The advent of the disastrous covid-19 pandemic significantly altered the market, leading to the loss of jobs for various individuals in India. However, it also increased the appeal of some forgotten roles due to the changes in user behavior.
One of the most impacted roles was that of a sub-broker in India.
Before the pandemic, users investing in stock were few and far between. As the appeal of the stock market increased, people began experimenting with small investments, later moving on to dedicate a good chunk of their monthly salaries to acquire profits.
At the start of 2022, it was confirmed that the Central Depository Services (CDSL) consisted of 89.7 million active Demat accounts. Compared to 2021, this was a 63% increase!
While this exponential rise can be credited to several factors, our focus will lie on how it has increased the number of individuals starting sub brokership without deposit. But before diving into the financials, let us understand the role of a sub-broker.
What is a sub-broker?
A sub-broker is a professional who acts as a middleman between investors and stockbrokers.
The definition might have you needing clarification. Do investors and stockbrokers or stock broking platforms need a link between them? Can they not invest directly?
That is true. While several investors choose to conduct their investment journey independently with adequate research, everyone might need more time. In such cases, a sub-broker helps investors understand market sentiments and offers them financial advice.
Sub-brokers are professionals who lack a trading license but require a certification from the Securities and Exchange Board of India (SEBI) to function officially. Hence, they work for certain stockbrokers and help them onboard new investors.
Roles and responsibilities of a sub-broker
While sub-brokers do not possess an official trading license, they are certified to offer investment advice and assist investors on behalf of stockbrokers in making wise choices. Here are some typical roles and responsibilities synonymous with sub-brokers.
- Assist new investors in opening up a Demat account and standard procedures like know-your-customer (KYC)
- Approach clients on behalf of stockbrokers to convince them to open a Demat account and start investing
- Familiarize investors with an overall picture of the market and inform them about the corresponding risks and opportunities
Given the nature of their role, sub-brokers are also mandated to fulfill specific criteria.
What are the requirements for becoming a sub-broker?
SEBI has laid down some uniform guidelines for individuals looking to receive their sub-broker certifications. So how to become a sub broker in India? The principal guidelines for sub-broker eligibility include the following.
- Completion of higher secondary education (10+2)
- Knowledge of financial markets and transactions with a working understanding of the stock market and its associated elements like Demat and trading accounts
- Technical proficiency with a basic understanding of Microsoft Excel
In addition to these basic sub-broker eligibility criteria, these professionals are expected to possess excellent communication skills to interact with potential investors and convince them to open a Demat account.
How much do sub-brokers make?
Unlike stockbrokers, sub-brokers are not eligible to become trading members. Hence, they are not authorized to acquire brokerage charges from investors.
Then how do sub-brokers make money?
However, sub-brokers earn a fluctuating commission based on the investments of clients that they helped procure for a stockbroker. Whenever the investor uses their Demat account for an investment, a small portion of their total investment value is provided as sub-broker commission.
Fortunately, the sub-broker commission increases as per the investment. The commission per investment value is predetermined between the stockbroker and the sub-broker to work out a mutually beneficial arrangement.
This commission model is also why sub-investors work for stockbrokers with relatively higher brokerage charges. Increased brokerage charges equate to higher commission percentages, resulting in higher incomes.
Should you become a sub-broker?
If you become a sub-broker, you can learn about the financial market while addressing your financial woes. As you evolve into a more proficient sub-broker, you can leverage your position to discuss an increase in commission.
Alternatively, you can apply your learnings in this market to open an undertaking of your own. For instance, working as a sub-broker will familiarize you with the intricacies of being a stockbroker, something you can build on and start your brokerage firm. You can also build on your financial learnings to pursue other avenues.
Summing up
Finally, answering how much does a sub-broker earn in India, it is safe to say that the sub-broker earnings vary according to the brokerage amassed by the stockbroker and the number of investors they bring to the platform. Hence, the pay of a sub-broker is always scalable.
You also gain significant experience in the stock market and learn about the space’s nuances. Ultimately, it will be a distinctive learning experience far better than any theoretical exposure.
