The Indian stock market is growing at a great pace, especially in the past few years. The NIFTY 50 stock market index has almost doubled itself in the past five years.
While the investors are taking advantage of the booming market, you as a sub-broker can also enter the market and build a profitable business venture out of it.
Many stock brokerage houses offer a sub broker business model. If you want to join as a sub broker, you have multiple options, and here lies the big question: which brokerage house to choose to partner with and how to choose them.
Here are some tips for people wanting to join the market as sub-brokers. These tips are related to how to choose the best brokerage house to join as a sub-broker –
- Market share of the broker
The first thing you should look at is the market share of the brokerage house. For example, there are 10 stockbrokers in the country, and the daily trading volume in the stock market is Rs. 1 lakh. Now suppose out of these Rs. 1 lakh of trading volume, from stockbroker A’s platform Rs. 25000 trades got executed, so the market share of stockbroker A is 25% of the market.
So, you have to check which brokerage house has the highest market share in the market as per trading volume. This helps in understanding the popularity of the stock brokerage house. If the stockbroker you are partnering with is a popular one, it will be easier for you to get clients on its behalf and sell them the products and the services the broker offers.
- Products and services
Taking a cue from the above point, the next thing you need to check is the list of products and services offered by the brokerage house. Whether the brokerage house offers all types of investment instruments like equity, currencies, commodities, futures and options, and other investment vehicles like mutual funds, bonds, and others, or whether the broker only provides limited products like equity or currencies and others.
The more products the brokerage house offers, as a sub-broker, you can offer the same to the prospective clients. This will help you fetch more clients and thus help you earn more as commission. Apart from products, you need to check the services the brokerage house provides to the clients. Whether there are research and advisory services or not, PMS services or not, and other facilities that traders, as well as investors, look for.
- Revenue sharing model
One of the crucial things you need to evaluate and compare is the sub-broker franchise revenue sharing model. This means whether the broker shares revenue or a fixed amount. Mostly, a percentage of the revenue generated by the client you referred and manage, is shared with you.
Suppose, your client traded securities worth Rs. 10 lakh in a month and the brokerage revenue sharing model is 40 %- 60 %. This means the company will keep 40% of the revenue while sharing 60% of the revenue with the sub-broker.
This percentage varies from broker to broker, and you need to check and compare the same to find the best revenue sharing model offered in the market.
- Support facilities and training
For becoming a reputed sub-broker you not only would need good publicity and marketing but also good knowledge of the products, and a lot of support like backend support, and administrative support from the brokerage house you join.
Thus, while choosing the broker, you need to check which all training they provide and the support facilities they have for the sub-broker franchise.
- Brand value and experience: Brand value and the experience of the brokerage house matter a lot too. If you are choosing a broker who has just entered the market, you will have to struggle to get clients, while if you choose a brokerage house which has already been in the market for years, and has a brand value, it will be easier for you to grow your sub-brokership business.
Finally, you need to check the sub-broker eligibility that the broker has kept for enrolling the sub-brokers into their sub-brokership program. If you qualify for the same, you can apply to become a sub broker with the brokerage house.
To build and expand your sub-brokership business, the first crucial thing you need to do is find the right broker to join. The tips above can help you in the process of finding the right brokerage house for yourself.