Becoming a Sub-Broker: Roles and Responsibilities

A sub-broker is an individual or entity that acts as an intermediary between investors and stockbrokers. They play a crucial role in facilitating securities transactions and providing financial services. Acting as representatives of brokerage firms, sub-brokers engage in client acquisition, and trade execution, and offer valuable financial guidance. Understanding the functions and responsibilities of sub-brokers is essential for anyone seeking insight into the dynamics of the financial market.

Defining a Sub-Broker

A sub-broker is a person who works alongside a broker and is predominantly in charge of persuading and bringing new clients to the stockbroker’s business.

• Another term for a sub-broker is an authorised person (AP).
• Sub-brokers receive a percentage of the broker’s revenue as payment, assisting in bringing in additional customers.
• Sub-brokers play a crucial role in connecting clients and primary brokers, functioning as intermediaries in the financial market.
• The sub-broker uses their connections and sales skills to increase the broker’s clientele. In contrast, the broker receives access to a larger market without spending much time and energy on client acquisition.
• The amount of money paid to the sub-broker is often determined by the amount of business the clients they refer bring in, with a share of the profits going to them.

Difference Between Stockbroker and Sub-Broker

Understanding the key differences between a stockbroker and a sub-broker is crucial for anyone interested in the stock market. Here’s a detailed breakdown of what each one does:

Definition

• A stockbroker is a licensed financial firm with the authority to provide an intermediary to buy and sell securities, such as stocks and bonds, directly in the stock market.
• A sub-broker operates as an intermediary between the stockbroker and the client. They do not have direct access to the stock exchange but work through the stockbroker to help clients buy and sell securities. Sub-brokers provide valuable assistance to clients who may not have the knowledge or experience to navigate the stock market independently.

Direct Interaction with Customers

• Stockbrokers communicate directly with clients to understand their investment goals and perform trades on their behalf.
• Sub-brokers serve as intermediaries between clients and stockbrokers. They support clients with records and guide investments.

Statutory Conditions

• To function in the financial markets, stockbrokers frequently need licenses and certifications and are subject to strict regulatory regulations.
• Sub-brokers may conduct business under the licensed stockbroker or brokerage firm and may be subject to alternative regulatory regulations, frequently involving softer licensing standards.

Freedom

• They may affiliate on their behalf or as a group inside the brokerage companies. They are authorised to decide on investments for clients on their initiative.
• Sub-brokers normally function as representatives for a certain brokerage business. They follow the constraints provided by the brokerage.

Client Collection

• Stockbrokers are responsible for bringing in new clients and expanding their existing ones.
• At times, clients for sub-brokers come from the brokerage company. They contribute to attracting buyers to the brokerage.

Commission

• Stockbrokers receive commissions or fees for carrying out trades and overseeing client portfolios.
• Sub-brokers also receive commission payments, but often, they receive a cut of the commissions brought in by the clients they refer to the brokerage house.

Benefits of Being a Sub-Broker

Sub-brokers provide a number of benefits to their clients as well as to themselves. Here are some of the benefits of being a sub-broker.

• Financial Wisdom: Sub-brokers can gain financial knowledge and expertise in securities trading by receiving training and guidance from affiliated brokerage firms. This helps them better understand market dynamics, investment strategies, and financial instruments.
• Diverse Additional Services: Sub-brokers have the opportunity to provide a wide range of extra services to their clients. These services may consist of tailored investment advice, portfolio management, research reports, and access to trading platforms, which help create value for clients beyond basic buy and sell transactions.
• Low Investment Requirements: One of the significant benefits of becoming a sub-broker is the relatively low investment required to enter the industry. Unlike starting a full-fledged brokerage firm, the initial capital required for sub-brokers is quite low, making it a cost-effective entry point into the financial services sector.
• Income Formation: Sub-brokers receive commissions based on their clients’ trading activity to generate revenue. Sub-brokers can make a consistent income as their clientele expands and conduct more transactions. This commission-based system can offer monetary stability and room for expansion.
• Support and Infrastructure: Sub-brokers can take advantage of the infrastructure and support offered by the brokerage company to which they are connected. This includes having access to trading platforms, research resources, compliance assistance, and back-office services, which can greatly reduce the workload.
• Assistance with Client Acquisition: Several brokerage houses help sub-brokers with client acquisition by offering leads and marketing assistance. Sub-brokers may be able to increase their clientele in this way more effectively.
• Brand Association: Sub-brokers gain credibility and the trust of their clients by working with a reputable brokerage firm. Customers are more willing to trust sub-brokers connected to reputable brands with their money.
• Governance Enforcement: Sub-brokers conduct their business within the boundaries of the rules set forth by financial regulators. This guarantees that they follow moral and legal standards.
• Portfolio Maintenance Diversification: Sub-brokers may broaden their income streams by selling a wider range of financial goods and services, such as mutual funds, insurance, and commodities, as they gain experience and increase their client base.

In the end, becoming a sub-broker delivers the opportunity to create additional sources of income, knowledge of finance, cost-effective entry, support from the brokerage business and brand credibility, these benefits make it an appealing choice.

Conclusion

Authorised Persons (APs) play a crucial role in financial services, providing accessibility, guidance, and convenience to investors. They can open doors for aspiring professionals, while clients benefit from personalised service and diversified investment opportunities. However, adherence to regulatory standards is essential. You can join the Share India partner program to learn more about sub-brokers. For this go to the Share India website and look out for the perks and eligibility to become a sub-broker.

Frequently Asked Questions (FAQs)