Being a good shareholder is about more than just managing assets - it's about ensuring a smooth transition if your family will be managing deceased estate shares.
I'm excited to be partnering with Jon Moses, a specialist deceased estate stockbroker (and great human), from JM Invest. I asked Jon what it takes to be a good dead shareholder and he didn't just answer the questions, he came through with all the information.
If you'd like an introduction to Jon feel free to contact me, or head to his website for more information.
How to Be a Good, Dead, Shareholder? Estate Planning For Investments with JM Invest.
Recently, I was thrown quite the intriguing question: "How can you be a good dead shareholder?"
Sounds a bit brash doesn't it?
But the more I thought about it, the more it excited me. As we're smack in the middle of the biggest wealth transfer in history, this question becomes ever so relevant. As a deceased estate stockbroker, I constantly see how shares can easily slip through the cracks of the outdated system the stock market still clings to.
The stark reality of missing shares
It's frighteningly easy for shares to go missing or dividends to go unpaid without you or your loved ones even realising.
Our blind share search service finds that about one in five estates have shares and dividends that would have otherwise gone unnoticed.
The amounts involved can be staggering—a blind share search has turned up as much as $750,000 in one case and $450,000 in another - years after the estate was thought to be settled. "It feels like they just won the lottery!" were the words from the solicitor.
The complexities of managing deceased estate shares
You might think managing shares in an estate is straightforward—either sell them off or transfer them to beneficiaries.
Yet, the reality is filled with opportunities for mistakes, making the process way more complex than it should be. This complexity makes the question of how to be a good dead shareholder even more pertinent, especially when many of us invest precisely to leave a legacy for our loved ones, one mistake can make a huge difference.
As a deceased estate specialist stockbroker here are the questions I'd like you to ask yourself if you plan to leave share as part of your estate:
1. Have you got everything in order? Are you sure?
Deceased estates generally fall into three categories:
1. Well-Organised Estates: these estates have their shareholdings well-documented and executors are confident they know what assets the estate holds.
2. Uncertain Estates: these estates know shares exist but have no paperwork to prove it - they're unsure about what shares the deceased owned or where they might be held.
3. Unaware Estates: these are the estates that don't think they hold any shares at all.
Interestingly, the number of missing shares tends to be similar across all three categories. This leads me to ask once more: Are you really sure you’ve got everything in order?
Here’s what I’d recommend to make sure you're fully prepared, especially if you want to be a commendable dead shareholder:
Conduct a Blind Share Search: I’d perform a blind share search on my holdings and related entities. You'd be surprised how often people discover assets they didn’t know they had—which can mean a significant financial uplift to an estate. Imagine discovering the extra $750,000 in shares mentioned above, hello family holiday to remember!
Consolidate Your Shares: If you hold shares on SRN (Security reference number), consider moving them to a single HIN with a trusted adviser. This not only makes managing your estate simpler but also enhances the security of your assets. Typically, there’s minimal to no cost involved in this consolidation, but the benefits are massive.
Communicate and Update: Make sure to inform your loved ones about your investments and update your succession plans accordingly. It’s essential to pass on this knowledge; after all, we haven’t yet figured out how to download information directly from someone’s brain—although I hear Elon’s getting close!
2. Do your loved ones want to inherit your rubbish or your lottery tickets?
Let's be real for a moment—I'm guessing you've worked bloody hard for your money, not just for yourself but for your family. It's worth making a few simple tweaks to ensure the legacy you leave behind reflects the fruits of your labour, not the scraps.
As life goes on and your goals evolve, so should your investment portfolio. Sadly, this update often gets overlooked. There's a time in life for the high-risk bets—the speculative stocks and those 'lottery tickets'. But trust me, your loved ones probably don't want the hassle. You might fancy yourself as a bit of a stock-picking savant, but will your heirs want to wear that mantle? Not likely.
I've seen it too many times—estates where beneficiaries inherit a handful of shares worth peanuts, with the transfer costs dwarfing the value of the shares themselves. Or, they might inherit a massive, single-stock portfolio that puts their financial security on the shaky ground of one company's stock performance.
Here’s a sobering stat: 85% of professional fund managers don't beat the market over the long term. If the pros struggle, what chance does a hobbyist investor have? It's far better to ensure your portfolio is diversified and set up for steady growth. With modern ETFs, it's straightforward to pivot your investment strategy to a broad market index strategy. This approach sidesteps the need to outperform the market by simply being part of it—letting the market's natural growth work for you.
Think of your investment cleanup like tidying your yard—prune the deadwood, ditch the losers, and nourish the winners. Just like that broken chair on the front porch, and the 80 teaspoons in the cupboard your loved ones don't want your investment lottery tickets.
Let's tidy up, streamline, and set your financial legacy on a solid foundation. After all, your family’s gratitude will be worth more than any speculative gamble
3. Is DIYing the sale of your shares really the best option?
I believe they have invented the perfect container for the DIY will. It is machined steel, with 4 walls, a bottom, and a top. Sometimes, it even has wheels and handles for easy transport. The vessel? A rubbish bin. There’s simply no better place for a DIY will. In the same vein, I can't believe that there's a DIY option when it comes to estate shares.
Millions of dollars get left on the table each week because estates try to save what amounts to the difference of a single note from your wallet. The savings just don’t add up. Please, spend the extra $50-100 and get a professional to process your estate shares. If you’re reading this and you want to be a good, dead shareholder, then speak with your succession team and ensure your portfolio is going to be handled by a professional. When you move your shares from SRN to HIN, ask the adviser about their estate services and gauge their confidence. The same goes for their cybersecurity policy—no one can protect your investments better than you, so ask the right questions.
A professional will transfer all your money quickly and efficiently. They will perform audits before, during, and after your estate finalises. So, put DIY to bed, in fact, skip the bed and head straight to the garbage bin mentioned above. Repeat after me = DIY wills and DIY shares belong in the bin!
Avoding the registries will help you avoid frustration and overwhelm
In Australia, your shares are managed by one of about half a dozen share registries responsible for their administration. When handling an estate, you're likely to have to interact with these registries, but here’s the thing—they can be extraordinarily frustrating. Not trying to make enemies here, but they are often beyond hopeless. Ask any lawyer, or anyone who’s had to deal with them; they'll likely tell stories of being sent down rabbit holes with incorrect forms, bad and conflicting advice resulting in drawn-out, months-long processes for tasks that should be simple and straightforward.
I'm not here to bash other businesses. Managing vast amounts of data for numerous clients isn't easy, and perhaps the issue isn't with the registries themselves but the ecosystem they operate within. But being aware of this can save you a lot of headaches.
Don't take their first response as the final word. It's often worth hanging up and calling back, as different operators might provide different answers. And don't be shy about seeking professional help; the complications at registries keep me quite busy, and frankly, I'm grateful for it.
The importance of being prepared
Being a good dead shareholder is about more than just managing assets—it's about ensuring a smooth transition of your legacy to the next generation.
By taking proactive steps now, you can safeguard your investments and provide a clear, hassle-free path for your beneficiaries.
This is how you honour your life's work and truly care for those you leave behind.