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The broking industry is evolving and an increasing number of brokers are leaving behind business ownership to transition back into working for a brokerage.
With around 20,000 brokers in market and growing and despite market share at record highs, consolidation is likely to continue.
According to Broker Essentials’ founder and director Jason Back, 41 per cent of brokers are solo practitioners.
Market influences are seeing an increasing portion of brokers recognise the value in sticking with a brokerage.
Running a brokerage involves compliance, marketing, technology, people management, and business development, while also juggling clients. Brokers are seeking support structures to better service clients.
“For many, the burden outweighs the benefits. Brokerages that offer infrastructure, mentorship, and a strong cultural fit are attracting solo practitioners who want to maintain autonomy without the full weight of running an enterprise,” said Back.
This is more than a trend, said Back, “it’s becoming a defining characteristic of the industry.”
Higher cost of living, inflated interest rates, and tight regulation have made owning a business more difficult. This has been recognised as business insolvency risk climbs higher.
With risk high, Back said that the natural progression doesn’t need to be starting a solo gig. Not every broker is a good business owner and not every business owner is a good broker.
A win for the industry?
Consolidation isn’t a bad thing. As co-host Phillip Tarrant said in a recent episode of Broker Daily Uncut, “there’s strength in scale.”
Mergers and acquisitions are a constant occurrence. Tarrant said that this is positive for the industry.
“If you can crystallise and channel a lot of your energies and effort to larger, more consolidated businesses which are high performers, everyone will benefit from the back of that,” Tarrant said.
Back agreed that when done well, consolidation is a win for the client. The benefits can range from more consistent advice, quicker turnaround times, and better engagement.
“Broker consolidation will likely continue to grow as the complexities of running a business increase. However, with the right support, tools, and education, solo brokers can still thrive,” said Back.
“The future of broking is about being smarter, not just bigger. Whether that’s as part of a consolidated group or a well-supported solo enterprise, brokers need to be equipped to adapt, automate, and lead. They also need to build a practice or be inside a business that works for them. It’s not always about writing more.”
Ageing demographics contribute and with a mature industry, brokers “will be looking to pass the baton onto newer entrants in the marketplace as they contemplate their own exit strategy,” AFG CEO David Bailey said in late 2023.
“Newer entrants are looking at ways to assist this transition by buying into existing businesses or joining entities with a successful business structure… Broker consolidation is inevitable, with ageing broker demographics and increasing industry complexity, as well as a growing investment need in digital to meet evolving customer expectations,” Bailey said.
The future could see fewer small brokerages and solo practitioners, if consolidation persists.
