Owing to the growing popularity of PMS among wealthy clients, the AUM of portfolio management services has been increasing on a monthly basis. SEBI data shows that the assets under PMS reached Rs3.50 lakh crore, excluding EPFO’s contribution.
We spoke to a few experts to understand why IFAs should look at expanding their business by adding PMS to their offerings.
Increasing demand
Experts believe that advisors should consider recommending PMS to wealthy clients. “High net worth clients prefer investing in non-discretionary PMS as it gives them flexibility. In non-discretionary PMS, a fund manager cannot execute transactions without prior permission from investors. Simply put, investors have a say in stock selection. These clients want to validate their financial knowledge,” says Vinod Jain of Jain Investments.
Accelerate AUA growth
Since minimum investment in PMS is Rs25 lakh, IFAs can increase their assets under advisory by adding PMS to their offerings. Vinod believes that advisors who offer PMS would be able to grow their assets faster and offer more investment options to their clients.
“HNIs do not have enough time to monitor their portfolio. This is where PMS can come in handy for them. Advisors can use this opportunity to increase their AUA,” says Ajit Dange, head of domestic PMS at SBI Funds Management.
Customised service
Experts say that PMS offers customised products and can cater better to the portfolio needs of an individual. “PMS offers customised portfolio solutions, which mutual funds cannot do. Unlike mutual fund managers, PMS managers can rebalance asset allocation depending on the prevailing market conditions,” says P. Phani Sekhar, fund manager, PMS, at Karvy Capital.
Transparency
In non-discretionary PMS, portfolio managers have to explain to clients the rationale behind any investment decision they execute.
“It is more transparent because clients can know about their holdings on a real time basis. They can examine if the fund manager remains true to the investment philosophy,” says Manish Sonthalia, Head of Equity PMS at Motilal Oswal Asset Management.
Since PMS has performed according to the expectations of investors so far, their confidence in PMS has been increasing, says Manish.
