Sub-broker is one of the vital business models of stockbroking houses in India. The sub-broker income in India is decent enough with respect to the functions carried out by the person. There are numerous stock broking houses in the country such as Sharekhan Franchise, Angel Broking Franchise, Kotak Securities Franchise, HDFC securities Franchise etc.
Sub-broker Income Basics
The sub-broker income range really depends on multiple factors. It has a lot to do with the quantity and quality of your client base, then there are dependencies on the geographical location of your business, the amount of competition in that area from other stockbrokers and so on.
However, one of the most important factors that decide in figuring out the sub-broker income is the business model you choose to enter into with the stockbroker.
Most of the top stockbroking houses generally offer three or more business models. These include the sub-broker or the franchise model, the Remisier or the referral model and the master franchise model. There could be other modes of partnerships available but these are the most prominent models used.
A brief overview of these prominent business models is discussed in this article.
The Franchise business or the sub-broker business model:
Just like the main broker, the sub-broker has a vital role to play in the stockbroking industry. This is because he acts as the connecting link between the buyer and seller, assisting the seller for efficient trading as well as addressing his concerns.
A sub-broker income or the salary of a business partner is basically dependent on the business operations he undertakes to make the venture successful. The registered stockbrokers run this partnership business for which they obtain a broking license first. The cost of this license is significantly high and can’t be easily afforded by everyone.
But there are people who aspire to become a broker and owing to lack of enough capital, they fail to do so. In this case, such people can still begin their own business by opting to become a sub-broker for which no license needs to be taken. The investment involved in setting up the sub-broker business varies with the company you are choosing.
It is primarily the sub-broker business which has a major contribution towards the expansion of stock broking house. He is not a direct trading member of the stock exchange but serves on behalf of the trading members. He signs a sub-broker agreement with the main broker for registering himself as a sub-broker.
We can even refer the sub-broker as the intermediate person that coordinates the business operations between an investor and a stockbroker. It is essential to get the sub-broker registered in securities and Exchange Board of India before starting the operations.
The sub-broker income in India includes different commissions involved in the business. He helps the clients to take the right trading and investment decisions because everyone wants a good return after making an investment. Such functions increase the importance of a sub-broker in the stockbroking industry. The better services he is able to provide, the better will be the stockbroker’s value in the market.
There are numerous factors on which the sub-broker income in India depends. Here are those listed:
- The first thing is the number of clients the person is able to acquire to enhance the existing customer base of the company.
- Advertising – In general, the stockbroking house supports the sub-broker in marketing activities such as TV advertisement, publicity through radio, signboards, pamphlets, and mouth to mouth publicity, all of which play a vital role in the client acquisition process and makes it easier.
- The next factor is the revenue generated by the clients, which determines the sub-broker income. During the registration process, when he signs the agreement, a certain revenue sharing percentage is fixed.
The revenue sharing is generally in the range of 40%-80% that varies with the stockbroking firm of which the sub-broker is a part.
In most of the cases, the sub-broker is entitled to a greater revenue share and the remaining is kept by the main broker. No one will generally tell you this, but you must always bargain the revenue percentage before signing the agreement. If you have good negotiation skills, you can bring things in your favour.
There are certain stock broking houses which set stringent eligibility criteria along with a high-security deposit for becoming a sub-broker. Though this amount can be bargained, you should know that the revenue shares you are entitled to depend on the initial amount you have deposited. So higher the security money you deposited, higher will be your revenue share.
One more factor that determines a sub-broker income in India is the size of his client base. Suppose you already have a business set up with many clients working under you and you have opted to become a sub-broker. Or else, you may not own a business but have very strong social connectivity. In such cases, it becomes easy to have a very good client base and this has a direct effect on the total revenue generated.
To give you an idea, let’s take a quick example:
Let’s say you have a client base of 100.
On average, each client generates a brokerage of ₹5000 per month.
Thus, the total brokerage generated by your client base would be: ₹5000 X 100 i.e. ₹5,00,000
Now, if you have an arrangement where the revenue sharing is kept at 60-40 where you take the bigger chunk, then 60% of the total brokerage generated becomes your revenue.
In this case, it will be 60% X ₹5,00,000 i.e. ₹3,00,000.
The numbers taken in this example are not far away from ground reality and in case you are looking to move into such a business for long-term, getting to these numbers will not be much of a difficulty.
This is also known as the referral model of the stockbroking houses and is suitable for someone who wants to earn extra income besides working in his own business. It has the least roles and responsibilities in the stockbroking industry. This is the reason the sub-broker income in India is not very much as compared to other financial geographies of the world.
A Remisier can refer his friends, relatives or anyone in his social circle. After referring the clients, his function is over as the rest of the functions will be carried out by the sub-broker. This includes convincing the client to trade with the stockbroker, providing him marketing support, trading platforms, research report, and trading platform whenever needed.
In general, a Remisier is entitled to only 10%-30% commission when the client referred by him starts trading with the stockbroker.
For instance, Zerodha offers a remisier business partnership model offering a flat 40% revenue sharing to start with. This revenue sharing percentage increases with the increase in the overall brokerage generated by the partner.
Thus, in this case, if you are able to generate a brokerage of ₹1,00,000 through the clients referred by you, then, you will be bagging away ₹40,000 for that month. That’s good, right?
Master Franchise model:
This business model resembles the sub-broker model. When in a particular region a Master franchise works, no other sub-brokers are allowed to operate there. This model is offered by a few stockbroking houses only. It requires you to invest a certain amount ranging from ₹1 lakh – ₹3 lakh to become a master franchise.
Just like the sub-broker income in India is 30%-80% of the generated revenue, a Master franchise is entitled to 60%-85% of the total brokerage generated. Besides this, whenever a person begins a franchise model after your referral, you will be entitled to a certain amount.
The primary difference between a sub-broker and master franchise business model is that as a sub-broker, you are an isolated business partner with the main stockbroker. However, a master franchise takes care of the businesses of multiple sub-brokers and franchises in that location.
Therefore, the overall sub-broker income in this partnership model is multi-fold in nature.
With this, we would like to wrap up this piece on sub-broker income. Feel free to let us know any of your queries in the comments section below.
Furthermore, if you are looking to become a sub-broker or a stockbroking business partner in any form, let us assist you in taking the next steps forward:
More on Sub Brokers
If you wish to learn more about sub-brokership, here are a few references for you: