If we were going on a trip to Europe, we could buy our tickets or book hotels ourselves. But we still prefer to book through an experienced travel agent who can answer our queries and help us make informed decisions.
Most of us like the idea of the hand-holding that these travel agents offer us. The travel agent earns commissions from the hotels, airlines, attractions, and transfer operators or sometimes charges a premium on the bookings.
A franchise works similarly. It acts as a central location where an investor can carry out his trades.
This article discusses the definition of a franchise, how it works, and its role in the share market. You will also understand the benefits of becoming an authorized person and the process of becoming one.
What is a share market franchise, and how a franchise works:
To understand how a franchise business works, you need a little background.
Investors cannot directly place trades on the stock market but must do so via a stockbroker. However, the number of investors far exceeds the number of brokers, and therefore, investors will very often see value in placing trades via authorized agents. A stockbroker hires the authorized person (earlier the sub-brokers) to carry out trade instructions from investor clients.
Authorized persons are appointed by a broker (or must sign up with a broker, depending on how you look at it) at an agreed-upon commission rate, paid based on each successful trade execution.
Today, sub-brokers are often referred to as authorized persons or business partners. However, all three terms are equally accepted by investors.
Benefits of becoming an authorized person
Income
An AP earns a percentage of the brokerage charged by the broker on all trades placed by their client investors. It means that agents earn on every successful transaction processed by them.
Depending on the commission (or percentage of brokerage) that your broker extends to you, the number of investors, and the frequency at which they place trades, you can potentially increase your earning possibilities.
360-degree support
Of course, this does depend on which broker you choose to partner with, but one can typically expect a reliable support system that includes:
Marketing support
One can expect their broker to undertake the right kind of marketing efforts (at the moment, digital marketing appears to be the way to go) and incentivize them to acquire new clients or cross acquisition milestones.
In addition, authorized persons receive support in their efforts through marketing collateral like flyers, brochures, research reports, and more.
Training and periodic updates
APs can upgrade themselves from periodic workshops and training organized by the broker on client onboarding and acquisition, new products, risk management techniques and strategies, sales and marketing (client acquisition) tips and hacks, general product training, and refresher training. The broker will also offer training on running all the software needed for managing your business.
Technical and infrastructure support
It is the most critical factor for a lot of authorized persons. Technical support from the principal broker is essential to offer clients a seamless and hassle-free experience. Usually, when an authorized person places a trade order, the broker acts immediately to ensure the trade happens seamlessly.
Inventory management tips
A brokerage firm passes on the essential knowledge through market research and stock recommendations to the authorized person to boost their business. They also help authorized persons with regular market research reports, newsletters, and other literature that allow agents to stay on top of their games.
Affordable upfront investment:
Unlike the staggering investment that any start-up business would demand, becoming an agent usually requires a small upfront investment of anywhere between Rs 10,000 to Rs 50,000. This amount is generally fully refundable.
Requirements for becoming an Authorised Person
Although the upfront investment for becoming an authorized person is not extensive, there are other requirements that potential business partners would have to factor in. After all, this is serious business, and the franchiser is about to give you their branding rights, so some level of prerequisites are in place to ensure the safety and convenience of investors:
Educational qualifications:
Stock market franchisees need to have a minimum qualification of 10+2 or HSC (Higher Secondary Certificate. However, some franchisers might cite a graduation degree as the minimum qualification.
Hands-on experience:
Strong knowledge and understanding of the capital markets will immediately put you ahead of the competition. It essentially includes understanding the larger picture of the economy and world politics.
Work experience:
Most brokers will want their franchisees to bring a minimum of two years of hands-on work experience as an employee in a brokerage or as a dealer in the stock market.
Inherent personality traits:
Effective communication is essential to properly convey investment options to your clients.
● Additionally, you’ll need the necessary tech and infrastructure to start the franchise.
Conclusion:
Becoming a stock market franchise could be a desirable career with substantial earning opportunities. If you already have the prerequisites, you can sign up right away. Angel One can help you take the next career step.
