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How do Sub-broker Franchise Work to Facilitate Trading

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Introduction

Sub broker franchises work in association with large brokerage firms and provide trading services to their clients. This association is facilitated by stock brokers and runs on a commission sharing basis. In this blog let’s discuss how the working of sub broker franchise in India, but before that we will try to understand what these franchises are exactly. 

Additional Read: 7 Benefits of Being a Sub-Broker

What are Sub Broker Franchise?

Sub brokers franchises are intermediaries that offer trading and investment services to their clients on behalf of a brokerage firm. The stock brokers, in turn, are intermediaries to their clients and the stock exchange. The brokerage firms that offer such franchise programs, partner up with sub brokers, or authorized persons, and assist them in providing services on their behalf. They share a part of their revenue to the franchises on a commission basis. 

Additional Read: How to become sub broker

Key Benefits of Being a Sub-Broker Franchise

  • Sub broker franchise entities leverage established brand recognition, facilitating easier client trust and acquisition.

  • Access to a broad spectrum of financial products enables a sub broker franchise to meet diverse client investment needs effectively.

  • Enhanced operational support from the franchisor, including advanced trading tools and platforms, optimises sub broking activities.

  • Higher client retention rates are often achieved by sub broking under a renowned brand due to consistent service quality and brand assurance.

  • Comprehensive training programs provided to sub brokers ensure they are equipped with the latest market knowledge and effective sales techniques.

  • Marketing and advertising support from the franchisor helps sub broking increase visibility without significant personal expenditure.

  • Lower startup costs compared to independent setups make entering the sub broker franchise field an economically viable option.

  • Favourable profit-sharing arrangements allow sub brokers to earn significant income based on their performance and client brokerage generated.

  • Continuous professional development opportunities are available for sub brokers, enhancing their skills and growth potential.

  • A robust support network within the franchise framework aids in navigating regulatory requirements and maintaining compliance, ensuring smooth operations.

These advantages make becoming a sub broker franchise an attractive option for those looking to enter the financial services industry with the backing of an established brand and comprehensive support system.

What Are The Conditions To Become a Sub-Broker?

  • The minimum educational requirement for a sub broker is passing the 12th grade, although a degree in higher education is preferred for enhanced credibility and depth of knowledge.

  • Sub brokers must have a solid understanding of the capital markets and expertise in managing finance-related transactions to successfully navigate the complexities of the financial industry.

  • Effective communication skills are crucial for sub brokers to attract and retain clients, as these skills are essential for explaining complex investment strategies and building client trust.

  • Sub brokers should stay updated with the latest financial, economic, and policy changes to provide timely advice that could impact the stock market and investment decisions.

  • A comprehensive understanding of various financial instruments, including equities, commodities, mutual funds, and currencies, is necessary for sub brokers to offer diverse investment solutions to their clients.

Functions of a Sub-Broker Franchise

  • A sub broker franchise plays a crucial role as a mediator between clients and brokerage firms, offering a gateway to financial markets.

  • Sub broking involves acquiring new clients by promoting investment opportunities that attract a diverse investor base.

  • Sub brokers guide and support their clients with personalised advice on market trends and investment strategies, enhancing client decision-making.

  • They ensure efficient transaction execution within the financial markets, maintaining a high standard of service delivery for client satisfaction.

  • Regular interaction with clients helps sub brokers build strong relationships, fostering trust and long-term engagement.

  • By organising educational seminars and workshops, a sub broker franchise empowers clients with knowledge, boosting their confidence in trading.

  • Sub broking tasks include marketing the franchisor’s services, utilising local insights and networks to maximise outreach.

  • They play a pivotal role in compliance, adhering to regulatory standards to uphold the integrity of financial operations.

  • Sub brokers also handle operational aspects like account management, providing comprehensive support to clients throughout their investment journey.

  • Finally, they ensure that all business practices align with legal requirements, protecting both the client's and the franchisor’s interests.

These functions outline the diverse responsibilities of a sub broker franchise, emphasising its integral position within the financial trading industry.

How do Sub-broker Franchise Work?

Sub brokers franchises have a set of responsibilities that they perform and here is a list of those responsibilities. 

