A financial distribution opportunity can look attractive because the headline is usually simple: “up to 70% revenue share”, “high commission”, “zero investment”, “recurring income” or “exclusive partnership”.
The risk is that the agreement and operating rules behind that headline determine the economics.
Due diligence means converting a sales pitch into verifiable facts before you pay a deposit, spend on leads or move client relationships.
In finance, this also protects you from joining an arrangement that uses the wrong regulatory terminology or expects you to do activities outside the permitted role.
Quick answer
Before joining any finance partner program, verify four things first: legal/regulatory status, exact commercial formula, client/lead ownership, and exit rights. If any of those remain verbal or vague, pause before committing capital.
What this Guide Covers
- Why due diligence matters
- Verify the regulator and principal
- 30-point checklist
- Commercial payout and revenue-share checks
- Client ownership and portability
- Lead ownership and data protection
- Targets and minimum performance
- Deposits, technology and hidden charges
- Marketing rights and brand use
- Clawbacks and reversal rules
- Tax, GST and TDS
- Termination and post-exit rights
- Red flags by business type
- Scoring framework
- FAQs
First Identify What You Are Actually Joining
“Franchise” is a marketing word; the legal relationship may be completely different. A stock-market “franchise” is normally an Authorised Person relationship with a stock broker.
A loan DSA is an outsourced sales/marketing arrangement with a bank or NBFC. An MFD uses AMFI registration and AMC empanelment. An insurance agent works under IRDAI/insurer rules. A PoP engages an NPS Pension Agent.
| Marketing Label | Underlying Relationship to Verify |
| Sub Broker franchise | Authorised Person / stock-broker relationship |
| Mutual Fund franchise | MFD / ARN-EUIN / platform or AMC relationship |
| Loan franchise | DSA / lender outsourcing agreement |
| Insurance franchise | Agent/POSP/corporate-agent or other permitted intermediary model |
| NPS franchise | Pension Agent engaged by a registered PoP |
| Research/advisory franchise | Check whether SEBI RA/RIA registration is actually required |
The 30-Point Due Diligence Checklist
| # | Check | What to Verify |
| 1 | Regulatory status | Verify the principal/entity on the appropriate official regulator/exchange/AMFI/IRDAI/PFRDA record. |
| 2 | Exact legal role | Confirm whether you are AP, MFD, DSA, insurance agent, PoP agent, referral partner or something else. |
| 3 | Principal identity | Contract must name the actual broker/AMC platform/lender/insurer/PoP, not only a marketing brand. |
| 4 | Written agreement | Do not rely on WhatsApp promises for commission, ownership or exit. |
| 5 | Scope of work | List what you may sell, service, collect, communicate and what you cannot do. |
| 6 | Revenue-share base | Define the number to which the percentage applies: gross brokerage, net brokerage, AMC trail, sanctioned/disbursed loan, premium or another base. |
| 7 | Deductions before payout | List every deduction before calculating your share. |
| 8 | Payout frequency | Monthly, weekly, quarterly; define cut-off and settlement date. |
| 9 | Clawbacks | When can commission already paid be reversed? |
| 10 | Reconciliation statement | What statement proves the calculation and can you download client-level/payout-level data? |
| 11 | Client ownership | Who owns the relationship while the agreement is active? |
| 12 | Post-exit servicing | Can you contact/service clients after termination? |
| 13 | Client portability | Can clients move with you, and under what consent/process? |
| 14 | Lead ownership | Who owns leads generated at your cost? |
| 15 | Data-use permission | Can the principal reuse your leads directly or for other products? |
| 16 | Customer consent | Does the lead form permit the actual data-sharing path? |
| 17 | Exclusivity | Can you work with competing lenders/insurers/platforms/financial businesses? |
| 18 | Targets | Client, revenue, AUM, premium, loan or activation targets; define consequence of missing them. |
| 19 | Security deposit | Amount, purpose, interest treatment, refund timeline and conditions. |
| 20 | Registration costs | Exchange/ARN/exam/licence/processing charges and who bears them. |
| 21 | Technology costs | CRM, terminal, API, back-office, renewal and transaction charges. |
| 22 | Marketing contribution | Who pays for leads, local ads, signage, creative and campaigns? |
| 23 | Brand/trademark permission | What logos/brand terms can you legally use? |
| 24 | Advertising approval | Does the principal pre-approve Google/Meta/social campaigns? |
| 25 | GST/TDS treatment | Whether the quoted payout is before/after GST/TDS and who invoices whom. |
| 26 | Support promise | Training, RM, onboarding, tech support and escalation must be measurable. |
| 27 | Complaint liability | Who handles complaints and who bears customer compensation if the agent mis-sells? |
| 28 | Termination | Notice period, immediate-termination triggers, cure period and consequences. |
| 29 | Post-termination money | Pending trail/renewal/commission after exit; when does it stop? |
| 30 | Dispute resolution | Jurisdiction/arbitration, governing law and escalation route. |
Why the Written Agreement Is the Centre of Due Diligence
NSE expressly requires the written agreement between a Trading Member and an Authorised Person to cover matters including scope, responsibilities, confidentiality, commission sharing and termination.
That is a good model for evaluating every finance partnership: if the point changes your economics or control, it should exist in the written contract or an incorporated payout schedule—not only in a sales call.
