Sub-broker model, Remisier model, and the Master Franchise business model are basically the three of the most prominent business models you can find in any stock broking house. The sub-broker fees and those of the other two models varies with the firm which you are choosing to join.
Sub Broker Fees Models
Let us look at each of these model’s fee structure closely in this review for a clear understanding.
Sub-Broker Model or Franchise model Fees:
A sub-broker plays a major role in providing tips and recommendations to its clients to be profitable in their trade and investments. He closely assesses the market for this purpose. The stockbroking firms require a certain fee for providing sub-brokership to their client.
This sub-broker fee is generally a security deposit amount that is refundable in nature. It implies that the money is returned back to the person when he wants to quit the partnership model. The reason why a sub-broker fee is charged this fees is to make up for any nonpayment or delay in payment during the course of the partnership.
To give you an idea, Angel Broking charges a fee of ₹50k to ₹2 Lakh as the security amount and for Kotak Securities, this amount can go as high as ₹3 Lakh.
Besides the security deposit, a one-time registration fee per segment is also needed along with charges for using the company’s trading software. This varies with the stockbroking house you chose to partner with. These charges are non-refundable in nature.
The registration fee is not that high and is generally in the range of a few thousand rupees. For example, SEBI sub-broker registration charges of ₹10k charged per year.
Then there are a few registration and renewal charges levied by different exchanges termed as:
BSE sub-broker registration fees
NSE sub-broker renewal fees
SEBI sub-broker renewal fees
In a few cases, these charges are levied off while in others you need to pay.
In certain cases, it is necessary to set up the office infrastructure to carry out the business operations. You have to make sure that your office is set up in the city’s prime location where the population is high. This will make sure that your office comes to the notice of the potential clients easily and they do not end up opting for some other stockbroking house while taking too long to reach your office at some remote location.
The cost of office infrastructure varies with your business goal objectives and can be in the range of ₹20k for starters. There is no upper limit as it is your choice on how much expense you’d like to carry out in your office.
Certain basic furniture is needed in the office, along with a set up that creates a good ambience for the visiting clients. This is the first impression you are going to make, so some investment is needed to accomplish it. It can also be considered to be a part of the sub-broker fees which you need to invest on your own.
There should be stable internet connectivity in the office along with a desktop or the laptop which you will use for trading purposes and carrying out other business processes online. Besides this you should be prepared for a monthly electricity bill, telephone bill and the office rent. So, all these together form the investment or the sub-broker fees, needed to start a fully functional business setup.
All these operational charges vary from city to city and are less than 5% of the overall sub-broker fees you may incur.
In general, the sub-broker model provides revenue sharing of 40%-80% of the total revenue generated. This depends on the size of your client base, the brokerage generated by them, the initial investment you have done in the form of the security money, as well as your negotiation skills.
It is necessary to skillfully negotiate the revenue sharing percentage before a registration process without fail to get a higher share. This model is suitable for those who intend to set up their own business and pursue a career in the stockbroking industry. It needs a lot of investment to obtain a license and become a broker.
Thus, a person with an entrepreneurial bent of mind can land at the less expensive sub-brokership option by paying the sub-broker fees and setting your infrastructure to expand the existing business of the concerned stockbroking firm.
Remisier model Fees:
Unlike the sub-broker model, this model does not need you to set up any office, as you can operate from the office of the sub-broker or even work from the comfort of your home. But, since most of the actions are online today, you will have to make sure that you have a high-speed internet connection along with a good desktop.
You need to refer the clients in this model and the rest of the onboarding process will be carried out by the sub-broker. This includes motivating them by telling them how the firm will help them in meeting their business goals, explaining them the business model thoroughly, registering them, etc.
In general, there are no fees for the Remisier model like the sub-broker fees in the sub-broker partnership model. So if you are someone who wants to partner with a stockbroking firm with zero initial investment, least responsibilities and get extra income then you can go for the Remisier model.
In this model, the general, the person gets a 10%-30% commission depending on the firm for which he works as a Remisier. It is suitable for someone who intends to run his own business besides being a part of the stockbroking industry. If you have good social connectivity, referring the clients and adding them to the company’s existing customer base becomes easier for you.
Once the client whom you have referred starts trading, you can enjoy a certain commission. As long as you are able to bring potential clients to the company, you can enjoy a consistent commission and this can continue throughout your life.
Master Franchise Fees:
This model is offered by a few stockbrokers only and is not so popular as the above two business models.
In this model, many sub-brokers are mapped under one Master Franchise in a region where he operates without any competitions from the sub-brokers also. Thus in this model, you can operate freely to ensure your business development without the fear of contenders.
It is necessary to make sure that the sub-brokers functioning under you are efficient enough to generate a decent revenue consistently. Just like the sub-broker fees, the master franchise fees generally range between ₹1 lakh – ₹3 lakh. This is for setting up the office and other associated costs. However, the operational costs and the sub-broker fees associated with this business model is relatively higher and is consistent in nature.
With this, we would like to wrap up this piece on sub-broker fees. Hopefully, you were able to extract the specific insights you wanted to know about. Nonetheless, if you still have any queries or doubts, feel free to let us know in the comments section below.
At the same time, if you want to start a stockbroking business or want to become a sub-broker, let us help you in taking the next steps forward:
More on Sub-brokership
If you wish to learn more about sub-brokership, here are a few references for you: