The stock market has witnessed significant activity lately, with more retail investors being introduced to the space. The primary aim of these investors is to expand their investment avenues and secure profits.
Long-term investment in securities or stocks helps them earn a passive income with a higher interest rate than traditional instruments like fixed deposits.
However, everyone entering the stock market does not have the time to conduct extensive research and understand the complexities of the space.
Hence, the Securities and Exchanges Board of India (SEBI) created and authorized the post of a sub-broker.
While SEBI does not grant them a trading license to function as independent stockbrokers, it provides them with a certification to officially associate with a licensed stockbroker in the stock market.
Given the upcoming opportunities in the market, a sub-broker is an attractive career option.
Read on to understand a sub-broker’s role and assess if the benefits are sufficient to dive into the domain.
Understanding the Roles and Responsibilities of a Sub-Broker
A sub-broker is an agent representing a particular stockbroker’s interest in the market. These professionals are not recognized as trading members in the Indian exchanges, preventing them from asking for brokerage charges.
However, they are permitted to work under the wing of stockbrokers to assist them and earn commissions.
Since they effectively function as an extension of stockbrokers, sub-brokers are also responsible for helping users with investment decisions.
They are expected to be well-versed in the nuances of the financial markets and recognize periodic market shifts to offer relevant advice.
Overall, operating as a sub-broker requires you to take on the following responsibilities:
- Seek out potential investors and indulge them in discussions about the stock market. Convince them to open a Demat account with the stockbroker you are affiliated with and guide them through the process of making their first investment.
- Assist users with understanding the relevant documents mandated to open a Demat account and ensure no discrepancies in standard procedures like KYC.
Usually, the sub-broker and the stockbroker have a mutually-beneficial agreement stating the terms of their collaboration.
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This document also highlights the commission per investment value for the sub-broker.
The Benefits Enjoyed by Sub-Brokers
Think of becoming a sub-broker as an entrepreneurial opportunity. You have access to flexible hours and a chance to work for several clients under the umbrella of a stockbroker.
However, the stockbroker does not control your business operations.
You are in charge of onboarding new clients and aiding them in executing high-profit trades to earn commissions.
Ultimately, becoming a sub-broker helps you avail yourself of several benefits.
1. Low or Zero Initial Deposit
Traditionally, sub-brokers were required to pay a minimal cost upfront to the stockbroker while the broking house handled all the other charges.
But the market’s resurgence has led to various brokerage houses forgoing the deposits to onboard promising sub-brokers.
For instance, several influential stockbrokers offer lucrative introductory offers with a zero deposit to stay afloat in the competitive market. These lucrative offers aim to acquire quality sub-brokers and increase the amount of Demat accounts and the trading value on their platform.
So, sub-brokership without deposit is possible and can aid you in kick-starting your entrepreneurial journey easily!
2. Operating under an Established Brokerage Platform
The most challenging aspect of a business is to build and nurture a reputation to increase client involvement and acquire their business.
Thankfully, sub-brokers work under the umbrella of stockbrokers who have already supplemented a distinctive reputation in the market.
Hence, it is relatively simpler to capitalize on this reputation and synonymize the business with exceptional investment advice to attract more clients.
3. Scalable Commission
Although sub-brokers are not authorized to collect brokerage charges directly, they are provided with a predetermined commission by the stockbroker.
The value of this commission is subject to fluctuation, increasing with the investment made by the clients.
The sub-broker commission per investment value also depends on the brokerage charges of the firm. Hence, collaborating with stockbrokers charging higher fees marks an increase in income.
In addition, several brokerage firms employ a revenue-sharing model to motivate sub-brokers to join their team and increase their clientele.
The revenue-sharing model may fetch significant dividends, depending on the client traffic directed to the stockbroker.
4. Learning Opportunities
Operating as a sub-broker will familiarise you with the intricacies of the financial markets in India. For starters, you will learn to observe the market movements better and understand the international and national events that cause fluctuations.
Frequent client interactions will also help accentuate communication skills and increase confidence.
Sub-brokers can use these insights to expand their business or delve into personal consultations to onboard more clients and amplify earnings.
5. Access to Advanced Tools
Brokerage firms often provide unrestricted access to several paid tools to assist sub-brokers with managing and tracking clients using a consolidated platform.
Additionally, sub-brokers are handed over research and stock advisory to undertake targeted and compelling research to advise clients better.
The relationship between a sub-broker and a stockbroker is essential and benefits both parties. Since, stockbrokers cannot directly approach users to open a Demat account with their platforms, sub-brokers act as a bridge between these broking platforms and investors.
In turn, they are compensated fairly as stockbrokers adopt brokerage sharing to provide suitable compensation.
Hence, the key to operating as a successful sub-broker involves forming a partnership with a reputed brokerage firm like Choice India!
