How to open a Portfolio Management Services Account?

PMS or PMS or Portfolio Management Services, are simply investments in the form of a diverse portfolio, managed by a professional portfolio manager. A portfolio can include stocks, fixed income, debt, cash, structured products, and other securities – specifically tailored to meet your financial goals. Investment solutions provided by PMS, primarily serve a niche clientele – High Net Worth individuals and institutions.

To act as a PMS provider for individuals, entities need to mandatorily register with SEBI. There exists no specific certification or qualification required for selling PMS products. In India, Portfolio Management Services are also offered by equity broking firms and wealth management services.

Once you decide to go ahead with PMS, a separate bank account and demat account will be opened under your ownership. A Demat or dematerialized account is a digital account that holds all the securities that you own and trade. All investments are made in your legal name, including shares held and traded in your Demat account. The bank account that you are made to open, is the account that will be credited with any gains or dividend pay-outs from your investments. You are required to hand over a power of attorney to your portfolio manager, about both – the bank account and the Demat account. This is so that your portfolio manager can operate these accounts on your behalf. Note that you have absolute access to these accounts, to verify the status of your investment portfolio.

PMS is very often confused with Mutual Funds(MFs). In MFs, the fund managers have the right and access to invest as per their discretion, provided they meet the client’s return expectations. On the other hand, portfolio managers offer suggestions as well as, are responsible for the investments in their entirety. In comparison to MFs, PMS offers you higher control in the choice of your portfolio composition. The number of investors is generally fewer and customization is made available for big investors. SEBI further stipulates that your chosen portfolio manager is also responsible for providing you with a detailed performance report once every six months.

What is the minimum investment in PMS?

SEBI has been regulating the PMS industry for decades. Since PMS dealings are an unpredictable space, small investors are shielded by mandating a minimum investment amount. As per SEBI norms, a PMS account can be opened and held, with a minimum corpus of Rs. 50 lakhs. Until 2019, this amount was restricted to Rs. 25 lakhs. However, different financial service providers have varying balance requirements for the financial products offered by them.

The documents you need to open a PMS account online

To open a PMS account as an individual, you would be required to submit the following documents:

  • PAN card
  • Photographs
  • Address proof – Aadhar card
  • PAN and Aadhar card copy of Guardian – If Nominee is minor
  • Second Holder – PAN and Aadhar card copy
  • Bank proof – Any one of the following
    1. Pre-printed cancelled cheque in the name of the Account Holder
    2. If cheque not pre-printed, then – Bank statement / Passbook required
    3. In case a cancelled cheque is given in the name of a proprietary firm then a bank letter along with a bank stamp is mandatory.
  • FATCA Declaration
  • Copy of the POA provided to the PMS
  • Demat account opening form
  • Term sheet

All forms of investment come with risk, including portfolio investments. The risks involved are clearly stated for your perusal. Before opening a PMS account, do make sure to understand all the nitty-gritty involved.