1. Client Acquisition and Onboarding

Sub brokers have to engage in marketing activities and invest in business development to attract clients. The brokerage firm does assist in many cases by offering marketing material and other resources. 

Once a client is on board, the sub broker has to help the client set up an online trading account and open a demat account. This involves assisting them with adding their KYC (know your customer) details, filling up documentation, and making sure regulations are followed. 

Then the sub broker will help the client with an initial training process where the client is taught how to use the trading platform, if needed. In addition, the basic principles and concepts related to investing in the market and some trading strategies are also shared with the clients at this stage. 

2. Trading Facilitation

Sub brokers execute trading orders for the clients on the exchange, through the broker’s platform. This would also include offering advice regarding trading decisions, and tips to help them make better decisions. The brokerage firms often have advanced trading platforms that come with nuanced tools for research and analysis. The sub brokers bring their clients access to these tools through the brokerage firm. 

3. Customer Support and Service

Managing the client’s trading accounts and tracking their portfolio for monitoring performance are part of the sub broker’s role. Helping clients to handle technical difficulties and any unforeseen glitches will also be done by the franchise. Besides this the sub broker also offers regular and precise updates on how the market is performing and about opportunities to invest, through various forms of communication. 

4. Compliance and Regulatory Adherence

The sub broker has to make sure that the compliance requirements are met on behalf of the clients. This includes the submission of KYC documents and the compliance of Anti-Money Laundering (AML) regulations.  The sub broker also has to report all of the client's transactions to the broker and regulatory authorities. The records are to be maintained and submitted with utmost accuracy.  In addition, the franchise also has to assist in regular audits that are organized by regulatory bodies. 

5. Additional Services

Besides the responsibilities that already exist, some sub brokers take up additional responsibilities to increase their revenue. These services might include portfolio management, financial planning, among other similar services. These services will be charged to clients separately by the sub broker. 

6. Networking and Business Development

Handling client relationship management is a key part in the sub broker’s responsibilities. This is coupled with attempts to bring referrals from the existing clients to expand the clientele. Besides these tasks, the sub broker also has to invest in business development activities to handle communication and bring in more clients. 

How do Brokers assist the Franchises

The sub broker franchises do have many responsibilities to handle, but they are not alone in these endeavors. The brokerage firms offer quite a bit of support for them to handle these requirements. The brokers offer training programs to educate the sub brokers, marketing material and resources to help with promotional campaigns, and access to a large network, technical support, and their reputation and brand value as well. 

Even with compliance requirements, which can prove to be a huge administrative burden, brokerage firms offer a lot of support to get them done. The sub brokers usually have a fair amount of assistance from the broker. When a sub broker blends all the support with their efforts, their responsibilities can be efficiently met with ease. 

Conclusion

In summary, authorised persons play a pivotal role in linking clients and brokers by offering personalized trading services. Their role is to leverage the resources of an established brokerage firm with reputation and brand value, and offer work closely with clients assisting them with their trading needs. This model works because of the complimentary responsibilities of the brokers and sub brokers in giving their clients what they want. 

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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Frequently Asked Questions

What is a sub broker franchise, and how does it work?

Answer Field

A sub broker franchise functions as an intermediary, enabling individuals or entities to operate under a large brokerage firm's branding. This model provides the sub broker with the necessary tools and platforms to access financial markets and serve clients effectively.

What are the eligibility criteria to become a sub broker?

Answer Field

Eligibility to become a sub broker typically requires a minimum educational qualification of a 12th pass or higher, a strong understanding of financial markets, and robust communication skills to effectively interact with and manage clients.

How much investment is needed to start a sub broker franchise?

Answer Field

Starting a sub broker franchise usually involves an investment that may include a licensing fee, security deposits, and initial operational costs. The exact amount can vary based on the franchisor's requirements and the scope of services offered.

What are the key benefits of becoming a sub broker?

Answer Field

Being a sub broker offers multiple advantages such as access to a wider range of financial products and services, the backing of an established brand, and support in marketing and operational aspects, which can lead to higher earnings and client satisfaction.

How do sub brokers earn revenue and what are the profit margins?

Answer Field

Sub brokers generate income primarily through commissions and fees based on the transactions and services they provide to clients. Profit margins can differ significantly depending on the trading volume, market conditions, and the specific terms of the brokerage agreement.

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