Succession Planning in the Australian Mortgage Broking Industry.

As I sit down to reflect on the current state of the Mortgage Broking industry in Australia, one issue keeps surfacing that deserves our attention: succession planning. While there’s much discussion around lead generation, compliance changes, or the digital transformation of lending processes, succession planning often doesn’t make it to the forefront of the conversation. However, as our industry continues to mature, it’s becoming clear that this is a crucial topic that brokers, business owners, and industry stakeholders need to prioritize.

In this newsletter, we’ll dive into what succession planning means for Mortgage Brokers, why it’s vital to the long-term health of our industry, and how brokers can create plans to secure their legacy while ensuring a smooth transition for the next generation of professionals.

Why Succession Planning Matters

Let’s face it: the Australian Mortgage Broking industry is aging. Many of the brokers who pioneered this space are approaching retirement, and the new generation, while capable and enthusiastic, often faces a steep learning curve.

As an industry, we’ve enjoyed rapid growth over the last few years. Today, Mortgage Brokers are responsible for three quarters of all new residential loans in Australia, a testament to the trust consumers place in brokers. However, the growth of individual businesses within the industry has led many brokers to focus more on day-to-day operations than on long-term planning. This "here-and-now" mindset can create an unintended vulnerability when it comes to passing the baton.

Succession planning, at its core, is about creating a sustainable business model that can outlive its founder. It ensures that clients are not left in the lurch when a broker retires, sells, or steps back from the business. It’s also about preserving the value brokers have worked hard to build — because, without a clear plan, the value of a brokerage can dissipate quickly if not managed properly.

4 Key Benefits of Succession Planning

For Mortgage Broking in Australia, succession planning offers several key benefits:

1. Client Continuity: Clients build trust with their brokers over years, even decades. When it’s time for a broker to exit the business, a solid succession plan ensures a seamless transition for clients, which maintains their loyalty and trust.
2. Business Valuation: Brokers often don’t realize that their business value is tied to their personal involvement. If there’s no clear plan for succession, the value of a business can decrease. Having a plan in place helps maintain and even enhance the value, making the business more attractive for potential buyers or successors.
3. Industry Stability: A well-thought-out succession plan helps maintain the overall stability of the mortgage broking industry. As businesses transition smoothly, we avoid potential disruptions in service, compliance issues, or market inefficiencies.
4. Legacy and Reputation: For many brokers, their business is more than just a source of income; it’s their legacy. A proper succession plan helps safeguard that legacy, ensuring that the values, culture, and client relationships they’ve cultivated continue to thrive under new leadership.

5 Challenges Facing Succession Planning

Despite the clear importance of succession planning, there are several challenges that brokers face when trying to create and implement such a plan.

1. Emotional Resistance: One of the most significant barriers is emotional. Many brokers are highly invested in their businesses, both financially and emotionally. The thought of letting go or passing the business on to someone else can be difficult to face. This is especially true for owner-operators who have built their business from scratch. The emotional attachment can often lead to procrastination or avoidance of succession planning altogether.
2. Complexity in Valuation: Determining the true value of a brokerage business can be tricky. Notwithstanding the value of your trail book, unlike other industries where there are fixed assets or inventories, the full value of a Mortgage Broking business often lies in intangible assets like client relationships, trust, and brand reputation. Assessing these and arriving at a fair value can be a challenge, making it harder to structure a smooth sale or handover.
3. Finding the Right Successor: Finding someone capable of taking over a brokerage is not always easy. Ideally, the successor should have industry experience, a strong understanding of client relationships, and the ability to maintain or grow the business. Whether a successor comes from within the business or externally, ensuring they are the right fit is critical.
4. Regulatory Hurdles: The Mortgage Broking industry in Australia is heavily regulated, and any change in ownership or control must comply with strict requirements. Navigating these regulations and ensuring that compliance is maintained during a transition can be daunting.
5. Training and Mentorship: The need for skill transfer and mentorship is often overlooked. Succession isn’t just about passing on the ownership of a business but also ensuring the successor can maintain the level of service and expertise that clients expect. This requires a period of training and mentorship, which needs to be part of the overall plan.

