Best Guide to Portfolio Management Services (PMS) in India

There are many financial products available in the market. Some are only for the retail investor and few are for High Net-Worth individuals (HNIs). Wealthy or High Net Worth (HNI) investors sometimes need personalized portfolio services in equity investment. Hence, Portfolio managers manage investor money through Portfolio Management Services.

This article gives some information related to PMS. If you want to invest your money in PMS, kindly check their website or contact company directly how can they serve you.

What is PMS (Portfolio Management Services) in India?

Portfolio management services (PMS) in India are offered by Banks, Stock Broking houses, Mutual funds companies and other portfolio managers.

PMS account is an investment portfolio of listed securities, fixed income instruments, cash, unlisted securities etc. These portfolios are managed by professional portfolio managers.

Types of PMS

There are two types of PMS in India. Namely Discretionary PMS & Non-Discretionary PMS.

Discretionary PMS

Portfolio manager manages the portfolio in aligned with investor needs or requirement.

Discretionary PMS gives the benefit of professional management.

Portfolio manager takes control of investment decision and investor has no interruption in the investment process.

During account opening, Investor may provide a list of companies where the investor does not want investment. Portfolio manager will ensure that those companies’ investment should be avoided.

Non-Discretionary PMS

Portfolio manager gives investment advice and Investor will take the decisions on investment choice and timing of the investment.

The portfolio manager will execute the decisions taken by the investor.

Note: Major Indian PMS are only Discretionary PMS

How to invest in PMS?

There are two ways for an investor to invest in a PMS.

• By Cheque.
• By transferring an existing portfolio of stocks, bonds or mutual funds to a portfolio manager. The value of the existing portfolio must be above the minimum investment required for PMS.

An investor needs to sign the following documents.

• PMS Agreement.
• Power of Attorney.
• New Demat Account opening form (Even if you already have one).

KYC documents are required like address proof and identity proof along with PAN card.

NRI can also invest in PMS through PIS (Portfolio Investment Scheme) account.

PIS (Portfolio Investment Scheme) account are offered by stocking broking in order to invest in the Indian equity market.

Taxation of PMS

Whenever there is a sell transaction, the Investor is liable to pay taxes (Short term capital gain or long-term capital gain). PMS gives an unnecessary tax burden to the investor’s portfolio.

Cost of investing in PMS in India

There are several costs involved in PMS account. These fees are decided at the time of account opening.

• Entry load: It is levied when PMS account is opened.
• Management Fees: It is the charge to manage the PMS portfolio.
• Sharing of profit: There is an arrangement to share profit with PMS company when investment return is crossed a certain percentage.
• Custodian fee.
• New Demat Account opening fees.
• Audit fees.
• Brokerage charges.
• Exit Load.

Read: How can you save huge commission in PMS and other financial Products by hiring fee-only financial advisor?

PMS Vs Mutual Funds

Both PMS and mutual funds invest in a portfolio of stocks or bonds. The major difference to an Investor in PMS versus mutual funds is:

• Focused Portfolio.
• Customized portfolio according to investor’s need.
• Investor directly owns the shares or bonds of the company.
• Less tax-friendly to all investors.
• More Charges or expenses as compared to mutual funds that is why mutual funds sahi hai.
• Entry is not applicable in mutual funds however there is an entry load in PMS Investments.

Are you unable to decide whether to invest your hard-earned money in PMS?

You should contact a financial planner who can check your current portfolio and your financial goals and guide you to make better decisions to invest your money in the financial market.

Frequently Asked Questions