Why Is Unclaimed Investments A Looming Financial Crisis?

Investments are a fundamental aspect of wealth generation, and both individuals and companies have allocated significant resources to various investment instruments such as stocks, bonds, real estate, mutual funds, and other financial assets. However, despite the numerous benefits of investing, a growing concern has emerged in the financial world due to the significant number of unclaimed investments. Recent data indicates that unclaimed investments have become a significant issue in many countries. For instance, the Bank of Canada was holding approximately 1.8 million unclaimed balances worth $678 million. Similarly, The Australian Securities and Investments Commission (ASIC) reports that there is over AUD $1.5 billion in unclaimed money from bank accounts, shares, and life insurance policies. 

Having said that, in this blog post, we will explore why unclaimed investments are a growing concern for the masses. Dive in to read the whole article!

1) A Costly Mistake with Diminishing Returns

Image Source: https://www.business2community.com/strategy/fooled-law-diminishing-returns-01795236

To start with, unclaimed investments lead to a loss of value. When an investment goes unclaimed, it does not generate returns, and the value of the investment diminishes over time. This is because investments are generally designed to generate returns over a set period. For example, a stock may appreciate in value over a few years, and the longer an investment is left unclaimed, the more likely it is to lose its value. The loss of value can be substantial, leading to significant financial losses for the investor.

For example, let's say that an investor purchased 100 shares of a company's stock for $10 per share, for a total investment of $1,000. Over the next three years, the stock appreciates in value to $20 per share, meaning that the investor's investment is now worth $2,000. However, the investor fails to claim their investment for another two years. During this time, the stock market experiences a downturn, and the value of the company's stock drops to $12 per share. If the investor had claimed their investment when it was worth $2,000, they would have made a profit of $1,000. However, because they left it unclaimed, the value of their investment has decreased to $1,200, resulting in a loss of $800.

2) Miss Out on Opportunities

Unclaimed investments can result in missed opportunities. Many investment instruments require an active approach to management, which means that investors need to monitor their investments and make necessary adjustments to optimize returns. For example, a mutual fund may have an option for investors to switch to a better-performing fund or sell their investment and reinvest in a more profitable instrument. However, if an investor fails to claim their investment, they miss out on these opportunities, and their returns are likely to suffer.

For example, if the investor's investment was in a company that is no longer performing well, they may want to sell their shares and invest in another company that is expected to perform better. If the investor fails to claim their investment, they will not be able to make this change and may be left with a lower return on their investment.

3) Legal Woes of Unclaimed Investments

Unclaimed investments can result in legal complications. When an investor dies or becomes incapacitated, their investments may go unclaimed. This can create legal complications for their heirs, who may not know about the investments or how to claim them. In such cases, the investments may remain unclaimed for years, leading to disputes among family members and legal battles. In some cases, the investments may be forfeited to the government, leading to a total loss for the investor's heirs.

4) A Red Flag for Fraud and Negligence

Unclaimed investments can be a sign of fraud or negligence. In some cases, unclaimed investments may be a sign of fraudulent activities or negligence on the part of the investment manager. For example, an investment manager may fail to notify an investor of a maturity date or a dividend payout, leading to the investment going unclaimed. In other cases, unclaimed investments may be a result of fraudulent activities such as identity theft, where the fraudster takes over the investor's account and drains it of funds.

5) A Threat to Financial Stability

Unclaimed investments can result in financial instability. When a large number of investments go unclaimed, it can create financial instability in the market. This is because unclaimed investments tie up capital that could be used for other purposes such as investing in new projects or funding research and development. When this capital is unavailable, it can create a ripple effect in the economy, leading to slower growth and reduced investment opportunities.

6) Reputational Damage and Loss of Trust

Unclaimed investments can result in reputational damage. When investments go unclaimed, it can damage the reputation of the investment manager or the financial institution that manages the investment. This is because investors expect their investments to be managed efficiently, and when this is not the case, it can lead to negative publicity and loss of trust among investors. This can have long-term implications for the institution's ability to attract new investors and retain existing ones.

Unclaimed investments are a growing concern that needs to be addressed by investors, investment managers, and financial institutions. The loss of value, missed opportunities, legal complications, fraud or negligence, financial instability, and reputational damage associated with unclaimed investments are all significant concerns that can have long-term implications for investors and the financial system as a whole.

How Can You Prevent Your Investments From Going Unclaimed? — My Wealth Locker!

To mitigate these risks, investors should ensure that they actively manage their investments and stay up-to-date with the latest developments in the market. My Wealth Locker can be a great tool to help prevent investments from going unclaimed. My Wealth Locker is a comprehensive financial management secure online platform that allows you to securely store all your financial information in one place, including investment accounts, bank accounts, credit cards, insurance policies, and more. One of the key features of My Wealth Locker is its Investment Repository, which can help prevent investments from going unclaimed.

How Can an Investment Repository Help?

The Investment Repository offered by My Wealth Locker is a centralized location where you can store all of your investment-related documents, such as account statements, trade confirmations, tax documents, and other important paperwork. By keeping all of your investment documents in one place, you can reduce the risk of losing or misplacing them and make it easier to keep track of your investments.

In addition to storing your investment documents, the Investment Repository offered by My Wealth Locker can also help you stay on top of your investments in other ways, such as:

• Investment Tracking: With My Wealth Locker, you can track all of your investment accounts, IRAs, and brokerage accounts. This allows you to keep tabs on all of your investments in one place and monitor their performance. You can also set up alerts to notify you of any changes in your investment accounts, such as new dividends or stock splits.

• Document Management: My Wealth Locker allows you to securely store all of your investment-related documents in one place, including trade confirmations, account statements, tax documents, and more. This ensures that you have easy access to all of your investment-related paperwork and can quickly locate any important documents when needed.

• Account Consolidation: My Wealth Locker allows you to consolidate all of your investment accounts into one place. This can help prevent investments from going unclaimed by ensuring that you are aware of all of your investments and can easily monitor them.

• Reminder Notifications: My Wealth Locker has a reminder notification feature that can alert you when it's time to take action on your investments. For example, it can remind you when it's time to rebalance your portfolio, or when it's time to contribute to your IRA.

To Sum Up,

Financial Data Protection is very important along with Investments and building generational wealth! Letting your Investments go unclaimed or lost would be the last thing you want, and so establish transparency among family members and seek solutions that can protect your finances. My Wealth Locker can help you stay on top of your investments and prevent them from going unclaimed. So, reach out to us today!