How do sub-broker franchises 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 franchises?

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

How do sub broker franchises 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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