MAIN FEATURE

PAS

Managing Portfolio
Professionally!

Portfolio Advisory Service has arrived in India and offers to investors host of benefits in terms of
getting their portfolios customized to their financial needs, risk appetites and return expectations.
Prakash Patil takes a look at what PAS offers to the investors and how they can take advantage of
this service
82

Dalal Street Investment Journal

July 20 - Aug 2, 2009

www.DSIJ.in

re you one of those investors for whom time

is money but have no time to manage your
money? Or you may be one among many
who invest in host of financial instruments,
but cannot find time to keep track of their
investments due to their hectic schedule. Or
you may be one among those who invest in equities and
debt instruments, but do not have the financial know-how
or expertise to evaluate the performance of your portfolio?
Well, if you belong to any of these beleaguered investor categories, then help is at hand. You can now drive away your
investing blues by availing the portfolio advisory service
(PAS). PAS is new in India and there are just a handful of
intermediaries offering it. So whats PAS all about and how
is it different from the portfolio management service (PMS)?
Lets take a closer look.

Advice You Can Use

Portfolio Advisory Service (PAS), as the name suggests, is
a specialised advisory service for the retail investors. Those
availing the service pay a specific fee for the professional advice
given by the portfolio advisor. DSIJs PAS offers the service
at price affordable to retail investor, providing advice on
portfolios comprising of equities and equity-related products.
It monitors and reviews on a day-to-day basis so the clients
receive the advice on time via SMS and email as well as online.
It also offers a window where clients can send their queries on
investments and can also add or withdraw cash, allowing PAS
to advice on every change of clients real investment. It comes
with a new software which captures live prices so the client can
check his returns any time and can see his portfolio performance live. To top it all, DSIJs PAS places no barrier regarding
portfolio size, so investors with portfolios of lesser corpus can
also join PAS and take advantage of professional advice.
Of course, there could be other PAS schemes where the
fees payable to the service provider may depend on the size
of the portfolio so that the higher the portfolio value, higher
the amount payable as fees. Some of the advisors may not
charge any fee to the client but they get the distribution fees
directly from the fund houses, insurance companies, etc. As
the market is developing we believe that in the near future
there will be advisory fees directly from the investors and not
from the fund houses, etc, says Sanjay Kumar Maheshka,
MD & CEO, PL Fund Advisors.

Scientific Methodology
PAS follows a scientific methodology for giving advice to
the investor. The portfolio advisor assesses the risk profile of
the investor as well as return expectations, and based on this
assessment, he proceeds to review investors existing portfolio
and suggest suitable changes in the portfolio in line with his
risk profile and return expectations. Accordingly, investors
having high risk profile are offered an aggressive portfolio,
investors with medium risk profile are suggested a moderate
portfolio and investors with low risk appetite are offered low
risk portfolio. DSIJs aggressive portfolio would constitute
higher exposure to high-risk equities and equity-related
products, moderate portfolio would consist of medium risk
equities, while low risk portfolio constitutes blue chip and
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We build sophisticated asset allocation models across

equity and debt
products with varying
financing patterns to
determine the optimal
investment strategy.
Periodic performance
reviews are carried
out to analyze return and measure accomplishments against
benchmark indicators
- SANJAY KUMAR MAHESHKA, MD & CEO, PL Fund Advisors
low risk equities. On the other hand, other portfolio advisors offering PAS service may suggest portfolios comprising
diverse asset classes such as mutual funds, debt, insurance,
fixed deposits, real estate, derivatives, etc. so as to realign the
portfolio to the risk-return profile of the investor. Following
an in-depth analysis of the clients income, expenditure,
taxation and risk profile, we build sophisticated asset allocation models across equity and debt products with varying
financing patterns to determine the optimal investment
strategy. Periodic performance reviews are carried out to
analyze return and measure accomplishments against benchmark indicators, says Maheshka.

Professionalism On A Platter
PAS offers to the investor the in-depth professional expertise and knowledge on a platter to the investor. PAS provides
a holistic view of his financial universe, equipping him with
thorough knowledge and understanding of the nuances of
managing personal investments. Such an in-depth understanding and knowledge helps him take informed decisions
for maximizing returns and minimizing risks. PAS provides
customized solutions to the financial needs of the investor by
doing an in-depth analysis of the investors income, expenditure, taxation and risk profile and return expectations. The
touchstone of PAS is the personal touch that manifests in the
creation of unique portfolios for each and every individual,
keeping their unique needs and expectations as the focal
point of the entire exercise.

Investor Captain Of The Ship!

