Seasoned sub brokers choose to work independently and build their businesses. But, if you’re inexperienced, working with a sub broker franchise is best. This way, you will get the necessary guidance and better chances of earning decent revenue.
Hence, it is crucial to understand the sub broker business model to optimize your strategies and generate more business value. You can also get more out of your customer deals and improve your income.
Keep reading to learn more about how the sub broker franchise model works!
Responsibilities of a Sub Broker and Stock Broker
To understand the sub broker business model, you need to delve into the roles of both parties involved – the sub broker and stockbroker.
A sub broker partners with a stock brokerage firm and avail services such as investment opportunities, strategies, offers and financial products. The sub broker then provides these facilities to their customers to improve their investment decisions.
As a sun broker, you will utilize all the assistance the stock brokerage company offers to guide the customers toward better returns.
Stock Brokerage Firm
On the contrary, the stock broker will offer their infrastructure and client base to the sub broker. They might also provide support and training to acquire more clients. As the sub broker works on behalf of the stock broker, the latter decides the commission rate.
All the transactions of this business model will follow government regulations. Moreover, sub brokers need to be registered by SEBI.
In addition, the stockbroker is called the franchisor, while the sub broker is the franchisee. Their partnership will work after signing an agreement.
Besides these, there are some other factors as well that explains the difference between a stock broker and sub broker.
Types of Sub Broker Franchise
Stock brokers can set the terms differently to conduct their sub broker franchise business. The most common franchise types consist of the following.
In this model, the stockbroker provides the franchising responsibility to a particular franchise in an area. They will sell the franchise rights against a fixed revenue or commission.
A remisier is an independent agent who fetches clients and customers for the stock broker. They work on a commission-based model and are not part of the brokerage firm.
In this franchise type, the remisier earns a commission when the referred customers buy products from the brokerage company.
Payment Systems of a Sub Broker Business Model
The sub broker commission rate can range between 50% and 80% of the transaction amount. However, it depends upon the earnings of the customer or the stock broker on a deal.
Franchise businesses follow multiple standard payment systems for the sub broker’s convenience. These include percentage-based and lump-sum systems. In the percentage-based system, the sub broker will revenue adding to the agreement between them and the brokerage firm. The percentage might increase according to the client turnover.
The sub broker will receive a fixed amount in every client or customer transaction for the lump sum system. This amount will be mentioned in the agreement between both parties.
Advantages of Sub Broker Franchise Model
This franchise model offers business opportunities to sub brokers who don’t have the necessary resources to begin. Other benefits of the model are –
- Business training and customer support services
- Marketing assistance for sub brokers
- Exposure to multiple investment products
- Access to a vast customer database
If you opt for a sub broker business franchise, you can work with clients from various sectors. The model also enables you to explore products like mutual funds, fixed deposits, equities, and bonds without much investment.
Try understanding all the associated rules and regulations before partnering with a stock brokerage firm. Ensure that your sub broker commission is sufficient to cover business expenses.
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