Retail brokerage Sharekhan has discontinued the services of its network of direct selling agents (DSAs) as a challenging market environment made this mode of client acquisition unfeasible, said three people familiar with the matter. The services of these DSAs were abruptly terminated a little over a month back.
?Sharekhan began delaying its payments to some of the DSAs,? said one source. ?Then, without warning, the brokerage decided to do away with their services.? As per one agent, DSAs that had recruited additional agents and opened offices specifically to cater to Sharekhan?s requirements, have suffered substantial losses. ?It was wrong on their part to stop our services suddenly,? he said.
According to sources, Sharekhan erred in using the acquisition model, focussing on the number of clients added rather than profitability. ?In the past few months a lot of dead accounts started accumulating and that possibly might have led the company to take the drastic step,? said one of them. ?There could have been an internal compliance issue that prompted this move,? added a senior broking official.
Sharekhan started its DSA network towards the end of 2007. Roughly 15% or 1,500 accounts used to be added per month through this network as per one source. The DSA arrangement worked out cheaper than the internal cost of customer acquisition through the sales team, he added. ?Sharekhan was mostly selling advance brokerage schemes through the DSA route,? said the broking official.
Sharekhan operated through about a dozen DSAs with a combined strength of around 250 individual agents. The brokerage also had a small in-house team to manage these DSAs. Sharekhan?s DSA network was the most successful among domestic brokerages, sources said. ?Brokerages such as IIFL, Kotak, Angel Broking and Anand Rathi also have a DSA network but they are not as aggressive as Sharekhan?s was. Besides, Sharekhan?s per account payment was the highest in the industry,? said the agent.
Sharekhan paid anywhere between R1,500 and R1,800 to its DSAs. ? DSAs that did high volumes got as high as R2,200 per account,? said the agent.