7 Key Steps for Successful Succession Planning

So, how can mortgage brokers create a solid succession plan that addresses these challenges and secures the future of their businesses?

1. Start Early: It’s never too early to start thinking about succession planning. Whether you’re just starting your career or nearing retirement, having a plan in place will give you peace of mind and provide a clear roadmap for the future. Many experts suggest starting the process at least five years before you expect to exit the business. This gives you ample time to find a successor, transfer knowledge, and address any issues that may arise.
2. Conduct a Business Valuation: Understanding the value of your business is a crucial first step. Engage a professional who can help you assess your business’s worth based on its financial performance, client base, and market position. This valuation will be essential if you plan to sell your business or bring on new partners.
3. Identify a Successor: Finding the right person to take over your business is perhaps the most critical element of succession planning. This could be a current employee, a family member, or an external buyer. What’s important is that they have the skills, knowledge, and drive to maintain and grow the business. If you plan to groom someone internally, start preparing them early, giving them increasing levels of responsibility over time.
4. Create a Formal Plan: A succession plan should be documented and formalized. This includes setting a timeline for the transition, outlining the roles and responsibilities of the successor, and detailing any financial arrangements. It’s also essential to consult with legal and financial advisors to ensure the plan is sound and that all regulatory requirements are met.
5. Develop a Client Transition Strategy: Your clients are the lifeblood of your business, and ensuring their smooth transition is key to maintaining the value of the business. Communicate openly with clients about the succession plan, introduce them to the successor, and ensure that they feel confident in the new leadership. The more seamless the transition, the better the outcome for all parties involved.
6. Maintain Regulatory Compliance: Succession Planning in the Mortgage Broking industry must comply with all regulatory requirements set by the Australian Securities and Investments Commission (ASIC) and other relevant bodies. Ensure that the transition process meets all necessary legal and compliance obligations.
7. Implement a Mentorship Program: Knowledge transfer is a vital component of succession planning. Consider implementing a mentorship program where you can work closely with your successor over an extended period. This will help them understand the nuances of the business, build relationships with clients, and develop the leadership skills they need to succeed.

The Future of Succession in Mortgage Broking

Looking ahead, the importance of succession planning in Australia’s mortgage broking industry will only grow. As technology reshapes how we do business, and as the demographic of brokers shifts, the industry will face new challenges and opportunities. Younger brokers entering the industry today may be more tech-savvy and adaptable to change, but they’ll still need to learn the fundamentals of client relationship management and trust-building — areas where experienced brokers have excelled.

For veteran brokers, the challenge is twofold: embrace the opportunity to mentor the next generation and ensure that their hard-earned businesses are passed on in a way that preserves both their legacy and client trust.

Succession Planning isn’t just about exit strategies; it’s about securing the future of your business, ensuring continuity for your clients, and helping the Mortgage Broking industry remain robust and competitive. For every broker, whether you’re at the start of your journey or nearing the end, now is the time to think about what comes next. The best time to start planning for succession is yesterday — the second-best time is today!

Conclusion.

We Mortgage Brokers are very creative problem solvers by nature, it's what makes us so good at what we do. Yet the really granular part of building a business of high value that can easily be transitioned to new ownership, well that's a skill set and knowledge base that often slips by,

Rest assured, I get it! I've been there too, just like you are now. Creating, building (and exiting successfully). So to be sure to make your future exitr the best outcome possible, reach out for a confidential chat about how Succession Planning can help you. Book your free chat with me here ? [Discovery Call].

About the Author

Ash Playsted | GM Broker Performance - RECLUDO Group

Ash is both a dedicated BUSINESS STRATEGIST and MINDSET TACTICIAN who relentlessly pursues his 'higher calling'. Ash been has been building businesses personally plus continuously learning for more than 40 years, all of it deep inside the Mortgage and Finance industry. He's written thousands of loans, hired and mentored hundreds of brokers and business owners, started, built, and successfully exited, multiple award winning Mortgage businesses himself. When he's not immersed helping clients create massive value you can find Ash with his loving family, including his wife Kaz, two children, two dogs, two cats and three parrots! Ash believes in keeping physically and mentally fit and is constantly developing himself through exercise of body, mind and spirit.