In recent years, the Indian stock market has grown by leaps and bounds, thus presenting a myriad of opportunities for the modern youth, particularly people like you who want to tip their toes into the world of investments and the share market. In fact, the boom in the industry has also contributed to the rise in the number of reliable and skilled brokers, as well as sub broker agencies.
In this post, we’d talk about how you can create your own sub broker business in India. This starts with understanding the profession and the business model. Such a business model can help you make money easily particularly when you team up with the right brokerage firm.
Introduction to the term ‘sub broker’
The National Stock Exchange defines sub broker as a person who’s not a trading member of the stock exchange, and yet acts on behalf of a trading member, either as an agent, or for assisting investors in dealing in securities.
Trading members instersted in having sub brokers, must enter into an agreement with them, detailing the rights and responsibilities of both parties, and those acting as sub brokers must obtain registration with SEBI before starting operations.
So to put it simply, sub brokers aren’t much different from brokers in terms of their role but act as intermediaries in investment trading. So, as you might have guessed already, the sub broker mediates between the broker and the client. They bring new clients for the brokers and assist in investments.
Who can become a sub broker?
Sub brokers are also known as authorized persons, and as they are not members of the stock exchange, they need to work under a registered broker, which we’ve already mentioned above. So, once you decide on starting your own sub broker franchise, you will get access to the broker’s brand name, trading tools/ products, and services. Moreover, your association with a major brand will help you win over clients more easily.
Here’s a deep dive into the criteria for the same.
- You should be at least of 21 years of age.
- You should have a minimum educational qualification of 10+2. However, having a Bachelor’s degree is always an advantage.
- You should have some working knowledge of the market.
- You should possess knowledge of computers as you would need it to manage the client’s account as well as the trading platform.
- You would need good communication skills.
- You must also clear the basic NIMS modules in equities, commodities, mutual funds, and F&O.
How much working capital do you need for setting up a sub broker business?
When looking to start your own sub broker franchise, you must keep the costs and the initial investments in mind. To put it simply, here’s what you’d need.
You’d need to pay an initial deposit to the principal broker. This may range between INR 50,000 to INR 3,00,000 – a one-time cost that has to be paid to get the license to start a sub broker agency.
Apart from the initial deposit, you’ll also need to pay a registration fee of INR 15,000 to 20,000. This is also a one-time cost.
Apart from the two above-mentioned costs, there are costs of setting up an office space, installation, money for laptops/ computers, televisions, workstations, and more.
All that being said, you will also have to consider monthly payments – be it in the form of office rent, salary to staff, telephone and internet bills, or other expenditures that is usually associated with setting up a business/ office.
Sub broker franchise: Points to note
To succeed in any business, you would need to build your clientele. You can either do so by building a natural database consisting of people whom you know, such as friends, colleagues, neighbours, and acquaintances, who have some interest in stocks. You can even reach out to people on social media sites such as Facebook and LinkedIn.
If you do not want to reach out to your friends and acquaintances, you can start cold calling. Many modern sub broker agencies resort to cold calling to keep the business running and flourishing.
Regular engagement and meeting with clients is an absolute must. In addition to this, you would also have to entice new clients to invest, and this would not be possible without regular meetings and communication. Thus, you must work on a pipeline of new leads.
Keep your clients updated with news on upcoming stocks, changes in rules and regulations (if any), and new investment opportunities. Nurturing your clients, would help you win their confidence. At times, even a simple email or a message can work wonders.
Till now, we’ve only talked about how you can woo clients and make sure that the money keeps coming in, but there’s more to building a sub broker franchise than meets the eye. Word-of-mouth advertising and networking does open the door to a lot of possibilities. Networking with fellow agents is a great way of remaining updated and expanding your business.
Another way to remain updated is to enroll yourself in different short- and long-term courses or sign up for investor education programs conducted by SEBI occasionally. Sometimes, even the broking firms conduct training workshops to help the sub brokers remain abreast of any and all stock market news. So, as an entrepreneur with a sub broker franchise of your own, you are expected to wear many hats.
Key takeaway
Believe it or not, sub broking is clearly one of the most promising avenues for business growth and thus, can be a brilliant revenue opportunity for you. If you keep the basics in mind, you can conveniently begin working as a sub broker or set up your own sub broker business – a challenging yet rewarding business proposition.
By creating your own sub broker agency you get incentives over and above the commission you get. Thus, your company earns more per trade, and so does the main broker. Thus, this business is a win for both parties.
So what are you waiting for? Put your skills to use now.