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The brokerage landscape in Australia is made up of three tiers: the sole practitioner, the boutique, and the enterprise.
Neither are better or worse than the other. Each comes with its own unique flavour and there is a viable and prosperous future for brokers at any level.
In a recent episode of Business Accelerator, Alex Whitlock and Jason Back unpacked these three core segments that contribute to a thriving industry:
1. The sole practitioner
A recent report from the Finance Brokers Association of Australia (FBAA) found that over half (51 per cent) of brokers are sole traders.
The solo broker remains a vital force in the industry. While there has been some fear in recent years that the solo broker option is not viable, Back said the future of the lone broker has “certainly got legs”.
He claimed solo practitioners generally write $50 million to $75 million in loans each year.
The key to succeeding as a sole operator is to double down on a specific specialty. Whether it’s first home buyer seminars, complex investment structures or a specific professional demographic, deep expertise is a competitive advantage.
Back also urged brokers to leverage technology and potentially virtual or offshore support to maximise efficiency without the overhead of full-time staff.
2. The boutique brokerage
This tier, typically with five to 10 staff, is often the most profitable and manageable. These businesses have moved beyond the founder’s personal capacity and have a team capable of handling significant volume ($60 million to $90 million plus).
The same FBAA study found that 35 per cent of brokers operate as business owners of a brokerage, fitting into the boutique category.
The primary challenge for these brokerages is scaling intelligently. Hiring new brokers dilutes existing volume and introduces complex questions around compensation (salary versus commission) and equity.
The industry-wide challenge of retaining top talent who may dream of starting their own shop means a compelling value proposition is required to keep teams engaged.
3. The enterprise brokerage
The final piece of the market includes large, branded groups like Aussie, Mortgage Choice or Lendi.
These are corporatised firms with more than 50 staff. Their growth strategy is often accelerated through acquisition, buying up smaller brokerages to gain both book size and valuable human resources.
Just one in 10 brokers work as an employee of a brokerage. The challenge for these organisations is similar to those of boutiques: hanging onto skilled brokers.
Still, these large brokerages are a great stepping stone for new to market brokers as extensive support networks are in place and can help boost a broker’s development.
The message from the discussion was ultimately positive and clear: there is a viable and prosperous future for brokers at every level.
[Related: Majority of brokers business owners]
