Democratizing Retirement Advice with AA

24 May 2023


Retirement planning holds immense significance in India, where the absence of social security benefits and reliance on children makes it crucial to secure independent financial freedom during retirement. Countless Indians face deprivation and hardships due to the lack of a well-structured retirement plan. Unfortunately, limited education and awareness about post-retirement challenges pose significant obstacles to achieving this goal. Rising medical costs and uncertainties add to the complexity.

Therefore, a sound financial plan for a smooth retired life is paramount. Additionally, the risks associated with the passing of a partner exacerbate the situation, leading to exhaustive, complex, and sometimes costly inheritance issues. A comprehensive retirement plan is essential to overcome these challenges and ensure a secure and comfortable future.

Estate planning is a crucial aspect often overlooked and misconstrued in personal finance management. In India, broaching this topic can easily elicit discomfort and resistance from individuals. At the same time, dismissing estate planning as a concern only for the affluent is a grave misconception. Regardless of the size of one’s assets, effectively managing inheritance is an imperative subset of retirement planning. This show-and-tell session aims to demonstrate an AA use case that can democratize retirement advice through estate planning.

What is Estate Planning?

At its core, estate planning involves preserving, managing, and facilitating inheritance. It is important because it accomplishes multiple objectives. First & foremost, it safeguards family wealth, ensuring it transitions across generations smoothly. Secondly, it is a powerful tool to avert family disputes that can arise due to a lack of clear planning. Moreover, estate planning effectively mitigates the burden of taxation. By streamlining the process, it eliminates potential complications in inheritance. Lastly, estate planning offers the opportunity to contribute to causes close to an individual’s heart through posthumous donations.

The creation of wealth should always be accompanied by a well-structured plan to ensure its smooth transition to the next generation, with minimal tax implications, all within the bounds of the law. Sadly, the absence of such planning has led to a staggering 82,000 crores of unclaimed wealth in mutual funds, equities, bank accounts, and provident funds as of 2021. Around one-third of accounts in banks, mutual fund folios, and demats, still need a nominee. According to the rules, this unclaimed wealth is not re-deployable. Thus, this vast pool of unused resources, resulting from a lack of nominee details, represents a deadweight loss to the efficiency of the financial system.

Use case Features

Inventory of all asset details & total worth Draft and download digital will
Add immovable assets details like land and movable assets like cash & jewelry Identify financial assets that do not have a nominee registered

This estate planning use case is a powerful tool that aims to simplify and optimize the estate planning of financial assets, including both digital and non-digital holdings such as jewelry and property. Users can consolidate all their assets in one centralized location, providing a holistic view of their wealth and financial standing.

One crucial function of the platform is identifying assets that lack a registered nominee. This ensures that users know gaps in their estate planning & designate beneficiaries for their assets. By allowing people to register nominees for these assets, the platform helps users safeguard wealth and ensure a smooth transfer of assets to the beneficiaries.

An essential and often complex aspect of estate planning is creating a legal & enforceable will. Recognizing the significance of this process, the platform addresses the legal complications associated with will drafting. This feature enables users to minimize the potential for legal disputes and uncertainties.

Role of TSPs

Auto-discovery/Priority-based discovery of accounts Analyzed data points to optimize estate and wealth tax
Identify accounts with no registered nominee Consolidated data points from all accounts

Through AA, clients can auto-discover all customer accounts and set priority accounts among them. The TSPs will enable customers to view consolidated data points from all accounts as well as analyzed data points to optimize estate and wealth tax. TSPs play a pivotal role in identifying accounts that lack registered nominees. By flagging such accounts, users are alerted to potential gaps in their estate plans.

Truly Democratic

Language can be a significant obstacle when understanding complex financial concepts and planning for the future effectively. Many individuals, particularly those in rural or remote areas, might not be fluent in English, as it is commonly used in financial services. As a result, they may feel excluded from accessing essential information and services related to estate planning and retirement advice. The decision to offer this use case in vernacular languages represents a pivotal step towards democratizing retirement advice. By breaking down language barriers, the platform makes crucial financial tools and resources accessible to a broader and diverse audience.

Watch the entire session here:

Check out & Download RBI-regulated AA Apps here →

Related Readings