The unique thing about PAS is that after receiving the
advice from the Portfolio Advisor, the investor can exercise
his discretion whether or not to follow the course of action
suggested by the advisor. He is at liberty to decide whether

July 20 - Aug 2, 2009

Dalal Street Investment Journal

83

MAIN FEATURE
he wants to fully or partly implement the advice or ignore it
altogether. Hence, he is fully in command of his portfolio of
investments as he has the liberty to take the advice and act
upon it or leave it, no questions asked!
The other unique thing about PAS is that the investor
does not part with the money he intends to invest. So, there
is absolutely no risk of losing the money to the fly-by-night
operators. The investor does all the investments (or disinvestments) himself and, consequently, all his investments belong
to him and not to anyone else. Above all, the profits made
by him are all his own. So, the investor remains the master
of his financial world. Of course, the size of the portfolio is
important and may differ from one advisor to another and
some of the advisors may specify a minimum portfolio size.
However, the best part about PAS is that the advice is
totally personalized in a way that is geared to meet your personal needs, expectations and goals. No two individuals are
the same because each has his own unique financial universe
to create and manage.

Profits Without Hassles

With PAS you can do away with the cumbersome routine
of monitoring your portfolio on a daily basis because your
portfolio manager is doing it for you. After all, you can no
longer park your money into stocks and FDs and forget
about it like the previous generation did. In todays times,
you have to constantly monitor your investments to make
sure you dont miss out on opportunities just because you
were not aware about them. PAS relieves you of the hassle
of keeping track of your portfolio on a day-to-day basis.
The advisor takes over the responsibility of monitoring the
portfolio regularly and comes up with timely entry and exit
advices with a view to optimizing portfolio returns.
PAS keeps a track of the investors portfolio on an ongoing basis so as to monitor the portfolio returns, cash flows
and asset allocation. Since the market situation can change
for better or for worse at any point of time, the portfolio
advisor provides timely advice for appropriate rebalancing of
the portfolio in keeping the changed market situation. Such
rebalancing of portfolio in a volatile market helps the investor minimize risks and optimize returns.
Of course, there is a flip side to PAS too. If the investor
does not implement the advice given by the portfolio on time,
the investor may stand to lose (or gain) depending on the market situation. So, execution is the key and inaction (or action)
on the part of the investor may work both ways. Hence, the
execution part carries the same risk associated with equities
and investors have to give a proper thought while deciding on
whether to act (or not act) on the advice of the advisor.

PAS A Step Ahead Than PMS

So how does PAS stake up against portfolio management
service (PMS)? Actually, it is one step ahead of PMS in all
respects. A PMS investor has to pay up the amount to be
invested to the portfolio manager and then the manager does
all the investing on behalf of the investor. So, the investor
has no control over his portfolio of investments and cannot decide which stocks or instruments to buy or sell. The
manager takes all the decisions as per his view of the markets

84

Dalal Street Investment Journal

July 20 - Aug 2, 2009

PAS

PMS

Investor does not have to

pay any amount to invest

Investor has to pay the

money upfront

Client invests in his own

name

The investments are done

in the name of the portfolio
managers firm

Investor has total control Investor has no control on

on decisions about his
decision-making as it is
investments as the advice non-discretionary
is discretionary
Investor may accept or
reject the advice of the
portfolio advisor

The portfolio manager

may or may not consult
the investor

Client can buy and sell

The portfolio manager may
securities as and when he churn the portfolio often to
decides
earn more brokerage
Can select own broker

No such choice available

and there is absolutely no involvement of the investor in the

decision-making process. In other words, the investors risk
and returns are determined by the portfolio managers call
on the markets. As against this, a PAS investor is fully in
command of his portfolio and can take his own decisions.
He does not have to pay up anything to anyone for investing and can invest any in any securities of his choice (in
accordance with or against the advice of his advisor). Since
he invests in his own name, he is the owner of the securities.
The main difference between the PAS and PMS is in its
decision making process; PAS recommends portfolio in nondiscretionary manner and all decisions are finally taken by
the investors themselves, while PMS manages a portfolio in
discretionary manner. The discretionary portfolio manager
will independently manage the funds of each client in accordance with the needs of the client. The non-discretionary
portfolio advisory services enables the client to take decision
with regards to his portfolio. Also most of the PMS offers
largely the equity exposure while the PAS is across all the
asset classes, says Maheshka.
Also, since the managers firm earns brokerage on all the
transactions, the manager may keep churning the portfolio
to generate more income for his firm, thereby burdening the
investor with additional brokerage charges and compromising the returns on investors portfolio. This cannot happen in
the case of PAS because the investor buys or sells on his own
and churns his portfolio as and when he deems fit.

Service Of The Future

PAS is the service of the future and, although it is in a
nascent stage in India, it is bound to catch up as the market
matures. More and more investors are bound to move over
to PAS because they, more than any other category of investors would be better placed to maximize returns on their
portfolios with professional advice from the portfolio advisors without losing control over their investments.
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