Brokers preparing for retirement or a new career path have traditionally been faced with few options when it comes to their trail book, says Freshwater Financial Services partner, Sean Richardson, but a new business model may provide a viable alternative.
He tells Australian Brokers that loan writers are typically presented with three options when preparing to move out of the industry, out of ownership of a business or into retirement.
“You try and sell equity in your business, you just sell your business (transfer of ownership) or you retain ownership but you outsource the function of managing the portfolio in your absence. Our perspective is where [brokers] don’t feel they’re going to get value from the sale and no natural succession plan in place, we’re providing an additional option where we provide intense, consistent management.”
Richardson says the industry’s relatively short history is partly to blame for a lack of exiting options, but with the average broker age creeping towards 50, he says it’s time to start thinking hard about succession strategies.
A bad experience following the acquisition of a broker’s portfolio, says Richardson, made him aware of a gap in the market for a portfolio manager that gets involved with the client well before the broker actually leaves - lessening stress levels for borrowers and maximising post-retirement returns for brokers.
“There are many who’ve been in the industry for ten or more years that are having a hard time getting a good deal on their book,” he says, noting that the sale often won’t cover even basic living costs for those who choose to exit the industry.
Another issue Richardson has come across is brokers who are burnt out and ‘jaded’, eager to drop everything (including clients) and pack up shop. His model, he says, provides an incentive to maintain those relationships and continue to send referrals to the portfolio manager.
“This outsourced specialised management service has the capability to extend the life of the trail book, thus improving the capital return over that offered from the short term benefit of a complete sale.”
He says the service includes monthly reconciliation reporting, regular communication with clients and consolidated reporting across aggregator books. Brokers are charged a one-off joining fee and monthly management fee based on a negotiated percentage or flat fee arrangement.
“Many brokers receive income streams from multiple aggregator sources but nobody’s out there offering centralised reporting like we’re going to be doing. We’re actually going to provide a broker a consolidated portfolio report, geographic spreads, fixed variable splits, interest only P&I – nobody else in the industry does that.”
