Share Broking Franchise Business | AICTE approved B-school in Bangalore

Posted by Prof. Susmitha TP On 22/02/2022 11:28:12

The crippling impact of Covid -19 is being felt in all walks of human life, across the world. But in the share market of India (BSE & NSE) after the initial drop in March – June 2020, recovery has been sharp and as a result, multitudes of people have joined as investors in the share market. Share broking franchise business has also become popular and profitable. AICTE approved MBA college in Bangalore

Let us ponder on the question!       What is a Sub Broker or Broking Franchise?

A sub-broker is basically an agent who sets the investor and he is not a trading member of the stock exchange.  Nevertheless, he helps them on their behalf for dealing in securities. Stockbroking franchise is one of the methods for local distribution of the products and services to its clients. To start a stock market franchise business, one must first partner with a registered brokerage firm. Such a tie-up will bring you access to the broker's brand name, trading systems, and catalog of products and services.

Some of the eligibility criteria of a franchisee are “he/she should be at least 12th passed ideally; a person should be a graduate.  He/she must have basic knowledge of computers. He must have excellent managerial skills along with in-depth knowledge of equity, commodity, mutual fund, etc. PGDM in Bangalore

The process of becoming a franchisee is very simple.  For lending, a franchise, the franchise manager of the broking house meets the client who is opting to take the franchise and tell him all the rules and regulations about the company.  He talks about the charges and the procedure. Generally, it takes 15 to 20 working days for the franchise agreement to complete.

An Authorized Person or Sub Broker is a concept where any SEBI registered Stock Broker can provide its franchise to any company or person who is willing to follow all rules & regulations of SEBI & have a good network of investors to act as a sub-broker on behalf of the franchiser. The Products, Services, Offers, etc. served by the franchisee are the same as offered by the franchiser.  Not only this, but the Franchisee can also provide extra benefits to their clients which are not offered by the Franchiser.  This business works as a brokerage sharing model where the Franchisee generally keeps maximum share & franchiser gets a low share. AICTE approved PGDM college in Bangalore

There are various kinds of franchises:

Master Franchise: In this type of franchise, the stockbroking house allows and hands over the control for all kinds of franchising activity in that area, territory, or city.  This means that for every franchise outlet that will open in your territory with your reference, then you will receive a fixed percentage as a franchise fee (according to the agreement signed).  In stock broking houses, the master franchising method is very common and is utilized widely across India.

For example:  If the stockbroking house agrees to give you 50% of every franchise outlet that opens in your territory and the cost of opening a franchise outlet is Rs.100,000 then you will receive Rs.50,000 as a franchise fee.  Also, you will receive a royalty of a fixed percentage of the brokerage generated from time to time, according to the signed agreement.

Authorized person (AP): It is a kind of franchising, where the authorized person is appointed as a franchisee by the stockbroking house and also by the trading member of NSE, who provides the AP agent the access to the trading platform of a stock Exchange.  Therefore, the Authorized Person is registered with the stockbroker and SEBI regulates the stockbroker and through a stockbroker, it oversees Authorized Persons.

Remisier: A Remisier is a representative of any stock broking house company and works as an agent on a commission basis.  In the Remisier process, the stock company provides the agent very less percentage of revenue sharing generated as brokerage, which is given mainly in 30:70 ratios by most of the stock Broking Companies, where 30% of the generated revenue goes to the reminder agent and 70% revenue goes to the broking firm.  Sometimes the broking house provides space in the office to the Remisier agent to deal with the clients.

The Remisier is responsible for their client base and will also be responsible for security deposit and fees segregation in various segments on behalf of the clients.  To become a Remisier agent one has to sign the agreement with the stockbroking house and make some deposit amount to the broking firm.

Introducer: Another similar way of earning money through a Stock Broking house is to become an “Introducer”. Here, an introducer is an agent of a stockbroking house who simply gives the reference of highly prospective clients who are willing to open Demat accounts or want to take the franchise of that broking firm.  As an Introducer, his only job will be to refer the most prospective clients and if any conversion happens then he will get the commission for every conversion.

Share broking franchise business has several advantages and disadvantages as well. Stockbrokers must choose the right brokerage house to mitigate the risk of failing. Proper training and skill set are also needed for financial success.

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