Australian Unity has sold its trail book to Trail Homes in a deal worth nearly $2 million, as the group continues its focus on retail banking.
Australian Unity Personal Financial Services Limited - a wholly owned subsidiary of Australian Unity Limited - has completed the sale of its mortgage and finance broking service.*
Since merging with Big Sky Building Society in 2018, Australian Unity has been divesting its non-core business assets to focus on retail banking (through its subsidiary, Australian Unity Bank), as well as other wellbeing services the group delivers to members.
This includes the divestment of its proprietary mortgage and finance broking service, as well as its general insurance broking service, offered through Australian Unity Personal Financial Services Limited.
The group has now confirmed that it has sold its rights to receive trailing commissions from its finance broker services business after selling the book to Trail Homes for the sum of $1,792,000.
Nick Young, the director of Trail Homes, welcomed the completion of the sale, stating it was a “record sale for this financial year, and delivered in a record time of six weeks – which is significant given its size, required due diligence and the complexity of the transaction”.
“In addition, it was in the best interest for all parties to ensure that ongoing client service was not disrupted by the sale,” he said.
While the group has sold its proprietary broking service, it will still offer mortgages via Australian Unity Bank and operate in the third-party space through aggregator partnerships.
Earlier this year, Australian Unity Bank released its interim financial report for the half-year ending 31 December 2019 showing that current mortgage book grew by around 14 per cent – with strong growth from the broking space. Approximately two-thirds of the bank's mortgage business is written through the third-party channel.
The group has added that the bank is “focused on being a lender, including growing and servicing its third party broker network and this sale has no impact on Australian Unity Bank’s current operations or its valued relationships with third-party brokers and clients”.
The group has also sold the assets of its general insurance broking services business to PSC Insurance Brokers.
Trail book finance for brokers
After commenting on the acquisition, Trail Homes's Mr Young emphasised that selling a trail book can provide a business or broker with a cash injection when needed.
Noting that trail books typically sell between one and a half and two times the value of the trail (though, in some cases, can be as high as three times, if the sale includes the business as a whole), Mr Young elaborated: “The value of a trail book can be optimised through implementing retention-based activities focused on fully servicing clients’ current and future requirements. This high-touch approach builds the broker’s business by increasing the likelihood of referrals, and importantly helps offset the trail book’s natural attrition,” he said.
“A trail book sale, in whole or in part, can provide an immediate ‘self-funded’ cash injection that can be used to stimulate growth or alleviate working capital strain. Equally, how and when a trail book is sold upon exiting the industry is of paramount importance to ensure brokers optimise their earnings from both their book, and business as a whole,” Mr Young added, suggesting that a broker’s exit strategy should be “carefully planned, developed well in advance, and ideally done in collaboration with an accountant”.
*This story was amended on 19/5/2020 at the request of Australian Unity to reflect that Australian Unity Personal Financial Services Limited, not Australian Unity Bank, had sold its trail book.
[Related: Mutual bank boosts focus on broker channel]