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Cross-selling brokerages could be driving an increase in trail book prices, but shrewd buyers could also be cashing in.
Ballast chief executive Frank Paratore said there were some potentially strong trail books out there just waiting to be properly exploited by the right firm.
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“The reason it’s a buyer’s market is because there is a lot of opportunity within trail books in that they’re not being worked to full capabilities,” he told The Adviser.
Mr Paratore said vendors could expect multiples of 0.7 to 2.5 times trail, depending on how often they were engaging with their database and how loyal they were keeping their clients.
Financial consultancy Radar Results represents about 200 financial services business, a quarter of which are looking to buy trail books, said principal John Birt.
He said the focus on cross-selling was driving a rise in buyer demand among brokerages, financial planning firms and accountancy practices.
“Once you’ve got a mortgage client you can cross sell him to risk insurance, do his taxation work as well and sell him an investment property,” he said.
Mr Birt told The Adviser that prices were rising. “You would’ve been lucky to get about one times the trail four to five years ago,” he said. “Now it’s probably up close to 2.0.”
Connective director Mark Haron said many brokerages and financial services business were in the market for trail books.
Multiples currently range from 1.25 to 2.0 times trail, according to Mr Haron, although he added that few firms were looking to sell because they were hoping for higher prices.
Sydney-based North Shore Mortgages, which manages trail books on behalf of investors, has found that it is buyers who are doing best in the current market.
Director Richard Kirby said the firm acquires about one book per month and that average multiples were now about 1.4 times.
“It’s probably more of a buyer’s market,” he told The Adviser. “There’s no clawback involved. There aren’t as many wanting to sell, but there are only a few that are buying.”
