Portfolio management services are becoming one of the popular investment methods in India for those people who have a high net worth. These individuals are looking to get more returns and extend their portfolios. We know pms service providers in India are increasing simultaneously the risk of fraud and scams is also increasing.
1. Ponzi Schemes
In a Ponzi scheme, an individual or scammer will promise high returns to the investor with the same money taken from the new investors to pay the returns of their old investors. It is one of the most common scams in pms service providers. If we talk about reality then the scammer is using that money for fulfilling their own needs and personal gain.
Methods to Avoid
If you don’t want to get scammed then first of all research the pms firms in India before investing. You should know about their past track and some crucial information related to that company. Some companies may force you to invest in them without giving you enough information. So be careful about these activities and get saved from scams of pms.
2. Churning
A churning scam means the manager of a portfolio will trade excessively in the account of the client to generate more commissions for scammers. As a result of this scam, clients are doing some unnecessary transactions from their accounts and getting a lower return value.
Methods to Avoid
If you want to avoid churning scams then you need to keep an eye on or review the trading activity of your PMS account. Try to find some unnecessary transactions in your account. Another way to get safe from this scam is by setting limits on the trading activity of your account.
3. Insider Trading
Insider trading is one of the powerful scams where a person has access to all confidential information related to buying or sell of a company before that company makes it public. It is one of the illegal and unethical scams in PMS service providers.
Methods to Avoid
To not get fraud from Insider trading, it is important to find a good and well-reputed PMS service provider which works ethically and has some legal standards. A good PMS firm needs to follow a code of conduct and some ethical principles which are being followed by every employee.
4. Unauthorized Trading
Unauthorized trading means when managers of PMS start trading through a client’s account without his permission. It is one of the illegal activities through which clients may face huge losses and get low returns.
Methods to Avoid
To get safe from unauthorized trading then you need to look at your PMS account daily and try to review all the trading activity of that day. You can even set some alerts for some unknown or unnecessary trading from your PMS account. If you get to know about some unknown trading then immediately report it to the PMS firm and respective authorities.
Conclusion
PMS service providers are becoming a prime source of fraud and scams every day. For a new user, it is very difficult to start trading. If you are a newbie then take a look at the above points to avoid some common PMS scams. Hopefully, you make your investments safe and get high returns.
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