This blog covers the challenges faced by distributors in the PMS Industry and the possible solutions for the same.

A panel discussion held at the APMI Conference on July 4, 2024, shed light on the critical role distributors play in the Portfolio Management Services (PMS) industry, the challenges they face, and potential solutions to empower them and unlock further industry growth.

The panellists include:

Dhruv Mehta, Foundation of Independent Financial Advisors

Ramanan Venkateswaran, Pygmalion Renaissance Pvt Ltd

Ashish Shankar, Motilal Oswal Private Wealth Management

Moderator: Saurabh Mukherjea, Vice Chairman, APMI Board

The panellists emphasised that distributors are not mere salespeople but serve as critical intermediaries in the PMS industry. They bridge the knowledge gap between sophisticated PMS solutions and the needs of high-net-worth individuals (HNIs) and ultra-HNIs, many of whom may be unfamiliar with the nuances of PMS. Distributors educate investors on the benefits and risks of PMS, help them compare different PMS products and managers, and guide them towards solutions that align with their investment strategy and risk appetite.

The panellists highlighted the diverse nature of the distributor ecosystem, with representation from large and smaller players, each catering to a different segment of the investor base.

Despite the growth potential, the panellists acknowledged significant challenges the distributors encounter. They stated that there is a need for standardisation. Unlike the more mature mutual fund industry, the PMS industry in India suffers from a lack of standardisation in several critical areas. This includes documentation where PMS agreements, risk profiling questionnaires, KYC forms, and other documents vary significantly across providers, leading to a complex onboarding process for distributors and clients.

Second, while not explicitly stated, the panellists hinted at a lack of transparency and potential inconsistencies in fee structures across PMS providers, creating complexity for distributors and investors seeking clarity on costs.

The highlight of the discussion was the slow pace of digitisation. A significant portion of the PMS onboarding process remains offline, relying on physical documents and manual processes. This reliance on paper-based systems creates several pain points. It involves multiple back-and-forths with clients and PMS providers. Thereby, creating administrative burdens and limiting the number of clients that distributors can efficiently onboard. Also, the slow adoption of digital tools hinders the industry's ability to reach a wider investor base, especially tech-savvy investors who prefer digital-first interactions.

The panel discussion suggested several measures to address these challenges and empower distributors. The industry could create standardised documents, that would significantly streamline the onboarding process and reduce the administrative burden on distributors.

Also, transitioning to a fully digital onboarding process, similar to what exists for mutual funds, would enhance efficiency and client experience. This includes enabling digital signatures, automating data capture and verification processes, and integrating different stakeholders onto a single platform.

There were a few points discussed on data transparency and accessibility. Providing distributors with real-time access to standardised data on PMS performance, portfolio holdings, and other relevant metrics would enable them to make informed recommendations and provide better client servicing.

There were calls for the regulator to play a more active role in driving these changes. This could involve mandating certain standards, streamlining regulations, better transparency, and promoting a more technology-enabled ecosystem. As such embracing these changes not only benefits the distributors but also strengthen the PMS industry in India, so it can continue its impressive growth trajectory.

This was the summary of the panel discussion on Family Offices and PMS industry trends held at the APMI Conference on 4 July 2024.