How to Invest in PMS Step by Step: Eligibility, Documents and Onboarding

Key Takeaways

1. Portfolio management services (PMS) are offered by SEBI-registered portfolio managers who manage a stock portfolio on your behalf, as per the agreed terms.
2. The standard PMS minimum investment is ₹50 lakh per client, which may be met through funds, eligible securities or a combination of both, subject to applicable rules and the portfolio manager's terms.
3. Resident individuals, HUFs, NRIs and certain entities may be eligible to invest, subject to KYC and other applicable requirements.
4. Common documents include PAN, address proof, bank details, demat details and the signed PMS agreement.
5. Before investing, read the Disclosure Document, fee structure, exit terms and investment approach.

Many investors hear about portfolio management services from a relationship manager or a friend who already invests through one.

The idea sounds simple. A professional manages your stock portfolio, and you track it.

But getting started is less clear. Who can invest, how much is needed, and what documents are asked for?

This blog explains how to invest in PMS step by step, from checking eligibility to completing onboarding.

What Are Portfolio Management Services?

Portfolio management services are offered by portfolio managers registered with SEBI. Under the PMS, a portfolio manager manages a client's funds and securities according to the agreed investment approach and terms. 

Unlike a mutual fund, where money is pooled from multiple investors into a scheme, PMS generally manages each client's portfolio separately, with securities held through the applicable client account and custody arrangements.

As per the SEBI (Portfolio Managers) Regulations, 2020, PMS can be offered in three forms:

• Discretionary: The portfolio manager makes investment decisions for the client within the agreed mandate.
• Non-discretionary: The portfolio manager manages the portfolio in accordance with the client's directions.
• Advisory: The portfolio manager provides investment advice, while the client makes and executes investment decisions.

Who Is Eligible to Invest in PMS?

Portfolio management services may be available to different types of investors, subject to applicable regulations, KYC requirements and the portfolio manager's terms.

These generally include:

• Individual resident
• Hindu Undivided Family (HUF)
• Non-Resident Indians (NRIs) as per FEMA and bank regulations
• Companies, partnership firms, LLPs and trusts, subject to their own approvals

The investment amount and applicable eligibility conditions must also be checked before onboarding.

What Is the PMS Minimum Investment?

The standard PMS minimum investment in India is ₹50 lakh per client, as per the SEBI Portfolio Managers Regulations, 2020. Applicable exceptions, including those for eligible accredited investors, are subject to the relevant regulatory conditions.

Depending on the portfolio manager's terms,  the PMS minimum investment may be made by transferring funds, by bringing in eligible stocks you already hold, or through a mix of both. Securities brought in are valued as per the portfolio manager's process. Some strategies may set a higher amount, so check the Disclosure Document.

Documents Required to Invest in PMS

The exact list can differ between portfolio managers, but these are commonly asked for:

NRIs may also be asked to provide a passport and applicable NRE/NRO bank details. Companies, trusts and other entities may need additional documents, such as board resolutions, authorisation letters or trust deeds, depending on their legal structure.

How to Invest in PMS Step by Step

Step 1: Know Your Own Goal

Start with why you want portfolio management services. Your time horizon, risk appetite and need for liquidity decide which investment approach suits you.

Step 2: Shortlist SEBI-Registered Portfolio Managers

Check whether the portfolio manager is registered with SEBI. You can verify the registration details on the SEBI website. Review the investment approach, risks and performance against the stated benchmark over comparable periods, taking fees into account where applicable. Past performance is not indicative of future performance.

Step 3: Read the Disclosure Document

Review the portfolio manager's Disclosure Document before signing the agreement. It covers the investment approach, risks, fee structure, conflicts of interest and other relevant terms. Under the applicable SEBI regulations, the Disclosure Document must be provided at least two days before the agreement is entered into. Check the minimum investment requirement for the strategy you are considering.

Step 4: Understand the Fees

PMS fees can be fixed, performance-based or a hybrid of both. Exit loads may also apply if you withdraw early. Ask the portfolio manager to explain how fees and other charges are calculated on your account. You can read more in our blog on PMS fee structures.

Step 5: Complete KYC and Sign the Agreement

Once onboarding is complete, transfer the investment amount from your verified bank account and/or eligible securities from your verified demat account, as instructed by the portfolio manager. The portfolio manager then manages your portfolio according to the agreed investment approach.

Step 6: Transfer Funds or Securities

Once your account is set up, you transfer the investment amount or eligible stocks to your PMS account. The portfolio manager then starts building your portfolio as per the chosen approach.

Step 7: Track Your Portfolio

You receive periodic statements showing holdings, transactions, fees and performance. Review them and raise questions when something is unclear.

Common Doubts About Investing in PMS

Can I invest in PMS directly without a distributor?

Yes. You can ask the portfolio manager whether direct onboarding is available. Under a direct onboarding arrangement, distribution intermediation is not involved, but the applicable PMS fees and other charges may still apply. Check the fee terms before proceeding.

Is my money safe in PMS?

PMS investments are subject to market risk, and the value of your portfolio can fall. Securities are generally held through the applicable client demat and custody arrangements. However, this does not prevent investment losses. Portfolio management services do not guarantee returns.

Can I withdraw my money anytime?

You can usually request a partial or full withdrawal, subject to the agreement terms. Exit loads may apply in the early years.

Is PMS suitable for every investor?

Not always. With a standard PMS minimum investment of ₹50 lakh and exposure to market risk, PMS may be more relevant to investors who can meet the investment requirement, understand the risks and tolerate possible losses. Suitability depends on an investor's financial goals, risk tolerance, liquidity needs and circumstances.

How mastertrust Helps With Portfolio Management Services

mastertrust offers portfolio management services on mastertrust.co.in for investors who want their stock portfolio managed by a SEBI-registered portfolio manager, subject to the applicable terms.

Before investing, you can read the relevant Disclosure Document and agreement. If you are still comparing options, read our blog on PMS vs mutual funds.

Final Thoughts

Investing in portfolio management services follows a clear path: check eligibility, meet the PMS minimum investment, keep your documents ready, read the Disclosure Document and complete onboarding.

Before choosing a portfolio manager, review the investment approach, fees, risks and withdrawal terms to assess whether the service fits your financial goals and circumstances.

Frequently Asked Questions (FAQ)

1. What is the PMS minimum investment in India?

The standard PMS minimum investment is ₹50 lakh per client, as per SEBI rules. Some strategies may ask for a higher amount.

2. Can I invest in PMS using my existing stocks?

Yes. You may be able to transfer eligible stocks you already hold, subject to the portfolio manager's terms and valuation process.

3. Who can invest in portfolio management services?

Resident individuals, HUFs, NRIs and certain entities can invest in portfolio management services, subject to KYC and applicable rules.

4. What documents do I need to start a PMS account?

Common documents include PAN, address proof, bank details, demat details, a photograph and the signed PMS agreement.

5. How long does PMS onboarding take?

It depends on how quickly KYC checks, document verification and the fund transfer are completed.

6. Can I start portfolio management services with mastertrust?

Yes. You can explore portfolio management services with mastertrust and review the strategy details, fees and onboarding steps before investing.