A sub-broker (authorised person) is an individual who represents a stockbroker’s brand. They assist investors by handling securities’ transactions through the broker and act as agents to enable trading activities.

The stock market has gained a lot of popularity among retail investors and the year 2024 saw an average of 4 million new demat accounts added each month. Retail or institutional investors are not allowed to trade directly on the stock exchanges. They must work with a stockbroker and maintain a demat account to participate in the secondary market.

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To meet the rising demand, a new business opportunity of becoming a sub-broker (authorised person) has materialised. A sub-broker (authorised person) is an individual/agent/business that represents a stockbroker under the broker's brand. They help investors by managing their stock transactions through the broker.

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Through this partnership, the sub-broker (authorised person) can deliver financial services and products on behalf of the franchisor. In this blog, let’s understand how sub-broker franchisees work to facilitate trading:

How do Sub-Brokers (Authorised Persons) Operate?

Sub-broker (authorised person) franchisees benefit from the brand name of their franchisors which makes it easier to attract new clients. They have got access to financial products which allows them to meet the diverse investment needs of their clients. Franchisors also provide operational support like trading tools and platforms.

Sub-brokers (authorised persons) also get access to training programs so that they are equipped with the latest and most relevant market knowledge. Along with technical knowledge, sub-brokers (authorised persons) also need to have sales techniques to expand their business. They get marketing and advertising support from the franchisor without any personal investment.

What are the Duties of a Sub-Broker (Authorised Person)?

A sub-broker's (authorised person’s) main objective is to help their franchisor expand its client base. By getting new investors and encouraging existing clients to reinvest, sub-brokers contribute to the growth of the stockbroker’s portfolio.  They also provide investment advice, and after-sales support. Let’s understand the things they do to generate profits and improve trading:

Client Acquisition

The first thing sub-brokers (authorised persons) undertake is that they try to get new clients through networking and advertising. They host seminars and online webinars to educate people about stock market investing who can end up becoming clients.

Client Servicing

Sub-brokers (authorised persons) can use their existing local connections to build clients. In the process, they must provide personalised assistance and act as the main point of contact to help clients when it comes to trading and investments.

Order Placement

Sub-brokers (authorised persons) also handle client orders. They must make sure the transactions are transmitted to the main broker’s trading platform and keep their clients updated about the same.

Market Research and Analysis

Sub-brokers (authorised persons) also conduct research on financial instruments and multiple industries. Based on their analysis - they can provide recommendations to help clients make informed decisions.

Risk Assessment

Sub-brokers (authorised persons) act like investment managers for their clients so they discuss client's financial goals and take account of investment horizons. This information allows them to recommend investment products based on their risk appetite.

Compliance and Documentation

Compliance with regulatory guidelines and the brokerage firm's policies is a top priority. Hence, sub-brokers (authorised persons) must make sure that clients are providing truthful data for KYC documentation and adhering to anti-money laundering requirements.

Knowledge Building

Trading in the stock market requires experience. Traders can make 10 profitable trades and earn Rs 10 lakhs, but it takes only one trade to lose it all. Hence, sub-brokers must organise training sessions and webinars to explain technical concepts and strategies for risk management.

Account Maintenance

Sub-brokers (authorised persons) allow clients to maintain their trading and demat accounts by updating personal information and preferences. They also make sure all account related paperwork is accurate and up-to-date.

Margin and Risk Management

Sub-brokers (authorised persons) also assist clients in managing their client’s trading positions by providing good margin in their accounts. Along with that, clients are advised to use a stop-loss order to cut down on unexpected downfall.

How do Sub-Brokers (Authorised Persons) Earn Profits?

Sub-brokers (authorised persons) earn their profits through commissions from client transactions. Their profit margins depend on the trading volume and the terms of their brokerage agreements.

Conclusion

Sub-brokers (authorised persons) act as intermediaries between clients and the main brokerage firm i.e., the franchisor.  The performance of a sub-broker can influence client satisfaction and the growth of the brokerage business.

Sub-brokers (authorised persons) use resources from reputed brands to establish brokerage firms and work closely with clients for their investments. This model succeeds because brokers and sub-brokers (authorised persons) complement each other’s roles which ultimately benefits the clients.

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