The Zerodha partner program resembles a pyramid scheme, is it legit?

Zerodha Zerodha trivia
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Let me give my experience of being a sub-broker/partner with Reliance securities for over 4 years before starting Zerodha.

  1. We would put up stalls in various offices, capture interested leads, but to open an account these leads would directly call Reliance office. Once the lead went to the main branch, I as a partner wouldn’t get any benefit of it.

  2. If I provided good service to the clients I have introduced, the clients would talk good about Reliance securities to their friends. These friends would then call the main branch, again I as a partner don’t benefit from it.

For any business to keep running, the referral bit has to kick in. Otherwise, it is not possible to sustain in the long run. Imagine if I had to open a restaurant and rely only on direct customers that I acquire and all referrals from my direct clients go eat at some other restaurant.

These were the pain points we were trying to address when we were putting up a partner module at Zerodha. So what we did was

  1. If a lead is entered by the partner, even if the client directly comes to us and opens an account, it is still mapped to the partner who had entered the lead first. Leads stay valid for 60 days and no new person can enter the same lead.

  2. We put up a unique partner sharing model. We said we will not only map the direct clients to you but also all the indirect/referred clients who come to Zerodha. By indirect, I mean clients who were referred by existing clients that the partner had introduced. But we also said that since the clients have to be paid for referring, we will reduce this from the partner’s payout.

So for example, if a partner is in the 50% sharing slab. He makes 50% from all the direct clients and 40% from indirect clients. 10% out of the 50% is shared back with the client who referred. So in essence, the partner works almost exactly like Zerodha, instead of Rs 20 at Rs 10 (50%). Like how Zerodha shares Rs 2 in Rs 20 to a referral, partner shares it from his Rs 10/trade or whatever slab he is in.

There is no MLM happening here, a client’s brokerage is either paid to a partner or a partner and a client. Never more than this. Partner gets the leverage to work almost exactly like Zerodha.

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