, check your bank account, correspondence address and nomination details regularly and update when needed
Because many times investments are started in young days and nominees are parents
In old age, signatures sometimes change.
Therefore, ensure spouses or child(ren) are made joint holders in banks
Ensure death certificates of family members are in place, wherever required
Keep at least one family member in the know of all your investments
Source: Kartik Jhaveri of Transcend Consulting
