Approaching one’s parents for financial advice is nothing new. However, here was a twist: Shalini is Palak’s mother.
“Parents only understand LIC and fixed deposits (FDs). Everything else is too risky,” says Palak, 32, who works as a brand manager with a fashion label in Gurugram and started investing in stocks during the pandemic. “My mom still doesn’t have complete faith in equities but is investing small amounts through SIPs.”
Parents have long held the responsibility of instilling savings’ habit in children. Their advice typically ranges from buying insurance policies to taking home loans. However, when the Covid-19 pandemic saw stock markets soaring, small investors flooded the market. Some of them started investing in stocks while others chose the MF route. A few others soon got their parents to invest.
Arnab Deb, 25, has been regularly investing in MFs since the pandemic. When his father retired last year and wanted to park the corpus in FDs, the Bengaluru-based engineer decided it was time to speak up. “My father was not very keen on MFs but after seeing the kind of returns I had made, he agreed to invest the lumpsum in equity.”
Investment advisors say children taking on the mantle of investing family money is a new phenomenon, which started after Covid and has picked up over the past one year. Many investment advisors say one in four investors, on an average, who approach them does so because of a nudge from their children. “A lot of youngsters who came in during the Covid boom saw their money double in quick time. They are now encour aging their parents, whose savings are mostly in FDs, to invest or are investing for them. Many are also coming to investment advisors like us,” says Ravi Saraogi, cofounder, Samasthiti Advisors. “Over the past 12 months, 20-30% of all enquiries have been initiated by people who wanted some equity exposure in their parents’ portfolio. And I don’t recall this happening pre-Covid at all.”Priyadarshini Mulye, founder of ARTHA FinPlan, says 10-15% of her client base are investors who were introduced to equity by their children. She says this has happened mainly after Covid and points to inflation as the main reason for this.
Investors over the age of 45 years have the largest share in MFs —35%—according to data for FY23 from the Association of Mutual Funds in India (AMFI). Their share has remained constant over the past 10 years, indicating their numbers have grown at the pace of overall investor addition. The sharpest increase over the decade has been in the 25-35 years age group, whose share has gone up from 16% in FY13 to 25% in FY23. And these investors are now teaching their parents the dreaded subject of money, or rather what to do with it.
“We are seeing a financialisation of savings happening and it’s being led by young people,” says Saraogi of Samasthiti Advisors.
Some parents are pretty quick on the uptake. When 22-year-old Deeshant Bhattacharjee started investing four years ago, he explained the basics to his father. “To be honest, I expected some resistance, but surprisingly he was very receptive to the idea. We both started investing around the same time,” says the Noida-based software engineer.
Arijit Sen, cofounder of Kolkatabased financial advisory firm Merry Mind, says the pandemic period saw a massive boost to financial literacy. “Almost 50% of my clients are in the 25-35 years age group and most of them try to get their parents involved with us once they get the hang of it.” Before Covid, their share was 15-20%, he says.
Investors, young and old, must be aware of the risks. Sridharan S, founder of investment adviser Wealth Ladder Direct, recalls a PSU banker, who watched his children make enormous profits from stocks during the Covid-time boom. When he decided to take the plunge, he ended up losing most of his retirement corpus. “Turns out he had invested in penny stocks and risky small-cap companies,” he says.
Preeti Zende, owner of Apana Dhan Financial Services, advises against investing due to FOMO (fear of missing out). “This is where kids should step in and inform their parents of the risks involved in different asset classes,” says Zende, who adds that 25-30% of her clients have so far brought their parents in.
Sridharan, who conducts financial literacy sessions for retired people, says there has been a 30-40% rise in queries from retirees compared with pre-Covid levels. “Before Covid, getting them to invest in equity was tough. Now they are more open to the idea.”
Once the older generation takes the equity plunge, they are “usually better investors than the younger generation as they have seen various up-down cycles in life and their return expectations are tempered”, says Samasthiti Advisors’ Saraogi.
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