Brokers are exiting the industry at an above average rate, according to one of Australia’s leading trail book experts.
Trail Homes cited natural aging of the original mortgage broker demographic, plus stresses brought on by the pandemic and the Royal Commission as the key reasoning behind many decisions to sell up and move on.
“The starting point is that we have seen a significant uplift in brokers looking to exit the industry,” said Nick Young, Managing Director at Trail Homes.
There’s a few reasons that have contributed to that, in no particular order. The first is that we have an industry for twenty plus years, and it’s only natural that someone who started in their late 30s, early 40s around twenty years ago is now looking at retiring. It’s like pine trees: you plant them and they have grown, you have a crop each year that is looking to leave. That’s going to be an ongoing feature of the industry.
The next is that we’ve seen a lot of compliance changes in the last few years, and combined with that, we’ve seen a lot of disruption due to Covid. In my humble opinion, any sort of change or disruption causes people to rethink and some of them have decided that now is the time to exit the industry.
We’re seeing what you might see as an above average amount of people leaving beyond what might be seen as the natural flow who reach the end of their careers.
Those three things have combined to see a significant uplift, and I don’t see it going away.
When brokers call it a day, they have the choice to sell their trail books, and for Young, there is one key factor that they need to bear in mind if they choose to cash in.
“The first thing is to go and talk to your accountant,” he said. “I keep stressing this again and again, because you have to understand the tax consequences of keeping your trail book as opposed to selling it.
It’s really boring, but if you can access the Small Business tax concessions that were put in place by the Howard government, you can potentially sell tax-free. As a successful broker, if you’ve done well, you’ll be in a high tax bracket.”
“Invariably, when they sell up, people forget about the huge amount of tax they’re paying and the idea of getting all the money up front tax-free rather than paying a higher rate of tax and keeping it, is absolutely black and white. You should look at selling and making a clean exit as opposed to keeping the trail book.”
