Sub Brokership – Meaning, Types of Business, Roles, Cost, Commission & more

The stock market has surged by 200% over the past two years, and the sub brokership business has also seen rapid expansion.

Because of the exponential growth of the stock market, the stock broker franchise business has become a potential earning avenue.

According to Moneycontrol, the sub broker franchise model has grown 3x in the last 2 years.

It is estimated to grow 30% year over year until 2027, indicating significant growth potential in the sub-broker business and suggesting it will continue to thrive.

If you are new to this business and want to know more about it, read this article well!

What is Sub Brokership or Sub Broker Business

What is a Sub Broker Business?

A sub-broker business, prominently known as a stock broking franchise, is a business where individuals act as sub-brokers and assist clients in trading and investing.

They work under a stockbroker, help clients create a Demat account, and train them to trade in top-performing stocks.

They earn a commission from the stockbroker for the clients’ successful trades. Simply put, they act as advisors to the clients and guide them throughout the trading journey.

To become a stockbroker, you must get permission from SEBI, which is quite expensive, time-consuming, and involves a lot of paperwork.

Because of all these difficulties, ordinary people cannot become stockbrokers. Considering this, SEBI has introduced a new concept called sub-brokers or authorised persons.

It is very easy to become a subbroker. You must take a franchise from any SEBI-registered stockbroker and offer services to the customers directly like any other stockbroker.

You are responsible for acquiring clients and also activating them to start trading.

Types of Sub Broker Franchise Business

Three primary business models are available: the authorized person, sub brokership, and master franchise, which we will discuss in detail here.

We will also examine the eligibility criteria, responsibilities, investment required, and revenue sharing offered in each model.

Sub Broker or Authorised Person Model

The most well-known business model in the stock broking industry is an authorised person. It is also known as sub brokership and is provided by all prominent stock brokers.

To become an authorised person, you must first satisfy some eligibility criteria. Let us take a look at it.

Eligibility Criteria to Become an Authorised Person

To become an authorised person with any stockbrokers available, you must fulfil the following eligibility criteria.

  • The individual willing to be an authorised person must be a citizen of India.
  • He must have a minimum qualification of 10th.
  • There should be no criminal record on him.

An individual, LLP, or a private limited company, anyone with the eligibility criteria, can become an authorized person.

Documents Required to Start a Sub Brokership

Documentation is almost the same for all the business models. As an individual, if you want to become an authorised person to any stock broker, you have to get approval from the exchange in the first place.

That’s where the need for the documents comes. The following documents need to be submitted to become an authorised person.

  • Aadhar
  • PAN card
  • Stamped authorised person agreement signature
  • Latest photograph
  • Bank details proof with a canceled cheque

GST is not mandatory for individuals willing to become authorised persons. Also, after submitting the documents, the process may take up to 10 days, which varies from broker to broker.

The documentation is slightly different for a partnership firm, LLP, or private limited company compared to an individual.

  • Partner or director PAN
  • PAN of the firm
  • Stamped authorised person agreement signature
  • Latest photograph
  • Besides, you must submit registered documents from your partnership firm, LLP, or private limited company.
  • Also, the GST certificate, the firm’s current account details, and the canceled cheque must be shared.

Roles & Responsibilities of a Sub Broker

The individual willing to become an authorized person has specific responsibilities that he must fulfill.

As soon as you become a subbroker under a stockbroker, you will be assigned a subbroker code to use to carry out the business. Check out all the responsibilities an authorised person has.

Client Acquisition

After setting up the business, a sub-broker must first acquire a new client. Then, under the subbroker code, the individual must help the client open a Demat account.

If you are new to the business and want new clients, you must rely on digital marketing techniques, connections, or telecalling.

To run your business hassle-free, you have to do this every day. For instance, if you have 100 – 150 active clients, you can quickly generate regular revenue for one to two years.

