How your Sub-Broker can help you in Making the Strategies for your Investment

A ‘Sub-Broker’ is not a Trading Member of a Stock Exchange but acts on behalf of a Trading Member as an agent or otherwise for assisting investors in dealing in securities through such Trading Members.

In India, anyone with the knowledge of the financial market and products can start a sub-broker business in India. Presently, the sub-broker industry has immense scope in India, as a significant proportion of the Indian population is financially illiterate, and India is a largely untapped market with less than 3% of the billion plus population of India participating in the financial markets.

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Any person with a graduate degree, knowledge of financial markets and computers can register with the SEBI and obtain a Certificate of Registration to start a sub-broker business. Anyone with a sub-broker marketing and excellent communication and interpersonal skills can help a large number of Indians to make money on the financial and stock market. As mentioned earlier, less than 3% of the Indian population participates in the financial market, which indicates a significant proportion of Indians are investing their savings elsewhere

One of the reasons a low percentage of the Indian population is involved in transacting on the financial markets is misconceptions of broker and sub-broker, a one-off case of unethical behaviour and fraudulent transaction undertaken by a miscreant sub-broker which plants the seed of fear and misconceptions regarding the broker and sub-broker business in India. Find below some facts and myths about sub-brokers which potential and regular investors need to know to gain confidence in investing in the financial and stock markets and avail services of sub-brokers.

A sub-broker can help their clients to formulate various investment strategies. Some of them are listed below.

  • Purpose of Investment – A sub-broker business can help its client formulate an investment strategy by understanding the requirements and investment purpose of their client. Is the client investing for dividend income or capital gains? Based on this information, a sub-broker can design an investment strategy to enable their client to enjoy dividend income or capital gains, as per their desire.
  • Designing an investment strategy – A sub-broker business can help its customers to formulate and create an investment strategy which outperforms in the market during a period, protects their investments and returns and provides a balance to their financial planning. For example, during a bullish run, almost every stock showed gains, but a prudent sub-broker will ensure investing in stocks by providing maximum profits and returns.
  • Analyse Risk and Returns: A sub-broker business not only studies and analyses the financial market on behalf of their clients, but also design investment plans according to the needs, requirements, future goals, risk appetite of their clients. For example, A sub-broker can diversify investments in equity or debt funds if their client is conservative and has a low risk bearing appetite.
  • Regular studying and analysis of the Financial Market: Retail and small investors do not have complete knowledge of the stock and financial markets and often rely on tips, follow the herd policy wherein they invest in stocks where everyone is investing and do not regularly study and analyse the stock and financial market. A sub-broker business periodically examines and analyses the updates and changes in the financial markets and accordingly provides their clients with advice regarding investment, buying, selling and holding decisions.
  • Builds an Investment Discipline – Often retail investors, due to their lack of knowledge of the financial markets, make many decisions regarding buying and selling of stock on emotions and instinct. Often panic during market fluctuations indulges in panic selling whereas sub-broker business stays calm in such volatility and try to take advantage of the market abnormalities to make money and gains for their clients.

While a sub-broker can help retail and small investors to formulate investment strategies, it is essential for investors to keep the following factors in mind before hiring a broker to ensure higher returns on their investment.

  1. Pricing and charges charged by the sub-broker which include account opening charges, brokerage charges, annual maintenance charges, initial deposit and margin money required and other hidden costs. Investors should gain clarity on all the mentioned charges and have these charges finalised and negotiated in writing to avoid any ambiguity in future.
  2. Range of Trading segment the sub-broker is active in as there as various investment opportunities available for retail investors which include equities, currency, commodities, IPOs, mutual funds, NCDs, FDs, futures and options, derivatives etc. Investors should narrow down the investments and products of their preference and accordingly compare options of investment and financial products available with the stockbrokers.
  3. Fund transfer process as non-bank stockbrokers are needed to move money every time their trading account dries out.
  4. Reputation and track record of the sub-broker as investors are needed to trust their hard-earned savings and investments in the hands of their brokers and sub-brokers, it is advised to select their brokers and sub-brokers by their reputation and track record.
  5. Customer service provided by sub-broker across various platforms which include as phone, email, chatbots, social media etc., complete resolution of customer queries and issues in the lowest turnaround time, easy access to customer service platforms, structured escalation in an event of non-resolution of a problem etc.
  6. Expertise of research team of sub-brokers small investors do not have enough knowledge and expertise on financial and security market and often rely on tips and advice of their brokers and sub-broker to take their investment decisions. Good investment tips given by brokers and sub-brokers are based upon the expertise of their research team. A broker or sub-broker with a knowledgeable can design highly profitable investment plans for the client.

Not everyone is a financial expert, but that does not mean that one should not take advantage of the financial wisdom of a sub-broker business to make wise, educated and well-informed investment decision. With over 97% not participating in the financial markets and a vast majority of investors lacking knowledge of financial markets, sub-brokers can expand their sub-broker business to induct more people to participate in the financial market and help their clients reap benefits of investing using smart investing strategies.

John F. Clark

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