ISCOVER
Trail is no longer just a passive income stream for brokers – it’s becoming a strategic asset to fund growth, succession, and long-term business resilience, writes trail book specialist Nick Young.
Trail books have been central to a broker’s financial stability, and since the industry’s inception, they’ve provided recurring revenue and confidence. That hasn’t changed. What has changed is the significant maturity of the sector, which corresponds to a material difference in how brokers are now utilising trail.
Trail remains constant, but the way it is deployed reflects the growing sophistication of the industry.
Trail has historically been viewed as a stream of passive income throughout a brokerage’s life cycle, then a ‘nest egg’ transaction upon retirement.
Early in the game, brokers only sold their trail pre-exit as a last-resort measure to resolve immediate business pressures: settling a partnership, managing tax obligations, or freeing up capital. This was a time when brokers were predominantly sole operators, and the availability of alternative funding facilities was extremely limited.
We’re in a new world at all levels. The ‘one-man band’ juggling everything from loan processing to marketing is increasingly unsustainable as rising costs, heavier regulation, and borrower expectations for digital, instant service make the old model increasingly unviable. Larger firms are scaling through consolidation: acquiring books, absorbing retiring brokers, and investing in tech-enabled teams. Onshore and offshore support, digital assistants, and AI-driven CRM systems are now core to service delivery.
The upshot: the market is operating at a far higher level of sophistication.
Growth is no longer about simply writing more loans. It’s about building scalable, resilient businesses with the structure, systems, and client engagement to thrive long term.
Today, trail is still a steady foundation in a changing market, though, as I reflect on the last 20-odd years, the marked difference is that it’s progressively being treated as a strategic asset.
Viewing trail from a different lens means that brokers are able to benefit from operating on the ‘offensive’ versus the ‘defensive.’ Meaning that when considered as a line of ‘self-funded’ capital, brokers are utilising trail to deliberately structure and finance their business goals. Accordingly, brokers are using trail in part, or in whole, as an alternative funding line to facilitate growth, enable acquisitions, and underpin succession planning. And once brokers start to unravel how to unlock the value in their trail, the conversations become far more sophisticated. Which, in turn, perpetuates more robust businesses.
Unlike ‘back in the day’, where a trail was a ‘quick fix’ cash-out solution, the application of trails now broadly falls into three categories:
1. Stability: Trail still plays its original role as a reliable revenue stream and is still regarded, rightly so, as a safety net. What has shifted, however, is the quality and durability of that revenue stream. Legislative changes, combined with an uplift in standards and corresponding business practices, have positively contributed to greater focus on client retention. The upside is a more stable and predictable cash flow profile for brokers who are comfortable with trail being limited to a passive income model (and equally, for brokers ‘nurturing’ their trail to yield higher multiples when sold in part, or in whole, for growth or at retirement).
2. Growth: Brokerages are leveraging trail as a growth tool. Interestingly, these investments are usually staged, and more often than not, we’re discussing growth strategies in conjunction with accountants to ensure that growth is measured and supports sustainable scale.
3. Succession: I’m pleased that trail is now being considered as a long-term wealth strategy, and that brokers are staging their exits and facilitating succession plans. Corresponding discussions are also occurring much earlier, which again reflects the market’s maturity. Rather than being approached by brokers at the tipping point of retirement, there’s been a notable shift to start having transition discussions with brokers a good 10 or so years away from final retirement. This approach is both lucrative for the broker and supports industry sustainability when a successor is appointed as part of the exit plan.
The mechanics of trail sales have matured alongside the industry itself. Straightforward multiples are still used for ‘vanilla’ trail book sales; however, brokers today have access to more flexible and higher-value structures, including buyback options and performance-linked structures, where the commitment to guaranteed run-off commands significantly higher multiples in return for guaranteeing the performance of their trail over a set period. The capital released is then typically reinvested in growth strategies, such as marketing, technology upgrades, or acquisitions, enabling brokers to expand and scale without relying on traditional finance facilities.
Looking ahead
The future of mortgage broking in Australia isn’t just bigger, it’s savvier and more sophisticated.
Leading brokers will continue to view trail as both foundation and lever: the steady base that can also fund innovation and growth. I expect the next evolution of trail will be refinement rather than reinvention, with the corresponding structures more nuanced and aligned with long-term business strategy.
My advice: stay proactive and embrace opportunities to build stronger, more resilient businesses, whether that be through strategic capital structures, industry collaborations, the adoption of technology, and aligning with strong business partners to maintain robust operations.
Nick Young is a results-driven specialist who has more than 20 years’ experience in the mortgage broking industry and now heads Trail Homes – Australia’s most established and longest-serving trail book purchaser.
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