Providing Portfolio Management Services (Non-Registered)

[gofindrahulsingh]

If you're a non-discretionary PMS provider, you're as good as an Investment Adviser. The point is to have an open mind. People coming to you for the advise generally won't disrespect your advise and take their own calls on the investments. That's what they'll be paying you for. Register as an Individual Adviser(Which you won't be able to use in the name of your firm) and develop a business model which would take you closer to actual PMS. Being a sub-broker would allow you to close deals faster on your advise. This would even ease out the regulatory and reporting burden on you. There's nothing illegal about being a broker/sub-broker and advising your clients. Brokers do charge for providing investment ideas. That's what you want to be doing right? Providing investment ideas, making sure that clients take your calls and in turn share the profits with you? Discretionary is only feasible for corporates.

Better yet is post this question in legal forums and see what they have to say. Do share if you get anything from those forums.

Thanks for your reply. Okay let me put it this way, What if, I operate through a corporate entity (New Investment advisory co.) and operate like a discretionary PMS? Do you think it's feasible? Becoming a sub-broker is a bit of a conflict of interest in this model because i intend to charge performance fees. Also it brings disrepute as it is the lowliest way to do it. That's my view. Please correct me if you think i'm wrong.

So basically becoming an investment advisor is of no use in this case. because it doesn't work for discretionary services. Don't most big technical analysts we see on television operate without registering? I read the guidelines, they are insanely complex and expensive.

 

[gofindrahulsingh]

Hi DSM,

Truly appreciate your genuine concern. Been a professional prop trader with 2 indian brokers for the last 3 years. Been managing portfolios for a few clients for over 2 years (Personal faith) . Started trading in 2007 and have experienced that severe liquidation in stocks as well..

The reason i'm choosing this path is because I have been successful. Also, I do not intend to trade heavily in PMS model. More medium term equity investments. Little to no leverage. Have you come across people who do it this way (Un-registered). I don't mean in the lowly sub-broker way..

 

[DSM]

Great.... Consistency or returns are a good sign.... Yes, I have met a few professional portfolio managers, who trade other people's money - but I am not in touch with them now....

Hi DSM,

Truly appreciate your genuine concern. Been a professional prop trader with 2 indian brokers for the last 3 years. Been managing portfolios for a few clients for over 2 years (Personal faith) . Started trading in 2007 and have experienced that severe liquidation in stocks as well..

The reason i'm choosing this path is because I have been successful. Also, I do not intend to trade heavily in PMS model. More medium term equity investments. Little to no leverage. Have you come across people who do it this way (Un-registered). I don't mean in the lowly sub-broker way..

 

[NJ23]

Thanks for your reply. Okay let me put it this way, What if, I operate through a corporate entity (New Investment advisory co.) and operate like a discretionary PMS? Do you think it's feasible? Becoming a sub-broker is a bit of a conflict of interest in this model because i intend to charge performance fees. Also it brings disrepute as it is the lowliest way to do it. That's my view. Please correct me if you think i'm wrong.

So basically becoming an investment advisor is of no use in this case. because it doesn't work for discretionary services. Don't most big technical analysts we see on television operate without registering? I read the guidelines, they are insanely complex and expensive.

Well doable it is but feasible? I have no idea. Costs and capital adequacy requirements are a concern. If you can meet them, it's feasible, isn't it. I don't think there should be any conflict of interests(we're brokers not dealers taking the opposite position of clients) as long as you disclose to clients that you'd be earning commission on the trades as well(it's an additional service you're providing, executing trades for them). And brokerage won't be your primary revenue channel so you won't go for portfolio churning. Since you'd link the performance with your fees, clients' and your interests are aligned. Most of the full-service brokers are also PMS providers(I don't know if they churn their PMS clients). If you don't mind asking, why do you insist on being discretionary?

 

[gofindrahulsingh]

I said it's not feasible as it is way too expensive for me. I think the "Discretionary" Service is better because investors are generally in other fields of work and they just want someone to take care of the investments.. They don't want us to keep pestering them about new stock ideas or entry/exit levels. That's more of a Tip service which we don't want to engage in.

The model is - They invest with us, and we take decisions. Not ask them to do it. because they may not act in tandem with the advice given. or the timing may differ.

 

[gofindrahulsingh]

Any views??

 

[puneetsinghania1980]

Guys.... Sub broker route is not feasible legally... U see the regulation is very clear on providing advise...if u r doing it for a fee... U need to have PMS license or investment advisor license

 

[puneetsinghania1980]

Investment advisor regulation have come primarily to address the capital requirement issue under the standard PMS regulation and lot of independent professionals

 

[NJ23]

Guys.... Sub broker route is not feasible legally... U see the regulation is very clear on providing advise...if u r doing it for a fee... U need to have PMS license or investment advisor license

What's the difference between being an advisor who would give you ideas to be invested in and the brokers who provide ideas? Kotak Securities asks for a flat fee to subscribe to their 'Research Calls'. How is this case different than an advisor asking for a flat fee?

 

[puneetsinghania1980]

I suspect KOTAK asking for any flat fee.. Any token fees would be for SMS charges or so.... What is the price u have come across?