How Do Sub Brokers Make Money

Now that you seem interested in the Sub Broker business model, you must be wondering what exceptional opportunities does the broker provide and how do sub-brokers make money? In this article, we’ll cover all about this money-making plan to help you out.

First of all, do you actually understand the term Sub Broker?

A sub-broker is generally a person who acts as a middleman between the stockbroker and the client or as said, the customer.

They are represented as the extended branch of the broker house who work on behalf of the broker and thus are closely involved in client retention and customer handling. Financial advisory tasks also add to their list of roles and responsibilities.

Post this brief introduction of who a sub-broker is, let’s jump straight into the earning model;

Sub Broker Business Model

One question that haunts every mind before starting a share market business is how do sub-brokers make money or what is their business model?

Considering the business model, Sub broker works as a partner with the reputed stockbrokers to fulfil the following duties: 

1. Handling the Business development, which means getting new clients for the firm who are interested in trading in the capital market. And thus increasing the business volume.  
2. KYC Verification, for this segment of the onboarding process, holds the integrity of the entire security market under the surveillance of the regulatory body, SEBI.
3. Tracking Sales Activities, along with trade transactions made by their clients a sub-broker needs to submit the data to the stockbroker on a regular basis.

Along with this, they need to perform certain tasks with clients like:

Providing research tips to maximize their profit. 

• Analyzing the market to do fundamental and technical analysis of stocks thus guiding their client in making an informed decision. 
• Well a sub-broker earning is entirely based on the clients onboarded or retained, meaning commission model. 

Sub brokers earn commission not only on the brokerage which is taken in the form of sales done by the broker but also on the products and services offered to the client. 

Sometimes the hustle is until the onboarding and then the sub-broker earns a commission on the brokerage each time the client makes a trade transaction in his entire life span. 

After understanding how do sub brokers make money it is now time to know-

How much can you earn through this business model?

How Much Sub Brokers Earns?

A sub-broker is a full-time employee of the stockbroker firm. And yet their earning is based on a commission model. 

Unlike Remisiers whose earnings range between 10% to 30%, Sub brokers earn a much higher commission which is about 50% to 80%, considering the hectic list of functions they perform. 

The above concept can be understood with the help of an example;

Roni is a new trader with a decent understanding of the stock market. So he reaches out to a sub-broker. 

The task of that person would be to understand the type of trader Roni is and help him get started with his trading journey,

Suppose Roni is intrigued by the intraday type of trading. And with the help of a sub-broker, he trades for about ₹500000 in multiple trades. He pays the brokerage of ₹40000. 

As per the minimum percentage, the commission earned by the sub-broker would be-

50% of ₹40000;

Which is ₹20000.

While the maximum earning would be;

80% of ₹40000

Which is ₹32000

Hence in this scenario, the sub broker’s earning commission would be between ₹20000 to ₹32000.

This is just one case, this earning varies based on different factors such as the services provided to the customer, brokerage fee of the sub-broker, trading segment in case the customer is availing the advisory service and many more. 

Brokerage Calculation Method

Although under commission model comes different types of methods through which the sub-broker partner earns money:

• Percentage based commission model
• Lump-sum based commission model
• Hybrid commission model

Under a percentage-based commission model, a sub-broker makes money based on the percentage of the brokerage paid by the client or the trader. Say for example,

A client called Suresh has a demat account with ABC stockbroker which charges about 0.20% brokerage of total turnover. So he purchased about 1000 shares at ₹400 each. 

So total turnover would be (1000*400)= ₹400000

Hence the brokerage earned by the sub-broker, in this case, would be :

0.20% of ₹400000,  which is;

₹800

But one should keep in mind that this percentage may vary as per the agreement between the stockbroker and the sub-broker.

Next comes the lump-sum model, in which the sub-broker decides a fixed lump-sum amount that would be charged from the client irrespective of the turnover value. 

Let’s say in the above example, Suresh is pre-informed about the amount he would need to pay as teh brokerage, which is ₹500.

Now even if his turnover value comes to be 5k or 50k, he will need to pay only ₹500 to the sub-broker. 

And finally the hybrid commission model. As the name suggests, this type comprises both the percentage and lump-sum model. Let’s say for example,

The turnover value in the above example is ₹500000. And as per this method, 

Let’s say a fixed value of ₹1000 has been defined for the turnover of ₹200000.  And for the remaining exceeded value, the brokerage would be charged 0.20% of the turnover. 

Hence, for the remaining ₹300000 turnover value, the brokerage that Suresh would be paying is ;

0.20% of ₹300000, which is;

₹600.

Hence the total earning of the sub-broker will be ₹1000+₹600

= ₹1600

But,

Earning of the sub-brokers depends upon the tasks they perform. Their job includes a proper infrastructure with all the necessities that align with their work. Hence they make money by choosing the right broker with the right kind of commission model. 

Conclusion

So what do you think? Are you the one with the zeal to outgrow and build your own trading business under the brand names of top brokers, after having the gist of how do sub brokers make money?

If your answer is Yes! Get started today.

But first, make sure you choose the right broker to partner with, after the complete analysis of your financial goals and your investment capital availability as this franchise model would require you to deposit some security money which after a period of time gets refunded.  

Also, consider the revenue sharing percentage of the broker along with its trading platform as this would be your base for the commission you earn.

Once you are doing with the homework, you are good to go;

Happy Investing!

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