The PMS industry manages close to Rs 20 trillion in assets
Those who sign in wealthy individuals to invest through the portfolio management service (PMS) route face problems in adding clients because the process has a physical component to it.
Portfolio managers require clients to sign a document called the power of attorney
(PoA). They need this document to manage funds in their clients’ investment account. The process of getting the physical signature on the documents creates friction and requires seven days or more for an account to be opened, whereas brokerages and mutual funds can sign on clients online, according to industry officials.
The PMS industry manages close to Rs 20 trillion in assets.
A large portion of this (Rs 14.3 trillion) is provident funds. The rest is from wealthy individuals.
The Securities and Exchange Board of India (Sebi) had doubled the minimum investment in such schemes to Rs 50 lakh before the pandemic hit India.
Akhil Chaturvedi, associate director and head of sales and distribution at Motilal Oswal Asset Management Company, said his company had made the account-opening process digital to a large extent. The only missing piece is the power of attorney
document, which takes about a week to process because physical signatures are required.
Vikaas M Sachdeva, chief executive officer at Mumbai-based Emkay Investment Managers, said the removal of this physical barrier and reduction in time taken could help the industry garner assets better.
“The industry can grow larger because most people tend to gloss over the convenience aspect,” he said.
PMS assets grew 19 per cent from Rs 16.1 trillion in 2019-20 to Rs 19.1 trillion by September this year. The mutual fund industry’s assets grew 21 per cent to Rs 26.9 trillion in the same period. They were Rs 22.3 trillion in 2019-20.
Prakash Jhamnani, business development lead at Fintuple Technologies, which helps in digitising processes, said portfolio managers had begun in earnest after the problems associated with Covid-19 came.
Regulatory changes allowing the use of digital methods helped, according to him.
“The industry itself got into standstill position in April-May,” he said.
Sebi put together know-your-customer options in April. It allowed client verification by video and digital signing in certain documents.
“Constant technology evolution has taken place and innovative platforms are being created to allow investors to complete the KYC process online. Sebi has had discussion with market participants ... to allow ease of doing business,” said the regulator's note on the changes.
PoA is not part of the process as of now. Industry experts say this might require co-ordination with other authorities. A digital document such as PoA would face legal issues even today, they said.