While making investments in mutual funds, one may find that one has numerous folio numbers across Funds. At times investors forget what they hold and face difficulties when changes have to be made in folios or at the year-end while filing returns. Though there is nothing wrong with multiple folios in a mutual fund portfolio, too many folios can make the job of tracking and reviewing investments tough. Nominees too could find it difficult to track various mutual fund investments and manage many folios. Hence it would be worthwhile for investors to take stock of their holdings, check if there are numerous folios in the same fund and get the same consolidated into one single folio number for the fund.

 

While making fresh investments in an existing mutual fund, if the existing folio number is not mentioned as a reference, a fresh folio is created for the same holder(s). This leads to creation of multiple folios (accounts) and investors may find it difficult to maintain and keep records.  It is possible to merge all folios into one folio to be able to get a consolidated view of the investments. Consolidation is the merger of two or more folios into one single folio.

 

Consolidating folios into one would give you the benefit of having to track and transact in one folio and allow you a single view of your investments in the Fund - all investments in a Fund would reflect in a single statement.

 

Consolidation of folios can be carried out only if the following conditions are met: 

 

• Names of holders and holding pattern of investments is identical across all folios. 

• Mode of holding is same across folios (joint/either or survivor)

• Tax status of all investment is identical (NRE/Resident Indian/Corporate). 

• Signature, address, PAN and social status of investors is same. 

 

What if one of the folios does not meet the criteria?

 

If any of the folios does not meet the criteria, the other folios meeting the criteria will be consolidated and the investor informed. Investors also have the option of giving a request to change the address/bank details/nominee and dividend options. Once these match, the consolidation can be effected.

 

Request for consolidation 

 

Investors who wish to consolidate their mutual fund investments into a single folio need to submit a written application to the AMC/Investor service centre or to his/her investment adviser or agent to carry out consolidation. A standard format for application can also be obtained on the mutual fund website. 

 

Information needed 

 

All folios held in the fund should be mentioned in the application. The target folio into which all other folios need to be consolidated should also be mentioned. 

 

Signature

 

The request needs to be signed by all unit holders, if the units are held jointly. However, in case the mode of holding is anyone or survivor, the application can be signed by any of the holders.

 

Processing of request

 

The duly filled up form can be submitted to the AMC or investor service centre.On receipt of form, a stamped acknowledgement is issued to the investor for reference. Once all details are verified with AMC records, the request is approved and source folios are merged into the target folio.

 

What is the communication after consolidation?

 

A Statement of Account of the consolidated (target) folio will be sent to investors along with a covering letter confirming the processing of the request.

 

Why is consolidation so important?

 

Many financial advisers suggest that systematic transfer plans (STPs) are a better way of investing lump sum amounts in equity funds—invest a lump sum in a liquid fund and transfer a fixed sum to equity funds at fixed intervals. Of course, both these funds have to be from the same fund house. Did you know, they also have to be in the same folio? Let’s say you have investments in HDFC Liquid Fund (HLF; in folio number 123) and HDFC Equity Fund (HEF; in folio number 999) and you want to move money from HLF to HEF. If you think your money simply gets moved from HLF to HEF, you’re wrong. In practice, the fund house makes a new investment in HEF. You will now have three separate investments: the initial HLF in folio 123, a new HEF in folio 123 and the existing HEF continues in folio 999. 

 

When we build portfolios, we mostly focus on the schemes we buy and ignore how we buy them. Over time, we may buy many schemes from one fund house. If we ignore folio numbers, we could create many folios. This matters because the account statements that fund houses send us are folio-wise. If you have three folios, you will have to manage three account statements. 

 

A better way to manage your mutual fund investments is to consolidate. One way to do this is to try and minimise the number of folios you have with a fund house. Remember, you can only merge folios within a fund house. A folio is like an umbrella over your different mutual fund schemes. You can also think of a folio as a folder in a filing cabinet and your individual schemes stacked up in a folder. The problem is, multiple folios in the same fund house can also arise if we have had multiple distributors. As a distributor can only access details of the folios that she manages—and you can thus have multiple account statements—multiple folios can make it difficult to take a holistic view of your money box. 

 

Try to align yourself with one distributor or adviser. To do this, you may first need to transfer your holdings from one adviser to another (the one you wish to retain). And now the process of consolidation can begin. Even better only invest in direct growth schemes. Before you start consolidating folios, ensure two things are in order. 

 

One, you can only consolidate folios with identical holdings. Both the acquiring (the one you want to retain) and the acquired (the one you want merged with another) folios should have identical account holders and in same sequence. 

 

Second, the mode of holding should be the same: you cannot merge a folio whose holding mode is ‘either or survivor’ with another whose mode is ‘joint’, even if names and sequence of account holders in both folios are the same. But this, you can overcome. If all the holders of the folios give a joint and signed declaration to change the mode of holding, it can be done and the folios can be consolidated. 

 

Not always. Some advisers also feel that separate folios can be held if each folio is linked to a specific goal.

 

In such cases, it’s okay to have the same scheme in two different folios as long as the two folios have been clearly earmarked for different goals.

 

If the folios are consolidated into one, will a statement reflect all transactions for all schemes of the folios?

 

Yes! The statement of the 'Target' folio will contain all the details of all the transactions of schemes in all your previous folios. If you wish to make a transaction in the same Mutual Fund in future, please mention the folio number in future transaction slips and any new investment will be created in the same folio.

 

To avoid creating additional folios in future, one should remember to mention the existing folio number in transaction slips when making a purchase

 

Investors can also overcome the issue if they switch to Mutual Fund Utilities (MFU) or portalsusing their platform. MFU platform solved the problem of multiple folio generation successfully. If you forget to enter the folio, it automatically considers the transaction into the last transacted folio. This avoid the necessity to generate a new folio. 

 

MFU tracks the investments through PAN number. Mutual fund investors can use it to track all their investments in mutual funds. And for those who find multiple folios, they can go for consolidation of the folios by filling a form which is available on AMC’s websites.

 

Points to note

 

• Folio consolidation can be done only at a mutual fund level. Folios held across different mutual fund houses cannot be merged

• If the folio being merged is under lien or pledge, prior consent of the financier is required to be enclosed with the application.