Stock brokers have few equals in ingenuity. Even as inflows into their highly-profitable portfolio management service (PMS) schemes have been declining, most large stock broking firms have managed to sustain margins by arbitrarily changing the rules of the game.
Many clients having subscribed to PMS schemes have earned below par returns on their investments in the past few quarters, as stock brokers introduced new charges.
The fee for portfolio management service is higher than plain-vanilla broking transactions, as brokers claim they are giving customised services to their clients.
There is an upfront fee, which the PMS provider partly passes on to the distributor who brings in the business. In addition, the broking firm charges a management fee, performance-linked fee and an exit load if the client withdraws his money before a specified period.
Many broking houses have now introduced charges like allocation fees, custodian fees, incidental charges and also raised brokerage rates and the upfront fee.
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