India is known for having one the world’s largest and wealthiest expat community across the globe. As the Indian Economy grows, these wealthy individuals have increasingly been eyeing investments in Indian equities. Today, many advisory firms, broking firms and banks offer products and services that cater specially to the NRI community. Among such products and services is the PMS or Portfolio Management Services.
What is a Portfolio Management Service?
Portfolio Management Service is a customised solution for wealth creation for individuals with a high net-worth to invest in equities, debt and other securities through a designated fund manager, according to the investment objectives of the investor.
Investors who desire personalised investment solutions and portfolio construction, with easy access to the fund manager, and with a focus on long term wealth creation opt for portfolio management services. There is generally a minimum corpus required for investments under PMS Schemes offered by various entities registered in India.
NRIs can also invest in PMS
These services are open for all Indian nationals, resident or otherwise. Non-resident Indians or NRIs can also invest in the PMS scheme by opening a Portfolio Investment Scheme (PIS) Account as required under the RBI guidelines.
- The NRI has to appoint a stock broker who is a resident of India and can buy or sell shares on his behalf. The NRI also has to open a separate NRI PMS Account and sign an agreement with the PMS Service provider. The documentation process is typically handled by the stock broker or service provider themselves on behalf of the NRI.
- All the other dos and don’ts are applicable to NRIs under the RBI’s PIS Scheme. These include limits on the investments made in single stocks or on the procedure for investments made under repatriation & non-repatriation basis as well as those applicable for short-selling of shares.
- The NRI can also transfer existing investments to the PMS service provider. On the expiry of the PMS contract, NRI investors can repatriate the net investments, post-tax, if they were done through the NRE PIS Account.
- Charges for PMS may be fixed or performance-linked, or a combination of both. These are clearly communicated to the NRI investor and documented in the agreement between the two. Other charges, those applicable for operating the PIS Account, demat maintenance charges as well as brokerage charges for transactions are also required to be paid.
- Although at a higher cost with no tax benefit for NRIs, PMS services offer the benefit of personalised, professional money management with easy access to the fund manager as well as flexibility in investment decisions – making them attractive avenues for investment.