Why premium portfolio management services in India are failing to justify their fees
A recent social media post caught my attention—not so much for what it said, but for the torrent of responses it unleashed. An investor shared how his relative had entrusted ₹65 lakh to a portfolio management service (PMS) in 2022, only to see it grow to about ₹74 lakh by mid-2025. That translates to an annual return of roughly 6.9%—barely ahead of a bank fixed deposit and lagging most mutual funds and market indices. Meanwhile, the portfolio manager earned a comfortable 2% fee each year, regardless of performance.
What stood out wasn’t just this one case, but the chorus of similar stories that followed. Investor after investor described paying hefty fees for underwhelming results. The pattern was all too familiar: high costs, mediocre returns, and portfolio managers who prospered while clients bore all the risk.
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This reflects a deeper problem with many premium investment services, a fundamental misalignment between what investors expect when they pay more, and what they actually receive. The concern isn’t simply that these services sometimes underperform. All investment strategies have their lean years. The real issue is the lack of transparency, which leaves investors unable to make fully informed choices.
Unlike mutual funds, which disclose daily net asset values, publish monthly portfolio holdings, and issue annual reports detailing strategy and performance, many PMS offerings operate in the shadows. Regulatory oversight is weaker, and public disclosures are limited. This opacity makes it difficult to evaluate whether the premium you’re paying is justified by the value you’re receiving.
Consider the contrast: with mutual funds, you know where you stand every morning. You can see what the fund owns, how it’s performing, and what it costs. Annual reports are not just data dumps; they offer strategic commentary that invites scrutiny. That kind of sunlight keeps fund managers honest and accountable.
The regulatory framework for mutual funds adds another layer of investor protection. Fund houses are bound by rules on portfolio concentration, risk exposure, and disclosure. Independent trustees act as a check to ensure the fund is managed in the investor’s best interest. These guardrails simply don’t exist in the same form for many portfolio management services.
But transparency, while necessary, isn’t sufficient. The bigger question is: does paying more actually get you more? Many premium investment services justify their high fees by claiming deeper expertise or privileged access to market opportunities. Yet evidence suggests that expensive investment options rarely outperform their lower-cost peers over the long run. The reason is simple: fees compound—just like returns, but in the wrong direction.
That’s not to say all high-fee services are bad. But investors need to apply a healthy dose of scepticism. Before signing up, ask: What exactly am I paying for? Am I getting access to genuine skill, or just a well-branded illusion of exclusivity?
There’s a psychological layer here, too. Investors are often drawn to the aesthetics of premium services—the polished presentations, slick research reports, and exclusive events. These trappings can create the illusion of sophistication, even when results don’t justify the hype. It’s the financial equivalent of mistaking packaging for product.
Another important, often overlooked factor is taxation. In PMS, since transactions happen directly in your account, you’re liable for capital gains tax on every sale the manager makes—even if you haven’t withdrawn a rupee. That means you may pay taxes year after year, while your money stays invested.
In contrast, mutual fund investors pay tax only when they redeem their units, allowing returns to compound more efficiently. Over time, that tax deferral can make a meaningful difference.
For most retail investors, a diversified portfolio of high-quality mutual funds offers a compelling proposition. You get professional management, strong regulatory oversight, complete transparency, reasonable fees, and tax efficiency. You know what you own, how it’s doing, and what it’s costing you.
The lesson from that social media thread is hard to ignore: before signing up for an expensive investment service, demand transparency, understand exactly what you’re paying for, and compare it with simpler, lower-cost alternatives. In investing—as in life—paying more doesn’t always mean getting more. Often, it just means paying more.
Dhirendra Kumar is founder and chief executive officer of Value Research, an independent investment research firm.
