While the alternative industry has growth potential, the onboarding of clients faces a few setbacks. This blog explores the challenges and solutions.

The Portfolio Management Services (PMS) industry in India is experiencing rapid growth but faces significant challenges with its predominantly offline onboarding process. APMI, at its first conference on July 4, 2024, held a panel discussion on how to ease client onboarding in the PMS industry. 

The panellists include: 

• Udit Sureka, Nuvama Asset Services
• Mihir Parekh, WealthSpectrum 
• Vignesh Kumara Subramaniam, KFin Technologies Ltd
• Moderator: Sonal Minhas, Member, APMI Board

The panel discussion highlighted strategies to improve client onboarding in the PMS industry, focusing on digitisation, standardisation, and addressing bottlenecks.

The lack of standardised documents, especially for PMS fund documents and Demat account opening, creates inefficiencies and increases onboarding time. The panel suggested that industry bodies like APMI should lead the effort in standardising documents. While standardisation is not a requirement across the board, it is necessary in certain areas such as risk profiles, power of attorney forms, and parts of the agreement not related to fees. This would streamline the client onboarding process and enhance the client’s experience.

The panel emphasised the need to transition from the current physical and digital hybrid onboarding process to a fully digital one, at least for resident individuals. A fully digital system would facilitate faster client onboarding, reduce operational costs, and enable real-time tracking of investments and redemptions. Further, the discussion emphasised that going digital is not just a progressive step but a necessity for small PMS firms. This would improve client experience and enable these firms to manage costs and remain competitive.

The current Demat account opening process, involving multiple stakeholders like custodians, depositories (CDSL and NSDL), and KYC verification bodies, is often fragmented and inefficient. While a seamless digital process for KYC-compliant individuals is achievable, onboarding complexities increase for non-individual entities and NRIs. The panel highlighted the need for regulatory support in streamlining KYC norms, particularly for NRIs.

The onboarding process for NRE, NRO, and FPI investments is particularly challenging due to regulatory hurdles and documentation requirements like notarization and physical signatures. The panel suggested exploring digital signature solutions for FPIs as a potential pathway for extending similar benefits to NRIs, subject to regulatory approvals. They also advocated for eliminating the need for notarization to attract more international capital.

The panel discussion concluded with a call for collective action from industry participants and regulators. The primary recommendation was to increase the adoption of digital onboarding, aiming to shift the industry from a 60-70% physical onboarding rate to a 60-70% digital rate within a year. Achieving this goal will require ongoing efforts to develop intuitive digital platforms that cater to the needs of PMS clients, address regulatory bottlenecks hindering the digital onboarding of NRIs and FPIs, encourage collaboration among custodians, PMS providers, and technology partners to enable seamless data transfer and process automation.

These recommendations would aid the PMS industry’s client satisfaction, attract a wider investor base, and drive continued growth.

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