Client Activation

The next step is client activation. In this step, you must prepare customers to invest and trade. To generate revenue, you must help your clients start their trading journey.

The truth is that around 30% to 40% of the people do trading on their own, but for 60% to 70% of the clients, you have to conduct training sessions and teach them how to trade and invest.

After that, they transfer funds and start trading. The stockbroker provides the necessary training to the sub-broker, for that matter.

Moreover, the stock brokers conduct training sessions where clients can join to learn trading. It is essential to undergo this process.

Otherwise, the clients will create an account, and you won’t generate revenue.

Client Servicing

Another responsibility of an authorised person is servicing. In this stage, the individual is responsible for resolving the clients’ issues or queries.

As a subbroker, you have to provide regular service to the clients. For this, the stock broker also lends its full support.

There are two to three significant queries in servicing for the clients. The first is trading-related issues, followed by transaction-related issues, and then trading calls.

The stock broker provides relevant weekly training in all these queries and will assign a dedicated relationship manager.

Depending on your client’s number, you can add a dealer who can provide proper service. There are a few stock brokers who can also help you with hiring.

If you provide adequate surveys to the clients, they will be happy with your services and may also provide referrals.

You can also cross-sell financial products like mutual funds, insurance, etc. So, providing regular and proper service to the clients is important.

Sub Broker Franchise Cost or Investment

If you want to own a franchise for yourself in this model, it costs around 25k to 2 lakhs, which differs from broker to broker.

Let us look at the top five stock brokers and their commissions. Angel One, IIFL Securities, and Kotak Securities charge a minimum of Rs.50,000 as a franchise fee.

On the other hand, Sharekhan charges a minimum of 70k, and Motilal Oswal charges a minimum of 1 lakh as a franchise fee. The franchise fee is refundable.

The stockbroker refunds it after deducting 10 to 15% of the cost.

Other than the franchise fee, some investment is required to run a day-to-day business, though it is not compulsory. You can run the business from the comfort of your home at zero cost.

If your revenue has increased, you can set up an office and hire individuals to expand the business. This will significantly impact profits and speed up business growth. It will take 30k to 50k every month.

Sub Broker Commission and Revenue Sharing

Revenue sharing is yet another aspect we have to cover in this model. Again, revenue sharing is different for different brokers.

In this model, the revenue sharing is generally 50% to 75%. Small brokers like Choice Broking, SMC Global, Tradebulls, etc., look for customers with high revenue share.

On the other hand, major broking houses give 50% to 70% of commission. Look at the revenue sharing of each of the top stock brokers.

  • AngelOne gives 50% flat revenue sharing, and you can negotiate it up to 60% with time.
  • Sharekhan, Motilal Oswal, and Kotak Securities offer a 60% starting commission, which can be negotiated up to 70% with time.
  • IIFL Securities starts the commission with 60% revenue sharing, which increases to 75% in one to two years.

Apart from commission, you can earn revenue even by acquiring new clients. Almost all the brokers pay 300 to 500 for account opening and activation.

For example, if you have acquired 50 clients monthly, you earn 15k to 25k for just activation.

Stock Broker Partner or Remisier Model

Zerodha introduced this partner or remisier model to the stock broking industry. The remaining stock brokers have followed Zerodha’s footsteps and added this model to their offerings.

The eligibility remains the same for this model as well. However, the documentation is a little different than the previous model.

Documents Required to Become a Stock Market Partner

In this model, individuals willing to become stockbroker partners must submit the below documents.

To become a partner of any stockbroker, an individual should have PAN, Aadhaar, bank details, and a canceled cheque.

You can become a stockbroker partner in 2 to 3 days. Suppose you register through a partnership firm, LLP, or private limited company other than the stamp authorized person agreement.

In that case, you must submit all other documents generally required by the authorised person.

Roles and Responsibilities of the Stock Broker Affiliate Program

The partner or remisier role is very limited in this model. The responsibilities include:

  • The remisier is only responsible for client acquisition.
  • The stock broker takes care of the other things like client activation and servicing.
  • So, you get a minimal revenue share in this model.

