A broker only provides the Authorised Partner with a certain percentage of the total transactions as a commission. The commission is based on the volume and value of transactions the Authorised Partner carries out with clients.
Compared to other investment avenues in the country, the Stock Markets have seen tremendous growth over the last two decades. This growth has fostered an ecosystem where various market stakeholders have flourished. Among these key stakeholders are brokers and Authorised Partners, who play crucial roles in onboarding clients and executing transactions. Brokers and Authorised Partners assist clients in various activities and charge commissions for the services they provide.
An Authorised Partner acts as an agent for a broker and interacts with clients on their behalf. Serving as an intermediary between the stockbroker and clients, the Authorised Partner assumes power and responsibilities for sourcing clients and managing transactions on behalf of brokerages. Despite significant technological advancements, there remains a demand for physical assistance among investors. Many investors prefer to engage authorized individuals or agencies to assist with transactions and attract new clients for online brokers. Consequently, the role of an Authorised Partner has become increasingly important across the spectrum of trading today.
Authorised Partner Commission Structure
An Authorised Partner's income is directly linked to the number of clients it handles. A broker only provides the Authorised Partner with a certain percentage of the total transactions as commission. The commission is based on the volume and value of transactions the Authorised Partner carries out with clients. Whatever a broker charges from clients, it passes on a certain percentage of that earnings to Authorised Partners working under it. So, in a way, the earning opportunity is endless for an Authorised Partner, as the more clients it attracts, the more it can earn.
However, the percentage of commission for Authorised Partners may differ from brokerage to brokerage. Large and well-established brokerages might offer Authorised Partners higher commissions, acknowledging the efforts Authorised Partners undertake to bring in clients and execute transactions. Authorised Partners do all the legwork and bring the business to the brokerage.
Authorised Partner Commission Calculator
Here's how a percentage-based commission model for a stockbroker works:
Let's consider an investor who purchases 10 stocks worth ₹100, with each stock priced at ₹10. The total value of this transaction amounts to ₹100. Now, if the stockbroker charges a brokerage fee of 0.5%, a portion of this would be allocated towards the Authorised Partner's commission. Various brokerages have different commission models. Typically, brokerages offer Authorised Partners 10% of the total revenue generated from clients.
Difference between a Authorised Partner and Stock Broker
There are several key factors that differentiate the two. Some of them are:
- Stock Brokers are listed on exchanges as trading members, while Authorised Partners are not listed in the same capacity.
- Authorised Partners must obtain certification of registration from SEBI to operate their business.
- Stock Brokers are paid brokerage fees, while Authorised Partners are paid commissions.
- Only brokers registered as trading members can charge brokerage fees.
- Authorised Partners receive a percentage of the brokerage fees as commission.
Here’s how the Authorised Partner Commission Model has Evolved over the Last Few Years:
The Indian Stock Market has witnessed an unprecedented demand in the recent past. This is reflected in the record number of Demat account openings.
Technological advancements have led to many processes becoming completely digital. Among these advancements, the most notable is the digitalization of the trading platform and the systems involved. Dozens of discount brokers are now available online, mostly with apps. These apps allow you to trade in the Stock Market with little or no human intervention.
With technological shifts happening across sectors, including the financial domain, almost all brokerages have moved either online or to a hybrid mode. Even under the hybrid mode, they are more dependent on the digital mode and carry out their work online as much as possible.
Authorised Partners: Linking Clients to Online Platforms
For online Stock Brokers, the Authorised Partner acts as a bridge between the client and their platform, as the online brokerage firm cannot directly contact the client to open a Demat account. Thus, Authorised Partners ensure that they work on behalf of such online brokers and find new clients for them, assisting them in investment activities.
Once they add a new client to the online platform, the Authorised Partner is entitled to a predetermined commission on the transactions carried out by the client or the Authorised Partner on their behalf.