Aspiring brokerage owners share the biggest obstacles for ownership
November 8, 2022 by Alyssa DiSabatino
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What’s the biggest barrier to brokerage ownership for the 30% of brokers who aspire to one-day buy their own firm? Financing, according to results from a Canadian Underwriter online survey.
Of the 30% of broker respondents who want to own, exactly half said ‘yes’ without reservation, while the remainder said ‘yes’ conditionally. When asked for details, many specified their conditions for ownership are dependent on the market.
“M&As are making the industry difficult to buy into. Large companies are acquiring small brokerages — making it too costly to buy into, or compete in the market,” said one respondent.
“Multiples currently paid are extremely high. A correction would help,” said another.
Aspiring owners listed financing (57%), age (26%), training (23%) and lack of support/encouragement from senior execs (19%) among the biggest challenges they face in becoming brokerage owners or principals.
“Financing is difficult without using insurer-backed financing,” said one respondent.
“I feel that financing could be an issue for non family members,” wrote another.
However, more than half (61%) of respondents said they do not aspire to own a brokerage, and 7% said they’d do so “only if asked.”
Atop that, only 30% of non-owner respondents felt as though proper training and support is currently available to help young brokers own their own brokerages.
Comparatively, 55% of owners said there is sufficient training and support for aspiring broker leaders and owners alike. However, 33% of owners felt more training was necessary.
“It has become more complicated and new leaders have more responsibilities in today’s climate. As we all know, [protecting the financial wellbeing of a client] is a serious industry, however, the ease of doing business was simpler 40 years ago,” noted one owner.
“They need to learn that you actually have to work, and [that] algorithms & AI don’t solve everything. Things take time and are not always a 30-second fix,” said another.
When brokerage owners were asked the same questions as young brokers about the obstacles they faced in becoming owners, they listed financing (51%), training (30%), lack of soft skills (23%) and lack of support/encouragement from senior execs (22%) as their biggest barriers.
“Markets [are] unwilling to support smaller brokerages,” said one current owner.
“No issues, [we have a] family succession plan,” said another.
Interestingly, broker respondents said they felt more supported in climbing the senior management ranks than they do about ownership. They also expressed more interest in that approach to advancement.
More than half (53%) of broker respondents specified they are interested/very interested in being promoted to a managerial or senior executive role. Another half (48%) felt proper training and support is currently available to help young brokers advance into managerial or senior leadership roles.
Some (43%) said additional training or support is required: “More succession planning is required at the brokerage level to ensure transition can take place when needed,” said one respondent.
Overall, respondents said there is more than one way to prepare young brokers for senior leadership or brokerage ownership.
“Network with non traditional financers,” advised one respondent.
“Force existing owners to provide you with full access to the [opportunities] from the onset. Allow enough time to understand the role and what is required of it,” said another.
“I believe that more…needs to be done to train young brokers to take a targeted approach to combat inefficiencies often overlooked by senior management and current brokerage owners,” wrote another respondent. “We should also move away from having a system so inundated with massive conglomerates that hamper competition and hamper growth of smaller independently owned brokerages.”
Feature image by iStock.com/PeopleImages