In the wake of the deal with Walmart, a large number of Flipkart employees will make windfall gains from their stock options. Business Standard spoke to some of the country's top wealth managers, including Sandeep Jethwani, Managing Partner of IIFL Investment Managers, for suggestions on how these individuals should invest their new-found wealth and the mistakes they should avoid.
In our experience, we have seen two very diverse behaviour patterns. The first, which is more prevalent, is where the mandate to the wealth manager is to preserve wealth. Having taken significant risks, some do not want to lose capital - even at the cost of lower returns. The second, seen typically in younger first generation entrepreneurs, is the ability to handle much higher risk, with the focus being long-term capital appreciation.
While every situation is unique, we anticipate that quite a few of these young millionaires will fall in the second group. They may start new entrepreneurial journeys or even fund multiple other businesses. To such clients, our advice has been twofold. The first element is that they should ensure that at least a part of their new wealth is managed in a diversified manner which takes care of their and their family's long-term needs. The other is that for their private investments in new businesses, they should think through how such investments are held and periodically reviewed. We have found that housekeeping of the private investments has often been neglected.
Setting up a framework and process for managing the financial portfolio is also very critical. Involve a family member in the investment process.