The Indian stock market is witnessing unprecedented growth, attracting a new wave of investors seeking expert guidance. For those with a keen interest in finance and an entrepreneurial spirit, venturing into the sub broker business offers a compelling opportunity. A sub broker, now more commonly referred to as an “Authorised Person” (AP) by SEBI, acts as a crucial intermediary, connecting investors with larger stockbroking firms and facilitating their trading journey. This comprehensive guide delves into what it takes to become a successful sub broker in India, exploring the business model, earning potential, regulatory landscape, and practical steps.
What is a Sub Broker (Authorised Person)?
At its core, a sub broker or Authorised Person is an individual or entity appointed by a SEBI-registered stockbroker. They operate as an extension of the main brokerage, providing essential services to clients, including account opening, trade execution, and investment advice. Unlike a full-fledged stockbroker who is a direct member of the stock exchange, a sub broker leverages the infrastructure and regulatory framework of their affiliated brokerage firm. This partnership allows aspiring entrepreneurs to enter the financial services sector with comparatively lower initial investment and access to established platforms and research.
How to Become a Sub Broker in India
To start a sub broker franchise stock broking business, one must meet specific eligibility criteria and complete the application process through a registered stockbroker. Here’s how to get started:
Eligibility Criteria
Minimum age: 18 years and above
Educational Qualification: Typically, a minimum of 10+2 (Higher Secondary Certificate) from a recognized board.
Financial Knowledge: A strong understanding of financial markets, investment products (equity, derivatives, mutual funds), and market dynamics is crucial.
Certifications: Obtaining certifications from the National Institute of Securities Markets (NISM), particularly those relevant to equity derivatives and mutual funds, is often mandatory and highly beneficial.
Clean Record: The applicant should not have any history of defaults on stock exchanges, criminal cases, or instances of fraud.
Application Process
Choose a reputed stockbroker: Select a brokerage that offers strong backend support, competitive revenue sharing, and access to technology.
Fill out the application form: Provide KYC documents including PAN, Aadhaar, bank details, educational certificates, and a passport-size photo.
Submit exchange forms: Complete the AP registration with NSE/BSE through the broker.
Pay registration fees: Typically nominal, though fees may vary by broker.
Verification and training: After document verification, brokers often provide training and access to the trading platform.
Once approved, you can start onboarding clients and earning commission-based income.
Investment Requirements and Earning Potential
Compared to setting up an independent brokerage, the investment required for a sub broker franchise is considerably lower.
- Security Deposit: Many brokerage firms require a refundable security deposit, which can range from ₹50,000 to ₹3,00,000, depending on the firm and the business model chosen.
- Operational Costs: These include office rent (if applicable), internet, electricity, and marketing expenses.
- Technology: Basic computers and reliable internet are essential. The primary broker typically provides the trading software.
The earning potential for a sub broker is directly linked to the volume of business generated by their clients and the agreed-upon revenue-sharing model. A larger, active client base and consistent trading volumes translate to higher commissions. Successful sub brokers often leverage their networks, marketing efforts, and strong client relationships to maximize their income.
Technology and Support Systems
Modern sub broking heavily relies on technology. Reputable brokerage firms provide their Authorised Persons with:
- Advanced Trading Platforms: User-friendly web and mobile trading platforms for seamless trade execution.
- CRM Systems: Tools for client management, tracking leads, and managing client portfolios.
- Research & Advisory Tools: Access to in-depth market research, analyst reports, and advisory tools to assist clients.
- Marketing & Branding Support: Collaterals, digital marketing assistance, and branding guidelines to help sub brokers establish their presence.
- Training & Development: Regular training programs on market trends, new products, and compliance requirements.
- Dedicated Relationship Manager: Support from the main brokerage to resolve operational issues and provide guidance.
Challenges and Benefits of the Sub Broker Business
Like any business, sub broking comes with its own set of challenges and benefits.
Challenges:
- Regulatory Compliance: Staying updated with evolving SEBI regulations and ensuring complete compliance can be demanding.
- Client Acquisition & Retention: Intense competition in the market necessitates continuous efforts to attract and retain clients.
- Market Volatility: Fluctuations in the stock market can impact trading volumes and, consequently, earning potential.
- Technological Adaption: Keeping pace with rapid technological advancements in the financial sector.
Benefits of Starting a Sub Broker Franchise:
- Low Entry Barrier: Relatively lower initial investment compared to full-fledged broking.
- Leveraging Established Brand: Association with a reputed stockbroker lends credibility and trust.
- Comprehensive Support: Access to advanced technology, research, and operational support.
- High Earning Potential: Unlimited earning potential based on client base and trading activity.
- Entrepreneurial Freedom: Opportunity to build and grow your own financial services business.
In conclusion, the sub broker business, evolving into the Authorised Person model, presents a lucrative pathway for individuals passionate about the stock market. By understanding the regulatory framework, leveraging technology, and focusing on client relationships, aspiring sub brokers can build a successful and rewarding career in India’s dynamic financial landscape.
