PMS Commission

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Portfolio Management Service is a profitable proposition for investors who are employed by investors to invest wisely and diversify their portfolios. However, the PMS companies charge some amount for the services in the form of PMS commission.

Clients, usually, High Net Worth Individuals (HNIs) opt for the PMS services. Here the clients get their portfolios managed by portfolio managers with ample expertise in making financial investments.

A portfolio is like a basket that contains all the investments made by the investor in various financial securities such as shares, equity, currency, etc. 

Investors take help from the portfolio managers in diversifying their portfolios. In turn, the investor is charged some PMS commission.

Also, read Is PMS A Good Investment?

How Can An Investor Invest In Portfolio Management Services? – Investors can get PMS services through either stockbrokers or asset management companies. 

The new guidelines from SEBI state that an investor needs to make a minimum investment in PMS of at least Rs 50 Lakh for availing PMS service.

Although the commission rates vary from one stock broker to another. The PMS commission models are more or less the same.


PMS Commission Models

A PMS company helps investors make better investments and in turn, the companies earn a commission from clients for their services. 

PMS Companies offer clients options in terms of commission models and the clients can opt from any of the 3 PMS commission models as per their preference. 

The commission models are discussed in detail below:

  • Prepaid Commission Model – In the Prepaid commission model, the investor pays the commission in advance. The investor has to pay the commission at the time the portfolio investments are made. 

The PMS commission rates depend on the total amount of investment and are charged in % of the investment amount. So, the higher the investment is, the lesser is the commission charges that the investor will need to pay.

The benefit of the Prepaid commission model is that the commission does not get impacted by profits that an investor makes from the investments. 

  • Volume Based Commission Model – The commission in this model depends on the volume of investments made by a particular investor. 

The commission charged by the PMS company depends on the total number of transactions that have been made by an investor. So, the more the number of transactions, the higher the commission.

This can prove costly for an investor because portfolio managers will transact more often so as to get more commission.

But then there are reliable portfolio managers who work to get their clients the highest profits from the least transactions.

  • Profit-Sharing Commission Model – As the name suggests, in the Profit-Sharing Commission Model, the PMS service provider charges commission on profits made by the investor.

The commission is charged only on the profit made by an investor. Hence in the event, the investor doesn’t make any profit, the investor needn’t pay any profit to the PMS company.

This seems fairly favourable for both parties. The portfolio manager ensures that the investor makes greater profits. 

On the other hand, an investor opting for this PMS commission model will have to pay a higher commission.


Conclusion

Portfolio Management Services is one of the finest and at the same time expensive financial instruments. HNIs go for these services where they get their portfolios managed by professionals.

While selecting from an extensive list of PMS service providers, investors pay notice to the PMS commission rates charged by a company.

The commission rates vary among the PMS companies, however, a lot depends on the amount of investment.

Further, there are 3 types of PMS commission models that an investor can choose as per their preference.

In case you are looking to use Portfolio Management Services, let us assist you in taking the next steps forward. Just fill in some basic details in the form below:

PMS Form

 

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