A 68-Year-Old Client Who Wants the 46% Strategy

Every element points the wrong way. Their stated objectives are monthly income, preservation of capital and access to ₹60 lakh within eight months; the product is a concentrated mid-cap strategy with a quarter in unlisted shares and a stated exit horizon of up to 90 days, which cannot fund either the income need or the house purchase. Their risk score and investment experience contradict the product's risk. The 46% figure is one client's twelve-month return, not composite performance, and pairing it with a Nifty comparison without a time-weighted computation, matching period and standard disclosures would breach the advertising requirements even if the strategy were suitable. The correct course is to decline this strategy, explain in writing why, and offer an appropriately risk-profiled allocation with the ₹60 lakh held in liquid assets outside the PMS. If they insist, document the advice given, the client's override and the manager's reasoned position - and be prepared for the firm to decline the mandate rather than book assets it cannot defend at audit.

Very little, and it may make matters worse. Risk profiling, suitability assessment, disclosure of fees, strategy, illiquidity and past performance, and the prohibition on assured returns are obligations the portfolio manager owes under the SEBI (Portfolio Managers) Regulations and the disclosure document; they cannot be contracted away by a client's signature. A waiver that says "I accept all risk" does not convert an unsuitable recommendation into a suitable one, and in a complaint or inspection it reads as evidence that the firm knew the product did not fit the client and proceeded anyway. What actually protects the firm is a documented process: a recorded risk profile, a written suitability note explaining why the recommended strategy fits the stated objectives, a record of alternatives discussed, and a client acknowledgement that returns are not assured and that illiquid positions may take time to exit. If the client overrides the advice, the override is recorded factually. Consent to risk is not consent to being mis-sold.

A joint holding is one client, so the ₹50 lakh minimum is met without difficulty; the constraint is design, not eligibility. First, carve out the ₹60 lakh for the house purchase into bank deposits or liquid mutual funds - money needed in eight months has no business in a market-linked portfolio, whatever the recent returns. Second, hold an emergency corpus of roughly six to twelve months of expenses, say ₹15-20 lakh, outside the PMS. Third, invest the balance in a strategy matched to a conservative-to-balanced profile, and be explicit that a PMS does not pay a dividend: the ₹1.40 lakh a month, about ₹16.8 lakh a year or 4% of assets, is funded by systematic withdrawals, which are redemptions that reduce capital and can lock in losses if markets are down. Set the withdrawal rate against expected return, disclose exit loads in the first year, stagger deployment rather than investing the entire amount on one date, and put the whole arrangement in writing so the client understands what is income and what is capital returning to them.