A portfolio manager is a person who provides portfolio management services to clients. A portfolio manager can be an individual or a corporate that has obtained a valid certificate of registration from the Securities and Exchange Board of India (SEBI). Some banks in India provide Portfolio Management Services (PMS) to high-net-worth individuals (HNWIs)—not the general public.
A Portfolio Management Service (PMS) is a professional financial service that provides investors with personalised investment management intending to deliver superior risk-adjusted returns. Unlike mutual funds which cater to a large pool of investors with the same investment objective, a PMS account is designed to meet customers’ specific financial goals, risk tolerance, and investment preferences.
Banks generate income from Portfolio Management Services (PMS) primarily through various fees charged to clients, including entry loads, management fees, and profit-sharing arrangements. The specific income stream depends on the chosen PMS plan and the individual bank’s fee structure.
The portfolio manager of the bank, before taking up an assignment of management of funds or portfolio of securities on behalf of the client, agrees in writing with the client, clearly defining the inter se relationship and setting out their mutual rights, liabilities, and obligations relating to the management of funds or portfolio of securities, containing the details as specified in Schedule IV of the SEBI (Portfolio Managers) Regulations, 1993
There are two types of Portfolio Management Services viz.: discretionary portfolio management and non-discretionary portfolio management.
The discretionary portfolio manager individually and independently manages the funds of each client following the needs of the client.
The Non-Discretionary Portfolio Management Service is the opposite of discretionary PMS. The first step remains the same in this PMS as well. The investor has to explain his financial goals based on which the investments need to be made. However, the portfolio manager acts on the instructions that have been given to them by the investor. Non- Discretionary Portfolio Management Service works well for investors who want to actively participate in the management of their funds and investments. Before dealings, the Portfolio manager consults with the investor as to which are the funds suitable for them. However, the timing of the investment lies with the investor. The execution is carried on by the manager.
The customer needs to open a separate bank account for this purpose and needs a Demat Account. The investments made by the customer in various portfolios will be held in the Demat account and the returns get credited to the bank account.
Benefits of portfolio management services:
Expert opinion on client’s investment: If you have limited knowledge about investment and the procedure involved or they do not have the time to monitor and rebalance your investment or if they are unaware of market volatility and ways to safeguard your investments in times of market uncertainty or you are looking to diversify your investment to reap benefits across multiple asset classes such as stocks, debts, equities, and so on.
One of the primary benefits of using a Portfolio Management Service is that your investment is in the hands of professionals. The portfolio managers assigned to you are experts in their field and understand how to deal with market volatility. They will manage your portfolio efficiently and aim to increase your profit margin over time.
Customised investment plans: The portfolio managers customise investment strategies based on your financial objectives. They then modify the strategy based on your income, budget, risk tolerance, and age.
Efficient risk management: A portfolio manager’s primary goal is to reduce the risk of your investment while increasing the returns. They focus on diversifying the risk involved so that you do not suffer a loss when market trends change.
Regular monitoring: A portfolio manager will keep a close eye on the performance of each asset and the returns generated regularly. Based on this analysis, your investment is altered to meet your financial objectives.
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