How to Verify Revenue-Share Claims
A percentage is meaningless without its base. “70% revenue share” can produce very different income if one broker applies it to gross client brokerage and another applies it after defined commercial deductions.
The same problem exists in DSA and insurance claims when a payout is quoted without saying whether it is based on sanctioned amount, disbursed amount, premium, net premium, persistency or another base.
- Ask for a sample payout statement with personal data removed.
- Ask for the exact formula in writing.
- Ask which items are deducted before the percentage is applied.
- Ask which items are deducted after the percentage is applied.
- Ask what can be clawed back in later months.
- Recalculate one sample independently before signing.
Client Ownership Is More Important Than Headline Commission
A finance business becomes valuable when it builds a book of relationships. Before joining, ask what happens to that book if you resign, switch principal, change legal entity or die.
A high share with no portability or post-exit economics can be less valuable than a lower share with stronger rights.
Lead Ownership and Data Rights
If you are paying ₹300, ₹500 or ₹1,000 for a lead, the agreement should say whether the lead is exclusive, whether the principal can contact the lead directly, whether it can use the data for other products, and how long the data can be retained.
In lending, RBI outsourcing guidance places strong emphasis on customer-information confidentiality, need-to-know access and monitoring of service providers.
Deposits and Hidden Costs
A refundable deposit is not automatically low risk.
Check the event that permits deduction, the refund deadline, whether disputes can freeze the amount and whether the deposit is linked to exchange/operational requirements or simply a commercial requirement of the principal.
| Cost Head | Question to Ask |
| Registration / processing | Official fee or principal-added fee? |
| Deposit | Refundable? Exact timeline and set-off rights? |
| AMC / platform / terminal | One-time or recurring? |
| CRM / software | Mandatory? Per user/client? |
| Lead generation | Minimum monthly commitment? |
| Office/signage | Mandatory brand-standard cost? |
| Training | Free, compulsory paid module or refundable? |
| Renewal | Annual maintenance / licence / ARN / exchange cost? |
Targets and Performance Conditions
Targets are not automatically unreasonable, but they must be measurable. “Maintain active business” is vague. “10 new funded accounts per month” or “₹25 lakh monthly disbursal” is measurable.
Ask whether missed targets reduce commission, trigger termination, make a deposit non-refundable or affect client ownership.
Advertising and Brand Rights
Financial partner programs often provide logos and creatives, but that does not mean the agent can publish anything using the brand name.
Check whether paid ads need pre-approval, whether you may bid on the brand keyword, whether you can create a landing page, and who owns the domain/lead data.
Due Diligence by Business Type
| Business | Extra Checks |
| Sub Broker / AP | Exchange AP status; one-trading-member restriction; brokerage base; client mapping; AP cancellation/switch process |
| MFD | ARN/EUIN validity; platform vs AMC empanelment; trail statement; client transaction tagging; post-exit trail treatment |
| DSA | Actual lender/NBFC empanelment; sanction vs disbursal payout; clawback; customer privacy; multiple-lender rights |
| Insurance | Exact intermediary status; insurer appointments; commission/renewal rules; persistency; clawback/free-look implications |
| NPS Pension Agent | Registered PoP relationship; PAN mapping; actual agent payout vs PoP charge |
| RA/RIA | Verify SEBI registration and whether sales promise crosses into regulated research/advice activity |
Red Flags
- The company refuses to show a sample agreement until after payment.
- The salesperson says “regulation is handled by us; you do not need to know your legal role.”
- They promote a commission percentage, but the payout base is undefined.
- Deposit refund depends on “management approval” with no timeline.
- The agreement lets the principal set off any disputed amount without a process.
- Client ownership after termination is completely silent.
- The principal claims SEBI/RBI/IRDAI approval without a verifiable registration/authorisation.
- You are asked to collect customer money into your own bank account, which the regulated model does not permit.
- The marketing plan depends on guaranteed returns, guaranteed sanction or assured income.
- The contract can change payouts unilaterally, without notice or a defined, published schedule.
A Simple Finobizz Scoring Model
You can score each of the 30 checks from 0 to 2: 0 = not available/unacceptable, 1 = partly clear, 2 = documented and acceptable.
A score isn’t a legal opinion, but it forces you to compare opportunities using evidence rather than sales enthusiasm.
| Score | Interpretation |
| 50–60 | Documentation is relatively strong; still negotiate material issues. |
| 35–49 | Proceed only after closing specific gaps. |
| 20–34 | Commercial/regulatory ambiguity is high. |
| Below 20 | Do not rely on the current sales pitch; major diligence is missing. |
FAQs
Should I join a finance partner with the highest commission?
Not automatically. Compare the payout base, deductions, clawbacks, client ownership and exit rights.
How do I verify a Sub Broker/AP opportunity?
Verify the stock broker and AP process on the relevant exchange and read the AP agreement, particularly commission sharing and termination.
How do I verify a DSA?
Confirm that the entity is actually engaged by the lender/NBFC and that the contract explains privacy, payout, clawback and permitted marketing.
Can a company change commission later?
Commercial agreements can permit changes. The due diligence question is what notice, consent or published schedule governs the change.
Final Takeaway
The best finance business opportunity is not the one with the loudest payout headline. It is the one where the legal role, economics, customer relationship, data rights and exit path remain understandable after the sales presentation ends.
Treat the agreement and payout statement as part of the product you are buying.