How to Offer Portfolio Management Services (PMS) in India
To offer Portfolio Management Services (PMS) in India, you must register with SEBI as a portfolio manager under the SEBI (Portfolio Managers) Regulations, 2020. That means meeting SEBI's net worth requirement of ₹5 crore, appointing a qualified principal officer, and setting up compliance, custody and reporting. Clients must invest at least ₹50 lakh each.
What is a PMS, from the provider's side?
A Portfolio Management Service manages investments for each client in a separate portfolio, held in the client's own demat account. Unlike a mutual fund, there is no pooled scheme: every client's portfolio is individual, even if most follow the same model strategy.
For you as a provider, that means you run a strategy, apply it to many separate accounts, and report to each client individually. If you need a refresher on how PMS looks from the investor's side, read what portfolio management services are, with types and benefits.
- ₹5 crore net worth SEBI requires of a portfolio manager
- ₹50 lakh minimum investment per client
- 3 service types: discretionary, non-discretionary, advisory
The three types of PMS you can offer
| Service | Your role | Client's role |
|---|---|---|
| Discretionary | You decide and execute, within the agreed strategy | Sets goals and limits, reviews reports |
| Non-discretionary | You recommend and execute after approval | Approves each decision |
| Advisory | You advise | Decides and executes |
Discretionary is the most common, and the easiest to run at scale, because you don't wait for approvals. Non-discretionary suits clients who want control but means slower execution.
SEBI requirements to start a PMS
The details are set by SEBI and change from time to time, so read the current regulations and circulars, and work with a compliance professional. The main requirements are:
- Registration. Apply to SEBI for a certificate of registration as a portfolio manager. You cannot take clients before it is granted.
- Net worth. Maintain a net worth of at least ₹5 crore.
- People. Appoint a principal officer and staff who meet SEBI's qualification, experience and certification requirements.
- Infrastructure. Have the office, systems and processes to run portfolios, keep records and handle complaints.
- Custody and accounts. Arrange custody of client securities and keep each client's funds and securities separate.
- Agreements and disclosure. Sign an agreement with each client and give them the disclosure document SEBI requires, covering your strategy, fees and risks.
- Ongoing compliance. Report to clients regularly, follow SEBI's reporting rules and keep your registration in good standing.
PMS or investment adviser?
Not every money-management business needs a PMS licence. Compare:
| Portfolio manager (PMS) | Investment adviser (RIA) | |
|---|---|---|
| What you do | Manage client portfolios | Advise clients on investments |
| Who executes | You (discretionary) or you after approval | The client |
| Client minimum | ₹50 lakh | No PMS-style minimum |
| Capital requirements | Higher | Lower |
| Fits | Firms managing large portfolios | Advisers who want to guide, not manage |
If your plan is model portfolios that clients follow themselves, investment adviser registration may be the better fit. Take regulatory advice on which route matches your business.
Building the business
Define your investment strategy
Write down what you buy, why, how many stocks you hold, how you size positions, when you sell, and how you control risk. Clients and regulators both ask for this, and you'll need it for your disclosure document.
Test it before you launch
Run the strategy's rules on historical data and look at the bad periods as closely as the good ones: the largest fall, how long recovery took, and how often you'd have changed the portfolio. A rule-based strategy can be backtested; a vague one can't.
Build the team
A principal officer, research and portfolio staff, operations to handle accounts and reporting, and a compliance function. Small PMS firms often outsource parts of operations and compliance.
Set up client experience and reporting
Clients expect a clear view of their portfolio, regular performance reports, and fast answers. Reporting is also a regulatory requirement, so get it right from the start.
Market responsibly
Use referrals, distributor partnerships and educational content to reach clients. Advertising by portfolio managers is regulated: don't promise or imply returns.
Where technology fits
Technology won't get you registered, but it does make a rules-based PMS easier to run consistently:
- Research and testing: turn your investment rules into a strategy and backtest it on years of data.
- Execution discipline: apply the same rules to every account, so no client portfolio drifts from the model.
- Model portfolios: keep one model and roll changes out to every portfolio that follows it.
For more on running a systematic approach, read systematic portfolio management.
Frequently asked questions
How do I start a PMS in India?
Register with SEBI as a portfolio manager under the SEBI (Portfolio Managers) Regulations, 2020. You need a net worth of at least ₹5 crore, a qualified principal officer and staff, the infrastructure to run and report on client portfolios, and a written strategy and disclosure document. Only after registration can you take clients.
What is the net worth requirement for a PMS in India?
SEBI requires a portfolio manager to maintain a net worth of at least ₹5 crore.
What is the minimum investment a PMS client must make?
SEBI sets the minimum investment per client at ₹50 lakh.
What are the types of PMS in India?
Discretionary, where the portfolio manager makes and executes decisions; non-discretionary, where the client approves each decision; and advisory, where the manager advises and the client executes.
Do I need a PMS licence to give investment advice?
Not necessarily. Advice for a fee, where the client makes and executes the decisions, generally falls under SEBI's investment adviser registration. A PMS licence is for managing client portfolios. Take regulatory advice on which fits your plans.
Can I use an algo platform to run a PMS?
You can use technology to research, test and run a rules-based strategy, as long as you hold the right SEBI registration and meet its rules on custody, reporting and client agreements. The platform is a tool; the regulatory responsibility stays with you.
