THE GIFT OF THE MAGI

CASE STUDY 9

Client Profile

Client : grandparents, single parents, parents of adopted children

Situation : planning to invest in mutual funds as gift, investing as single parents, planning for adopted children, gifting mutual funds.

Grandchildren, as we know, have a very special place in the heart of grandparents who often love to pamper them with love, toys and gifts. In our view, Mutual Funds can be an effective way of giving a long-term gift for the benefit of grandchildren. Further, mutual funds can also be an effective option for parents who want to start an investment for their minor child, or for a single parent who intend to make smart investment decisions to secure the future of their child/children. These investment requirements are a part of our firm’s continuity process with the existing clients, that is clients who already have their corpus under our care.

Mutual fund investment is synonymous with ‘trust’. At Investaffairs our goal is to identify clients’ needs based on their goals and values. Research and our own experience at Investaffairs has continually reinstated our belief in one thing- “businesses find greater success when they create more personalized experiences for customers and make more meaningful connections with people in their network”. There needs to be a division between work and life, but this line should not be a hard line. We must be prepared to blur this line as and when required based on our instincts as that can have a positive impact on both.

Now coming back to the point, basically there are two methods by which grandparents can gift mutual funds to their grandkids-

a) Can invest in their own name and keep the grandchildren as their nominees.

In this approach there is no limit to the amount invested as the investment is made by the grandparents themselves in their own name. At the time of making the investment, the minor is added as a nominee. Here only the KYC documents of the grandparents need to be provided. Also, along with this the grandparent(s) while creating their will can bequeath this investment to the grandchild.

b) Invest in the name of grandchild/ grandchildren as a gift.

In this case, each single investment or SIP instalment cannot exceed INR 50,000. A third-party declaration needs to be signed by the grandparents and submitted along with the application for investment. The form mentions bank details of the grandparents and their relationship with the beneficiary (in this case, the grandchild). It must be signed by the investor (the minor’s guardian in this case) and the grandparent (third-party) making the payment. The KYC documents of both the grandparent and the grandchild need to be submitted too.

However, to secure a child’s financial future by investing in mutual fund as a gift in the name of the minor child by creating a separate folio comprises all children, viz, adopted children, stepchildren and child/children of single parents as well. The best part of investing for your child while they are still young will inculcate in them the importance of saving every penny for building wealth. Investing for your minor child (below 18 years) can help build an education fund and demonstrate the importance of harnessing compound interest, and the benefits of such goal-based investment in let us say reducing the need to take on college loans later on in life.

In the long run, disciplined investing even in small amounts will instill financial discipline and help your children or grandchildren develop a responsible approach to money management. They will value your decision when they get to see the wealth growing exponentially over time. It is always beneficial to get the help of an expert who will guide you towards making informed investment decisions and reducing the risk associated with the process. You can invest in the name of your children through an AMC or any investment firm. You can come to us for a seamless experience. The existing clientele has had a very good experience whenever they have decided to create such portfolios.

We have mentioned earlier also that our utmost priority is our client’s well-being. At Investaffairs we strive to be as transparent as possible when it comes to suggesting schemes, mapping your goals and assessing your risk tolerance. Our experts will also help you with redemption as per your requirement (in case of emergency or urgent need). These may sound very technical to the first-time investors but then what are we here for! For your convenience we would like to share the list of documents that a parent needs for creating a portfolio for their minor kid.

Birth certificate - Provides proof of the child's date of birth.

KYC documents - Provides proof of the child's date of birth.

Birth certificate - Identity and address proof for the guardian and minor child.

Photographs - Provide passport size photos of the minor and guardian.

Cancelled cheque - For registering bank details to receive redemption amounts.

Guardianship certificate - If the parents are not the guardians

Also:

All the documents submitted should be self-attested by the guardian.

Typically, a legal guardian or parent must invest on behalf of the minor. The minor is the primary beneficiary, and the guardian manages the account until the minor attains adulthood.

Once the minor reaches the age of majority, usually 18, they can gain control of the mutual fund account, and the role of the guardian diminishes.

To conclude, we will reiterate that starting early is favourable because it gives you the flexibility to endure risks by investing in high risk, high reward financial instruments that help your money grow, mostly exponentially. Later as per your future requirements, you can reallocate your investment for yourself or for your child. To reassure you further, you need not have to worry even if your RM/Personal portfolio manager dies, as you are not purchasing from him. Your expert is just the mediator, you are Investaffairs’s client, our firm’s client. So, you may rest assured, once your folio gets created at Investaffairs, i.e. with the firm, our entire team will be here to help you should you face any problem. And like our clients we also have our continuity process in place.

CONCLUSION: Grandchildren, as we know, have a very special place in the heart of grandparents who often love to pamper them with love, toys and gifts. In our view, Mutual Funds can be an effective way of giving a long-term gift for the benefit of grandchildren. Further, mutual funds can also be an effective option for parents who want to start an investment for their minor child, or for a single parent who intend to make smart investment decisions to secure the future of their child/children. These investment requirements are a part of our firm’s continuity process with the existing clients, that is clients who already have their corpus under our care. By starting early, you can build an education fund, harness compound interest, and reduce the need for college loans later. It is important to work with experts to make informed investment decisions and reduce associated risks. At Investaffairs , we prioritize transparency, client well-being, and providing a seamless experience for creating portfolios for minor children.