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What is an Authorised Partner Business Model?

The Authorised Partners are registered with SEBI, but unlike the stock brokers, they are not direct members of any stock exchanges. The Authorised Partners can work with multiple brokerages simultaneously.

When an investor decides to buy or sell shares of a particular company, they cannot go directly to the company to do so. Instead, an investor needs an intermediary, similar to a middleman, to facilitate the buying or selling of shares.

This is where a Stock Broker comes into the picture.

The investors willing to participate in the stock trading can do it through a Stock Broker who is registered with the exchanges and has a licence from market regulator Securities and Exchange Board of India (SEBI).

So, to put it in simple words, an investor’s path to the shares of a company goes through an intermediary- a Stock Broker.

But, there is scope for one more intermediary - an Authorised Partner.  The stock brokers often work through affiliated agencies to expand their operations and such agencies are commonly known as Authorised Partners.

What is an Authorised Partner business?

All Stock Brokers aim to expand their client base and reach, employing various techniques to achieve these objectives. One of the best offers a stock broker can provide to a client (an investor) is personalised service. Since stock broking firms often have numerous clients and may find it challenging to offer personalised services to all, they use an intermediary to act on their behalf. This intermediary is known as an Authorised Partner.

This partner acts like an affiliate for a brokerage. Under the brokerage’s licence, it assists the clients of the broking firms in dealing with equities and earns commissions. The Authorised Partners are registered with SEBI, but unlike the stock brokers, they are not direct members of any stock exchanges. The Authorised Partners can work with multiple brokerages simultaneously.

An Authorised Partner’s business operations

  1. Acquisition and retention of clients: The biggest responsibility of an Authorised Partner is to acquire new clients for the broking firms and retain them by offering personalised service on investments and building relationships.
  2. Guiding clients on investments: Authorised Partners offer guidance in investment to the clients of the brokerage. By assessing the risk appetite and financial goals of each client, an Authorised Partner offers tailor-made recommendations to them. Authorised Partners also help clients make informed investment decisions by providing them market analysis, research reports, and fundamental and technical analysis.
  3. Assistance in executing trades: Authorised Partners assist clients to execute trade in the financial markets.
  4. Portfolio management: Authorised Partners monitor clients’ portfolio and adjust asset allocations according to the changing market environment, risk appetite of the client and investment goals.
  5. Ensuring regulatory compliance: Authorised Partners have the responsibility of ensuring compliance of regulatory framework established by SEBI, exchanges and other competent authorities.

Benefits of becoming an Authorised Partner

There are several advantages of becoming an Authorised Partner. Let’s take a look:

  1. Rewarding business model: Sub broking has emerged as a profitable and rewarding business model. With the leverage of market reach, expertise and tools of the broking firms, sub broking has ample scope for earning a handsome commission by providing broking services to the broker's clients. Since sub broking is a commission-based business model, more clients simply mean more income.
  2. No significant investment required: In India, establishing a stock broking firm requires substantial capital and adherence to several regulatory standards. However, an Authorised Partner does not need significant resources. With a SEBI license, an Authorised Partner can enter into an agreement with a stock broker and utilise the brokerage's resources to expand their business.
  3. Significant growth potential: A broker's research reports, investment strategies, tools and techniques and broad client base boosts knowledge, experience and skills of an Authorised Partner and offers tremendous growth potential to her.

How to become an Authorised Partner in India?

  1. As mandated by SEBI and Stock Exchanges, to become an Authorised Partner in India, one must clear the NISM exams for Equities, Commodities, Futures and Options and Mutual Funds.
  2. One should be a graduate. However, brokerage firms may have different criteria for educational background.
  3. One must not have a history of any default on any other Stock Exchange.
  4. One must have a basic understanding of the financial market.
  5. One must be comfortable in dealing with websites and mobile apps.

Conclusion

India is one of the largest Stock Markets in the world, with a market capitalisation of about $5 trillion. The experts expect India’s Stock Market size to double in the next five years with the rising number of investors. The growing need of personalised brokerage service will aid the proliferation of Authorised Partners. This could be the time to seriously think about a career in stock sub broking.