Table of Content
The advancement of any economy is connected to the stock market. India’s stock market is experiencing a positive development and is predicted to grow even further in the coming years. Sub-brokers are an important part of the stock market. They have become a key way to make wise decisions. Their demand is high. As a result, opening a sub-broker business has become a much-preferred career option.
Setting up a sub-broker business requires a proper understanding of the stock market, partnering with the right stock broker, and having an adequate risk appetite. Other factors impact its success as well. All of this has led to questions regarding whether the sub-broker business is profitable and sustainable in the long run. This article answers this query and also offers practical tips on how to succeed in the industry.
A sub-broker is an intermediary that works for a broker and helps investors with securities transactions. Like any business, starting a sub-broker business also requires some investment. But, in comparison to most other enterprises, the startup costs are pretty low. With just about ₹ 1 lakh, you can launch a sub-broker business. There are three main categories where the cost is divided.
First comes the security deposit, which is the amount that has to be paid to the stockbroker you will be associated with. This amount gets refunded after your agreement with them ends. The exact amount for the security deposit varies according to the stockbroker and can start at around ₹50,000. The revenue shares depend on the security deposit so you can increase the amount for more shares.
The registration charges with the SEBI or Securities and Exchange Board of India are next. Registration is a must and can cost around ₹ 11,000.
Like any business, a stock market sub-broker business also requires an office, as working from home might not always be feasible at a larger scale. The infrastructure costs associated with setting up an office are the next expense required. The cost depends on how you set up the office.
To understand if the sub-broker business is profitable, it is important to reflect on the sub-broker earnings. Sub-brokers receive a commission determined by the brokerage of their clients. This implies that the client you refer to, the primary stockbroker, pays a certain brokerage to the company when they trade on the broker’s trading platform. Sub-brokers now receive a predetermined portion of the total brokerage that clients pay to brokers. In India, sub-brokers often receive an average of 60% of brokerage revenue.
Example of sub-broker income:
Let’s consider that Mr Raj has 200 clients, and 10% are active traders. Mr. Raj receives a portion of the brokerage generated by the twenty active traders who work for the primary broker daily. Assume that his revenue share is 50% and that each client, or the active traders, brings ₹ 1000 per day in broking, and he works for 20 days.
Therefore, Mr Raj’s part will be ₹ 500 for each client.
His total earning per day will be 500 * 20 = ₹ 10000.
His total earning per month will be: 10000 * 20 = ₹ 200000
Hence, a sub-broker’s earnings or commission depends on the revenue share or commission, the stockbroker, and the number of active clients.
The table below highlights the initial investment and associated commission of India’s top five sub-broking businesses.
The following sections highlight six effective strategies for growing a sub-broker business in India.
Choosing the right stockbroker is the most important part of an authorised partner business. Your success depends much on the broker’s reputation, the reliability of the trading platform, and the support they provide. A robust trading platform and a well-regarded brand instil confidence in clients and facilitate business growth. Moreover, the revenue-sharing model with the broker should align with your business goals and allow for sustainable expansion.
The foundation of any successful business is its clientele. As a sub-broker, acquiring and maintaining clients should be your main concern. Your income will depend on how well you can provide value to the company. Some basic means this can be executed through are:
Use channels such as LinkedIn and Meta to connect with potential clients. Start writing blogs, create valuable content, and run targeted advertisements.
Use effective content and keyword strategies for strong results in search engine optimisation, creating organic leads for your business.
Email marketing can help you capture the interest of your target market. Provide your email subscribers with the most recent information on trading, stocks, investing, market statistics, and other topics.
Frequently arrange seminars and workshops to educate potential investors on the stock market, regulatory changes, investment strategies, and the advantages of investing through a certified individual. These encounters can help establish credibility and foster a sense of trust.
Compile an organic database of all the friends, family, neighbours, coworkers, and relatives that you know and who have shown an interest in stock investing. Try to connect with them.
You can encourage existing clients to refer new ones by offering incentives like reduced brokerage fees or other benefits. Getting referrals from friends and family can help you attract a larger number of customers.
To cater to a diverse client base, it’s imperative to go beyond the standard investment services. Provide as wide a spectrum of financial products as possible, from stocks and bonds to IPOs, derivatives, and mutual funds. Work with brokers who have access to a large variety of investment products, ensuring you meet your clients’ diversified needs and keep them from looking elsewhere for solutions.
Another key to success for any business is how efficient their customer service is. This helps gain trust and create long-term associations. A few effective ways to offer impeccable customer service are:
A sub-broker ought to be well-versed in all applicable regulations. This will guarantee that your company’s operations adhere to all applicable regulations. You should also be aware of whether your stockbroker has complied with all regulations since your business will suffer if your broker’s operations are negatively impacted.
A sub-broker is required to have excellent control over market trends. A sub-broker must stay abreast of events and changes daily and build an informed view to advise his clients. You should be ready on certain days, such as the day of the budget announcement, to give your clients information in real-time.
A sub-broker business is, without doubt, a profitable venture. However, it can only make you rich and be a sustainable source of earnings if you follow the right strategies and associate with the right stockbroker. A proper risk-handling technique is also required. You can follow the tips above to grow your sub-broker business and reap its full benefits.
1.Is a sub-broking business profitable?
A sub-broker business offers a high earning potential based on your partnership and number of clients.
2.How do I become a successful sub-broker?
A competent sub-broker needs to have a deep understanding of both the market and the products being offered. Having outstanding customer service skills and the ability to handle complex financial transactions are also essential.
3.How much does a sub-broker earn?
If a sub-broker chooses the correct broker, they can make up to 60% of the commission a broker receives on any given transaction.
4.How to acquire clients for the sub-broker business?
To draw customers to the sub-broker firm, you can use a variety of tactics like using social media, SEO, networking, organising events, and referrals.
5.How much does a sub-broker franchise cost?
In India, the registration costs can range from ₹ 50,000 to ₹ 1 Lakh. The security deposits and infrastructure costs vary.
6. What qualifications are required to become a sub-broker?
To start your sub-broker agency, pass NISM Series VIII certification and get a sub-broker license from SEBI sponsored by a stockbroker.
7. How can sub-brokers grow their client base?
Sub-brokers can expand their customer base by using digital marketing campaigns, publishing market content, attending trader meetups, offering webinars, and leveraging referrals.
Become a Partner & Earn up
to 1 Lakh* per Month!
Become a Partner & Earn up
to 1 Lakh* per Month!
