The Role of Sub-Brokers in a DIY Investing World: Why They Still Matter?

By Praveen Naidu, Head of Partnerships, m.Stock by Mirae Asset

In the era of digital transformation, investing has become more accessible than ever. With a smartphone and an internet connection, anyone can open a demat account, analyse stocks, and execute trades with just a few taps. This rise of DIY (Do-It-Yourself) investing has significantly changed the landscape of financial markets. However, while technology has enabled more participation, it has also created new challenges—lack of financial literacy, increased speculative trading, and a rise in financial frauds.

In this evolving ecosystem, sub-brokers (Authorised Persons, or APs) remain critical to investor success. They provide the human expertise, trust, and risk management that a digital platform alone cannot offer. As financial markets grow more complex, the role of APs is not diminishing—it is evolving.

Is DIY Suitable for All Investors?

While DIY investing offers convenience and control, it is not suitable for everyone. Many investors lack the time, expertise, or risk-management skills needed to navigate financial markets effectively. 

Emotional biases, such as fear and greed, often lead to poor decision-making. Furthermore, regulatory complexities and tax implications require expert guidance. This is where sub-brokers play a crucial role in ensuring investors make informed, strategic choices.

The Changing Investment Landscape

India’s rapid economic growth and digital adoption have led to an unprecedented rise in retail investing. Consider these statistics:

• India has over 17 crore demat holders, expected to reach 30 crore+ in the next five years.
• Smartphone penetration is at 65%, with internet access at record-low costs.
• 78% of India's population uses mobile phones, with average monthly data consumption of 18.5 GB per user, making digital investing more accessible than ever.
• India has the lowest internet costs globally, at just Rs.13.98 per GB, further enabling online trading and investing.
• 99% of the population holds an Aadhaar card, and there are over 60 crore PAN holders, ensuring greater financial inclusion and regulatory tracking.
• A younger, tech-savvy population is more willing to engage in equity markets.

Yet, while access has increased, so has risk. Many new investors enter the markets with the goal of making quick profits, leading to a surge in speculative trading, Ponzi schemes, and financial scams. This imbalance between opportunity and risk has widened the gap in client-broker dynamics. 

The Economic Survey 2024 highlights a significant surge in retail investor participation in India's derivatives market, with their share increasing from 2% in 2018 to 41% in 2024. This rapid growth is primarily attributed to a "gambling instinct" among investors seeking quick profits. The survey warns that such speculative behavior could result in substantial losses during market corrections, potentially deterring retail investors from the capital markets.

The Case for Sub-Brokers in a DIY World

With the push toward self-directed investing, the natural question arises: Do investors still need sub-brokers? The answer is a resounding yes—for several key reasons:

1. Bridging the Awareness Gap & Preventing Fraud
   • The rise of quick-money trading schemes has led to massive investor losses.
   • APs act as trusted advisors, guiding clients away from speculative traps and frauds.
2. Human Expertise in a Digital Age
   • While algorithms and robo-advisors provide data, they lack the human judgment needed to manage real-world risks.
   • APs offer personalized advice, helping investors make informed decisions based on market trends, risk appetite, and financial goals.
3. Regulatory Knowledge & Compliance
   • With market regulations constantly evolving, investors often struggle to keep up.
   • APs ensure that clients remain compliant with SEBI regulations and best practices.
4. Product Diversification: More Than Just Equities
   • Modern investing is not just about stocks—mutual funds, bonds, ETFs, insurance, PMS, and AIFs are essential components of wealth management.
   • APs who offer a diverse range of products become indispensable financial partners rather than mere transaction facilitators.
5. Risk Management & Market Volatility Guidance
   • DIY investors often struggle during market downturns, making impulsive decisions.
   • APs help clients navigate volatility, ensuring that long-term wealth creation remains the priority.