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There has been a gradual decline in the number of clients under advisory and non-discretionary portfolio management over the last three months, data provided by SEBI shows.
The number of clients opting for advisory Portfolio Management Services (PMS) in May was 7,716. This declined to 7,267 in July. The number of non-discretionary clients also decreased from 4,581 in May to 3,818 in July.
Fluid condition, a reason
The uncertainty in the stock markets seems to have affected clients under Portfolio Management Services. “The first erosion in the PMS category was in November 2010 and the second big fall was in May this year,” said Mr G. Maran, Executive Director, UNIFI Capital.
The volatile market conditions and the decline in the risk appetite of investors are causing them to withdraw from the equity market. There is a very thin line of difference between advisory and non-discretionary clients. In non-discretionary services, managers involve the client in the decision making process. In advisory services, managers advise their clients about investing.
“Keeping in mind the prevailing market conditions, clients are cutting out on the advisory side first. The client has more control on the advisory and non-discretionary side rather than the discretionary one,” said Mr Shashank Khade, Executive Vice-President (PMS), Kotak Securities.
Non-discretionary and advisory clients are the ones who mainly invest in equities. People are becoming wary of the market and this can be one reason for the decline in the number of clients, say some PMS fund managers.
Managing Relationship
“The number of clients enrolling for PMS services not only depends on the performance of the fund but also on the customer relationship management by the firm,” added Mr Maran.
“Discretionary clients may stay longer because the assets are in control of the fund manager who may give them confidence that they can handle the assets in the uncertain market environment,” said Mr Khade.
Firms providing PMS are facing a big problem as far as adding new discretionary clients goes.
“We have to convince clients to try out asset allocation which will ensure good returns in the future. At this point, customers are staying on the sidelines,” said Mr Manish Boricha, Head of PMS, Sharekhan.
Some PMS fund managers also say that clients are drawing a parallel with the 2008 market scenario. The money that they are withdrawing from PMS is directly going into the much safer Fixed Maturity Plans (FMPs).
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