As you are only entitled to acquire clients, your expenses are meager. Some stockbrokers, like Motilal Oswal, IIFL Securities, and AngelOne, allow you to convert into a sub brokership model.

You only need to submit additional documents and invest extra. Because of this option, people generally start from the partner model, and when the business tends to witness growth, they convert it to an authorised person model.

This will increase the earning opportunities.

Cost or Investment Incurred by Stock Broker Partner

In the sub-broker partner model, the franchise fee is minimal or may be zero.

  • Upstox and Angelone’s investment fee is Rs. 3000, with no exchange charges.
  • The Zerodha partner program, on the other hand, charges Rs.11,000 as an investment fee, which is used for different registrations.
  • For Motilal Oswal Digipartner, you must pay Rs.3000 for the registration fee and Rs.2500 per exchange. If you register in all exchanges, the cost will be around Rs. 15,000.
  • Sharekhan charges Rs.5000 as registration fee.

Taking an office area to run the partnership model business is not compulsory. You can run the business even from the house.

No money goes into hiring or office. Note that these registration fees and exchange fees are subject to change.

Commission earned by Stock Market Partner

In the Subbroker partner or remisier model, revenue sharing ranges from 10% to 50%. Full-service brokers generally offer low revenue sharing, while discount brokers offer more.

  • Zerodha pays 30% to 50% revenue sharing, and Upstox pays a flat 40%.
  • Under Angelone DRA MODEL, the revenue sharing is 30% to 40%.
  • Motilal Oswal’s Digi partner model provides 30% revenue sharing.
  • IIFL Securities provides 40% to 50% of its commission share to its partners.

Other than Zerodha, all other stockbrokers provide a commission of 150 to 500 for every new client acquisition. Also, you can earn Rs.150 to 300 for new client activation.

If you acquire 50 clients in a month, in a partner model, you make 150 to 500 for acquisition and 150 to 300 for activation, earning up to Rs.15,000 to Rs.40,000.

Other than this, with revenue sharing, you make enough money.

Stock Broking Master Franchise Model

For the unversed, the Master Franchise Model is almost closed and is only provided by small brokers.

Earlier, Motilal Oswal, AngelOne, and IIFL used to give this model, but now everyone has shifted their focus onto authorized person and partner models.

In this model, you will completely control the business in your designated area. There will be no sub-brokers under your management.

However, you can appoint authorised persons or partners and share the revenue with them.

Eligibility is the same as that of an authorised person, and the roles and responsibilities are similar to those of a subbokership model.

Investment by Stock Broking Master Franchise

For the master franchise model, the investment is high as you have complete control of the particular area.

Also, without your permission, there is no access to authorised persons or partners. So, the franchise fee starts from Rs.2 Lakh to Rs.4 Lakh.

It is also compulsory to have 300 sq. ft office space because you directly represent the stockbroker. Also, you must have 2 to 3 employees in the office.

Because of this, the total investment goes from 3 to 5 lakh depending on broker to broker.

Commission to Stock Market Master Franchise

As the investment is high, the revenue sharing is also high, ranging from 70% to 90%. Many master franchises take a 90% revenue share from stock brokers.

  • The commission for a Master franchise is 70% to 90%.
  • The stock broker charges 20% to 30% of the commission.
  • The Authorized person takes 50% to 70% of revenue.

Tradebull, Geogit, LKP securities, Religare Broking, etc, provide a master franchise model.

Sub Broker Business – Conclusion

This is all about the subbroker business. If you want to try this business, choose the model you think you can pull off well.

As you can see, each model is unique in its way. You can easily make a decent income from these business models with good connections.

Also, by educating yourself with the latest stock market trends, getting the required training and assistance from the stockbroker, and employing the expertise of your stock broker, you can move mountains in the industry.