What are the Benefits and Challenges for Authorised Partners

An Authorised Partner is essentially a person acting on behalf of an established stock broker to assist investors in buying, selling, or dealing in securities on its behalf in return for a share in the brokerage fee. 

If you are weighing the idea of becoming an Authorised Partner but are not able to make a decision, you have landed in the right place. A detailed look at the key benefits and challenges of this business may widen your perspective and help you assess the opportunity as an Authorised Partner fairly.

It is important to understand the role of an Authorised Partner. An Authorised Partner is essentially a person acting on behalf of an established stock broker to assist investors in buying, selling, or dealing in securities on its behalf in return for a share in the brokerage fee. While it may sound quite simple at first, a look into the pros and cons of being an Authorised Partner will help you understand the business better.

Benefits of becoming an Authorised Partner

Simple eligibility criteria: Almost anyone can be an Authorised Partner as you do not need any higher education degree to sign up for an Authorised Partnership franchise. An individual who has passed Class 10th can also enrol as an Authorised Partner with brokerages. Registering with the NSE is also required. Basic communication skills along with some knowledge of stock markets will help you to have an edge over others.

Low initial investment: There is no major cost involved in being an Authorised Partner. The franchise fee to the stock broker is significantly lower compared to other franchise businesses. The NSE registration fee also runs into a few thousand. A small fee is also paid to exchanges. Besides that, some money would go into setting up basic infrastructure like computers, internet connection, or any office space if needed.

Minimum regulatory compliances: Being a full-fledged stock broker requires extensive permissions and certifications. However, an Authorised Partner only needs a certificate of registration with the NSE in accordance with NSE (Stock Broker and Sub-Brokers) Regulations, 1992, under the SEBI Act, 1992.

Access to services/training provided by the stock broker: An Authorised Partner franchise model gives you access to the tools and resources offered by the stock broker. This also helps you deal with clients more effectively while improving your knowledge about stock markets. Also, as the franchise model lets you use the brand name of the broker, the brand value and credibility of your business increase significantly.

Scope of higher income as trading volumes increase: Earnings of an Authorised Partner depend on the commission on the total transaction value done by their clients. As trading volumes have increased significantly in recent years on Indian exchanges, Authorised Partners have immense scope for growth in terms of earnings going ahead.

Scope of selling other financial products: One of the benefits of an Authorised Partner franchise model is that you might get authorisation to sell other financial products offered by your broker to your clients, like loans, insurance, etc. This gives you a unique opportunity to earn and learn more.

Challenges faced by an Authorised Partner

Client servicing: The biggest challenge of being an Authorised Partner is client servicing. Since an Authorised Partner acts as an intermediary between the main brokerage house and the client, he/she needs to handle all the client queries, requests, complaints, or grievances. On the other hand, an Authorised Partner may also be at the receiving end of some heat from the main broker in case there is a slip in the quality of services or products being offered to clients.

Market downturns: Dealing with the panic among clients in events of major economic downturns or market corrections can also be challenging. Keeping clients at ease during such phases by educating them about the volatile nature of markets and helping them make smart investment choices defines the success of a good Authorised Partner.

Retaining clients: The competition in the space is increasing because of low entry barriers. In such a scenario, it becomes very difficult to retain clients for a longer duration of time as the hunt for a lower brokerage fee or better services is always on. An Authorised Partner needs to offer value-added services and personal attention to clients to build long-term relationships.

Embracing technology: Adapting to new technological tools and software can be another challenge for Authorised Partners, especially for those who have been operating for years and have always used conventional trading methods. Therefore, it is important to attend regular training sessions, workshops, or webinars organised by brokerage houses to embrace the latest technology.

Complying with changing regulatory norms: Even though the regulatory requirements to become an Authorised Partner are minimal, the fluid nature of compliance norms for operating the business could be a challenge. Frequent regulatory updates keep Authorised Partners on their toes as they need to ensure that operations remain compliant and risk-free. Any change in trading norms also needs to be communicated to clients.

Conclusion

It can be said that the Authorised Partnership business is easy to start and can prove to be extremely lucrative with consistent efforts. The client-servicing and technological upgradation demand a lot of hard work and can prove to be the defining factors of your success as a sub-broker.