Neil Borate@ActusDei
SEBI's PMS consultation paper today is arguably the biggest structural shake up proposed for India's wealth management industry in a long long time. If you're a Portfolio Manager, this is a gift. If you're an RIA, read this closely, because your addressable market is about to get squeezed.
First, the scale of the industry being regulated. PMS AUM has grown from ₹18.07 lakh crore (April 2019) to ₹42.61 lakh crore (May 2026), more than 2.3x. Clients have grown from 1.5 lakh to 2.19 lakh, and registered portfolio managers have more than doubled, from 226 to 515. This is a large, fast growing, increasingly retail adjacent industry, and SEBI is rewriting the rulebook to match.
Why this is a big bonus for PMS players:
1) A brand new "MF only PMS" (MF-PMS) category with dramatically lower entry barriers. Minimum client ticket size cut from ₹50 lakh to ₹25 lakh. Minimum net worth for registration cut from ₹5 crore to ₹2 crore.
2) Principal Officer certification simplified to a graduation degree plus two years' market experience plus NISM certification, no elevated qualification bar.
3) Additional employee and dedicated dealing room become optional.
4) Disclosure document format simplified.
5) No exit load restrictions.
6) And fees: a flat management fee up to 2.5% of AUM, plus the ability to also charge a performance fee with client consent.
This is a huge widening of who can become a portfolio manager. Smaller RIAs, boutique wealth advisors, and independent professionals who were priced out of the ₹5 crore net worth and ₹50 lakh ticket size PMS world can now enter at less than half the capital and half the client minimum, while keeping discretionary control and a richer fee structure than pure advisory.
A materially expanded investment universe.
1) "To be listed" securities now explicitly permitted. Discretionary PMS can now invest up to 10% of AUM in investment grade unlisted debt, previously banned for DPMS entirely.
2) Foreign securities, listed equity, listed debt, and overseas mutual funds or REITs, now permitted for both DPMS and NDPMS, bringing PMS to parity with Mutual Funds, AIFs and IFSC based managers who already had this access.
3) Exchange traded derivatives materially loosened too: total exposure up to 1.25x of AUM, unhedged short exposure via equity derivatives up to 50% of AUM, options exposure capped at 10% of AUM.
4) Real compliance easing. Dealing room requirement relaxed entirely for portfolio managers with fewer than 10 clients or AUM below ₹100 crore.
5) Disclosure documents can go fully digital. Filing timelines relaxed from 7 working days to 10 calendar days. Net worth definition now includes securities premium reserve.
6) POA requirements may be relaxed to ease client transitions between managers. Demat account portability is being floated to kill repeat KYC when clients switch PMS providers.
For anyone running or planning to run a PMS, this paper reads like a wish list.
Why this is a big problem for RIA license holders:
RIAs operate under the SEBI Investment Advisers Regulations, which come with real structural constraints PMS and MF-PMS won't face. RIAs generally cannot take discretionary control over client assets, they can only advise, leaving execution to the client. Fee collection is another challenge - it is automatic in PMS. In RIA, you have to raise a bill that clients are reluctant to pay.
Now look at what MF-PMS does to that model. A client with ₹25 lakh, squarely in the segment RIAs have built their business around advising on mutual fund portfolios, can now hand full discretionary control of that same portfolio to an MF-PMS, which can charge up to 2.5% fixed management fee plus a performance fee. That's a more lucrative and more hands off proposition for the client than paying an RIA an advisory fee and then executing the recommendations yourself.
SEBI has effectively created a structurally lower cost of entry, higher fee flexibility, discretionary competitor sitting directly on top of the exact client segment (₹25 to 50 lakh, mutual fund centric, mass affluent) that the RIA regime was originally designed to serve. Add the broader PMS expansion into foreign securities, unlisted debt and derivatives, categories RIAs can only advise on in a limited, non discretionary way, and the product shelf gap between PMS/MF-PMS and RIAs widens further. This is likely to become one of the more contentious threads in the public comment process, due August 13, 2026. Expect RIA industry bodies to push back on the MF-PMS ticket size or fee structure, or ask for reciprocal easing of RIA fee and discretion rules to level the field.
As for MFDs - expect lots of them to launch these MF-only PMSes and shift clients interested in direct plans to them.
