The Indian stock market offers various opportunities for individuals to partner with brokerage firms and earn a share of the profits. Two popular routes are becoming an Authorised Partner (commonly referred to as an Authorised Person) or opting for a franchise model. While both options provide avenues to collaborate with top brokerage firms, they differ significantly in terms of structure, responsibilities, and revenue-sharing mechanisms. This article explores the key differences between the two to help you make an informed decision.
Who is an Authorised Person?
An Authorised Partner is an individual or entity that collaborates with a stockbroker to bring in clients and execute trades on behalf of the brokerage firm. Unlike a franchise, an Authorised Person operates under the stockbroker’s SEBI registration and is not required to have a separate licence. This makes it a relatively low-cost and straightforward way to enter the stock trading ecosystem.
Key Features of an Authorised Person:
- Cost-Effective Setup: Minimal initial investment compared to a franchise model.
- Revenue Sharing: The revenue sharing of an Authorised Person is a percentage of the revenue generated from the clients they bring in. The revenue-sharing ratio is typically negotiated with the brokerage firm.
- Flexibility: Operates under the stockbroker’s guidelines, which reduces the regulatory burden.
What is a Franchise?
A franchise, in the context of stockbroking, is a business model where an individual or entity partners with a brokerage firm to operate a fully-fledged office under the firm’s brand. A franchisee is responsible for acquiring and managing clients, but they have greater operational autonomy compared to an Authorised Person.
Key Features of a Franchise:
- Higher Investment: Requires a substantial upfront fee and investment in infrastructure, office space, and branding.
- Revenue Sharing: The revenue-sharing ratio is generally more favourable for the franchisee, given their higher investment and responsibilities.
- Operational Autonomy: Although they operate under the brokerage firm’s brand, franchises have more control over their daily operations.
Authorised Person vs Franchise: A Comparative Analysis
Aspect | Authorised Person | Franchise |
Initial Investment | Low | High |
Revenue Sharing | Negotiated; lower than franchises | Higher due to greater investment and responsibilities |
Regulatory Burden | Minimal; operates under broker’s SEBI registration | Moderate; requires adherence to operational standards |
Branding | Uses broker’s name and support | Operates under broker’s brand with more visibility |
Target Audience | Smaller client base | Larger and more diverse client base |
Choosing Between the Two
The choice between becoming an Authorised Partner or opting for a franchise depends on your goals, investment capacity, and business acumen. If you are new to the industry and prefer a low-cost entry point with minimal regulatory responsibilities, becoming an Authorised Partner is ideal. On the other hand, if you have substantial resources and wish to build a large-scale operation, the franchise model may be more rewarding.
Popular Brokers Offering These Opportunities
Many reputed brokerage firms offer both models, catering to diverse requirements. For instance, platforms like mStock by Mirae Asset, Zerodha, Groww, and Upstox provide competitive revenue-sharing arrangements and robust support systems to their partners. These firms enable individuals to leverage their brand reputation and advanced trading platforms to acquire and retain clients.
Conclusion
Both the Authorised Partner and franchise models have their merits and cater to different types of individuals. Understanding the nuances of each can help you make the right decision based on your financial capacity, market understanding, and long-term aspirations. Whether you choose to become a sub broker or a franchisee, the revenue-sharing potential and opportunities for growth are substantial, especially when partnering with a leading platform like mStock by Mirae Assets. Assess your strengths and financial goals to embark on a successful journey in the stockbroking industry.