As trusted partners with deep insight into clients’ investments, MFDs are uniquely positioned to play a pivotal role in ensuring that this transition happens seamlessly. To explore how this can be done and why succession planning should be an integral part of advisory services, Cafemutual asked leading MFDs and RIAs to share their perspectives. Here’s what they had to say.
Chennai MFD Chokkalingam Palaniappan of Prakala Wealth believes that ensuring proper nomination is a fundamental responsibility for MFDs, especially in large investments. He adds that distributors can help clients structure their investments in a way that avoids complications during succession.
He cites the example of joint investments in countries that levy inheritance tax. In such cases, ensuring joint ownership can help the surviving holder avoid inheritance tax in the event of a death. Similarly, he advises MFDs to caution clients who have NRIs as nominees against making significant investments in government bonds, as such investments cannot be transferred to NRIs.
Chokkalingam also stresses the importance of understanding the distinction between a nominee and a legal heir. They should know that a nominee and a legal heir are merely trustees of the assets and they are not necessarily entitled to use the proceeds at their discretion.
He also said that MFDs should recommend that investors use mechanisms such as gifting mutual fund units to transfer assets to the intended beneficiary.
Beyond technical guidance, he believes that a well-prepared MFD can provide emotional support and assist the family with legal formalities during difficult times.
Mumbai RIA Suresh Sadagopan of Ladder7 Wealth Planners points out that MFDs can guide clients to engage professionals such as executors to ensure an orderly transfer of wealth. For distributors who are not yet offering succession planning services, Suresh adds that helping clients manage succession can deepen relationships and open the door to additional business opportunities.
Pune MFD Balvir Chawla of Finnovators Services says that MFDs can add significant value to their clients by taking a structured approach to succession planning. He advises distributors to begin by creating a comprehensive inventory of a client’s assets, including mutual funds, insurance policies, bank accounts and other investments and ensuring that nominations are updated and aligned across products.
He further suggests that MFDs encourage clients to consolidate scattered investments wherever possible, as this makes the transfer process easier for heirs. Regular reviews of nominees especially after life events such as marriage, childbirth, or the death of a family member are also critical, he adds.
Balvir also recommends that MFDs guide clients on the use of joint holdings, will, and gifting strategies, depending on the client’s family structure and asset mix. Finally, he notes that maintaining clear documentation and sharing basic succession details with family members can go a long way in ensuring a smooth transfer of wealth.
Key Takeaways
Succession planning is not just a value-added service, it is a natural extension of the MFD’s role
Proper nomination, ownership structure and asset selection can prevent major legal and tax issues
MFDs should consider taking professional help if they are yet to offer these services
Create a complete asset map for clients, covering investments, bank accounts, insurance and overseas assets
Review succession plans after major life events such as marriage, childbirth, divorce or death in the family
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