Around half of all new-to-industry brokers don’t make it through the first 18 months of business, the Finance Brokers Association of Australia has revealed.
Speaking to The Adviser, the FBAA’s Peter White said that although the membership body had seen an increase in new-to-industry members in recent years, there was a high failure rate too.
He said: “We see it first hand in our membership. Of the new-to-industry members, about 50 per cent of them don’t make it in the first 18 months of business.”
According to Mr White, a big barrier for many new brokers is supporting themselves while they find their feet.
He said: “The challenge in the marketplace is that it's a commission-based role. Anybody entering the industry for the first time needs to ensure that they have some sort of capital backing behind them to support them through their first three, six, nine months whilst things get up and running.
“They have to outlay money on things like costs of licencing and registrations, equipment and motor vehicles, petrol, mobile phones and laptops, and all that sort of stuff you need to get yourself going.”
He added: “You can't walk into this industry with empty pockets. So whether you've got family backing or personal asset backing, you need to have something to make it work.”
However, Mr White said that despite the high failure rate, things are looking up in the industry, as aggregators are increasingly “lifting their game on mentoring”.
“This really is their gig now. You've got lots of academies and support structures now that are specifically mentoring to ensure that the people they bring on board will make it and be successful. They've invested a lot of money in these people and they have the biggest risk at the end of day, outside of the individual, because they've spent all this time training and looking after the new brokers and helping them with their business. So, if these brokers don’t make it in the industry then the aggregator has lost a huge amount of money.”
He added: “The market is changing, and evolving in a very positive way to look after these new brokers. I suspect we'll see a succinct decline in the number of people leaving the industry because they don’t cut it in the last 18 months because of this.”