Published Article Details

What is Discretionary Portfolio Management Service?

Posted by: Girija Gadre on Dec 11, 2017, 12.32 PM IST

Portfolio Management Services (PMS) are Sebi registered professional services for investment management and funds administration to create wealth for the client. The minimum threshold for such services is Rs 25 lakh. However, some portfolio managers insist on a minimum requirement of Rs 1 crore. In a discretionary PMS, the portfolio manager manages the funds of the client in accordance with the needs of the client.

Disclosure document

The portfolio manager must give the client a disclosure document at least two days prior to entering into a PMS agreement. It contains the manager's performance, financials and fee details, portfolio risks and transactions with related parties.

PMS agreement

A discretionary portfolio management agreement must be signed between the portfolio manager and the client. The agreement sets out the rights and liabilities of the two parties, fees and investment details.

Power of attorney

The client gives authority to the portfolio manager to operate his bank and demat account by executing a power of attorney in favour of the portfolio manager.

Documents and forms

A separate bank and demat account is opened in the name of the client which is assigned for portfolio management. Account opening forms must be filled up by the client. PAN, Aadhaar and other KYC documents and photos must be submitted.

Contribution

The client can make an initial contribution either by a payment instrument or by depositing his existing portfolio of securities or a combination of both,adding up to the minimum participation threshold.

Points to note

1. Investments are made in the client is name only in his or her demat account and all incomes and dividends are credited in the client is bank account. 2. NRIs can also enter into a PMS agreement by opening a PIS account for investing through PMS.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.) This article appeared in Economic Times dated Dec 11, 2017, 12.32 PM IST

Online Courses

Financial Planning
Advance Level
INVESTING ASPECTS FOR NRIs

Meet the fast-growing demand of an economy that is drawing foreign investors, particularly NRIs. This cours

Financial Planning
Basic Level
FINANCIAL PLANNING PRIMER

People are discovering how financial planning can help their money grow and prepare for a more secure futur

Financial Planning
Advance Level
MEASURING INVESTMENT RETURNS

Learn how to measure investment performance through analysing Returns on Investment (ROI) through this onli

Financial Planning
Advance Level
INVESTMENT RISK

Understand the nature of investment risk with our course on measuring investment risk and how to manage it.

Financial Planning
Advance Level
PRINCIPLES OF PORTFOLIO CONSTRUCTION

Learn to construct portfolios and the techniques used to allocate assets across classes and manage risk.