New Rules of (Portfolio Management System) PMS and Its Impact

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New Rules of (Portfolio Management System) PMS and Its Impact 

1. The minimum investment to be increased from Rs 25 lakh to Rs 50 lakh. Existing investments of clients may continue till the end date of the PMS Agreement

2. Off-market transfers from or to clients’ accounts are restricted with certain exceptions to facilitate operational convenience.

3. The appointment of a custodian will be mandatory for all portfolio managers except for those providing only advisory services to clients.

The rules of (Portfolio Management System) PMS make the industry more transparent but at the same time, it creates a problem for industry players. Online platforms have changed the rules of the game and now the new rule of PMS will change further. The distribution industry has been reeling under revenue pressures due to the falling of margins and revenues.


There is no doubt that the new rules on PMS will bring radical benefits for the investors. SEBI has made it clear that portfolio managers cannot levy upfront fees in any form from clients. These steps are wonderful for the investor who used to be dark in certain PMS investments. Portfolio managers are asked to report performance data net of all fees and expenses (including taxes). This makes performance comparison easy for investors. The new breed of investors will not burn the fingers like historically but will get one of the best of the products to invest for long term wealth creation. Complex products should be more transparent but it also comes with baggage for the industry.

PMS has been one of the hot products for the IFA community since the earning was significantly high. At the same time, the increase of the minimum Application Amount from Rs 25lacs to 50 lacs was the 1st step and now the final part of the new rules came up. Further Direct Plans for the same segment will be coming up which will erode the premium being enjoyed over the regular ones. 

Direct plans will throw away a few players from the industry as most of the clients under the PMS are HNI or Ultra HNI segment and hence they are more informed about the subject.

The rules of the game for an IFA are changing. They have to be knowledge-driven and advisory driven organization. Time has come to move from sales-based advisory to advisory based Sales. Regulators are clear to communicate that they want an IFA to grow and develop gradually and forget the traditional model of the business process.

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