Authorized Person vs Partner Program

What is an Authorized Person (AP)?

An Authorized Person (AP), also known as a Sub-Broker, is a person or entity that works as an intermediary between a stockbroker and clients. The AP is responsible for acquiring and managing clients, assisting them in their trades, and offering investment advice. This model is ideal for individuals who have experience in trading and finance and are looking to establish a more active, regulated business relationship with a stockbroker.
 

How Does an Authorized Person Program Work?

The Authorized Person scheme is a controlled business model. To qualify as an AP, one must be registered under SEBI (Securities and Exchange Board of India) and the concerned stock exchanges. The AP is supplied with a trading terminal to conduct trades on the clients' behalf. As remuneration for their services, the AP gets a share in the brokerage charges earned by the clients introduced to them.
 

What is a Partner Program?

In contrast, the Partner Program is an easier and more lenient business model under which people earn commissions by introducing new customers to a stockbroker. The partner does not participate in trading or give financial advice. Rather, they concentrate on recruiting new customers and getting them signed up with the broker.

This model is less active than the AP program since it doesn't ask the partner to deal with clients or make trades. The only thing the partner has to do is refer potential clients using a customized referral link and receive a commission from the brokerage earned by the referred clients' trading activity.
 

How Does a Partner Program Work?

When you join an Authorized Person with a brokerage firm, you are given a referral link. Your job is to promote the link and get people to open trading accounts with the broker. When the clients register and begin trading, you are paid a percentage of the commission earned from their trades.
 

Differences Between Authorized Person and Partner Program

Authorized Person (AP) Program: Advantages and Disadvantages

Benefits of the Authorized Person Program

Proactive Role in Client Management: Being an AP, you actively play a role in client management. You have the opportunity to form long-term relationships with your clients, guiding and advising them on investments. This gives you a position where you can form a trusted advisory role, and that can be fulfilling.

Higher Earning Power: Because the AP facilitates trading for clients, the commission made is greater than the revenue share provided by the Partner Program. The commission rate is negotiable, and additional incentives based on performance are available.

Regulated & Trusted Business Model: Being an SEBI-registered Authorized Person carries weight with it. It's a trusted and highly regulated business model, giving you a sense of security and assurance that your business is following the rules and regulations of the stock market.

Access to Trading Terminal: Being an AP, you have access to a trading terminal through which you can carry out trades on your clients' behalf. This will be useful if you're experienced in trading and would like to offer hands-on support to clients.
 

Drawbacks of the Authorized Person Program

Regulatory and Compliance Requirements: The AP model involves compliance with SEBI regulations, so you have to make sure that you comply with the stock exchanges and regulatory bodies. This is a time-consuming and complicated process.

Initial Investment and Infrastructure: In order to become an AP, you will have to make an investment in infrastructure, including an office, trading terminals, and other operational expenses. You will also have to pay a security deposit to the broker.

Higher Responsibility: Being an AP means you have more responsibility. You are supposed to deal with client questions, facilitate trades, and give investment recommendations. This can be taxing, particularly if you have a big client base.
 

Partner Program: Advantages and Disadvantages

Advantages of the Partner Program

• Low Barrier to Entry: Partner Program membership is simple to join and involves no regulatory registration. It's not necessary to establish a business or invest in facilities, so it is a low-cost entry into the stock brokerage business.
• Passive Income Model: Partner Program is perfect for anyone seeking a passive income model. After referring clients, you do not have to actively work with them or make trades. Your profits are based on the trading activity of clients you refer to.
• Flexible Work Arrangement: You enjoy the flexibility to work anywhere, anytime as a partner. The referral link may be promoted by social media, blogs, videos, or any other digital channels, making it ideal for digital marketers, influencers, and content creators.
• No Client Handling: In contrast to the AP program, where you have to handle clients, the Partner Program does not require any client handling. You deal with the referral side alone and hence it is a trouble-free option.

Drawbacks of the Partner Program

• Lower Potential for Earnings: Although the Partner Program is profitable, the commission rate is often lower compared to the AP model. Partners are normally paid a set percentage, i.e., 40% to 60%, of the brokerage charges. There is some brokerage that gives 100% revenue share for a couple of months, but it also differs.
• No Active Control Over Client Success: As you don't control your clients' accounts, your income relies solely on the trading activity of the clients. In case your referred clients don't trade aggressively, your income will be low.
• No Recognition from Regulators: The Partner Program does not have the support of regulators which the AP model enjoys. This ensures that membership is easier in the program, but it implies less credibility and less trust attaching to the program as opposed to the AP model.

Which One to Opt For?

Opt for the Authorized Person Program if:

• You have previous experience in the fields of financial advisory, investment consulting, or stock trading.
• You wish to establish long-term customer relationships and provide them with customized services.
• You possess the funds and desire to invest in infrastructure and compliance with regulations.
• You seek a more active role in trading and working with a customer base.

Opt for the Partner Program if:

• You possess a solid web presence, e.g., blog, social media following, or YouTube audience.
• You wish to generate passive income without the hassle of dealing with clients or making trades.
• You don't want to invest heavily in infrastructure or regulatory licenses.
• You like a low-maintenance and flexible business model with less responsibility.
   

Conclusion

Both the Authorized Person and Partner Program provide profitable schemes in the stock brokerage business, but they suit different individuals. If you possess experience, infrastructure, and inclination to actively manage clients and trades, the Authorized Person Program may be most suitable for you. However, if you desire an easy, passive income source with fewer responsibilities, the Partner Program may be more suitable for you.

Finally, your choice should be influenced by your experience, capital, and the degree of participation you are willing to engage in the stock market venture. Knowing the intricacies of either model, you would be able to pick the best one that fits your career aspirations and preferences.