Mortgage broker succession planning keeps clients served and sets out who can receive trail when you die, lose capacity or leave broking without selling. Your aggregator or licensee agreement controls the payment rights. A will alone cannot make trail continue if that agreement ends the entitlement.
Put a servicing broker and written payment instructions in place while you can still approve them. Your family then has a person to contact and a documented process to follow.
What Happens to Your Trail Book Without a Succession Plan
Trail is paid under your aggregator or licensee agreement, so the contract decides whether an estate, a nominated broker or nobody receives it. Separate the event that stops you working from the event that ends your contractual entitlement.
| Event | What Needs to Happen | Risk Without Arrangements |
|---|---|---|
| Death | The executor establishes who holds the payment rights and follows the agreement’s succession process. | Payments can stop or be delayed while authority and the recipient are resolved. |
| Loss of capacity | Someone with legal authority manages the business while an authorised broker handles client credit needs. | Your partner cannot automatically sign business instructions or advise clients for you. |
| Exit without a sale | The aggregator confirms post-exit trail rights and any ongoing servicing conditions. | Termination or vesting provisions can reduce or end the trail you retain. |
Clients still need help with rate reviews and changes to their borrowing. An unserviced book risks faster runoff when clients take that work to another broker and refinance away. A payment nomination does not replace a client service arrangement.
Aggregator Succession and Vesting Clauses
Find the clauses that control the right to keep trail after you stop writing loans. Read the signed agreement, its schedules and later variations together.
- Vesting: the share of trail you retain, when that entitlement becomes established and any continuing conditions.
- Termination: what happens on ordinary exit, breach or loss of authorisation, including deductions and withholding.
- Death and incapacity: who can give instructions, what evidence is required and whether a successor needs approval.
- Servicing: the work that must continue and who bears its cost.
- Assignment: whether payment rights can transfer and whose consent is required.
A vesting schedule can leave a broker entitled to only part of the ongoing trail before a qualifying period ends. Another contract can end payments after a specified termination event. Neither outcome follows simply from calling the book yours.
Connective’s published membership information says brokers own their trail book and can take it when they leave. AFG’s 2015 prospectus summary of member agreements describes termination rights and commission payments governed by the agreement. Those statements do not establish your death or incapacity entitlement.
Ask your aggregator for the current wording applicable to your membership, including every variation. Request a written answer for each event: who gets paid, what approval is needed and what servicing must continue. Have your solicitor resolve any mismatch between that answer and the contract before relying on it.
Nominating a Servicing Broker
Nominate a broker whose licence or authorisation covers the credit activities your clients will need. An Australian credit licence (ACL) holder or an appropriately authorised credit representative can perform that work within their authority.
Section 29 of the National Consumer Credit Protection Act 2009 sets the licensing requirement, subject to applicable exemptions. The Australian Securities and Investments Commission’s INFO 126: Credit Representatives explains written authorisation and licensee supervision. A succession nomination alone does not grant that authority.
Before redirecting trail, obtain the aggregator’s required approval and document the nominee’s appointment. Payment rights, lender access and permission to provide credit assistance are separate checks.
Record the following terms in the servicing agreement.
- The trail split, payment route and responsibility for fees or clawbacks.
- Client review duties, response expectations and complaint handling.
- Who notifies clients, how records are accessed and what privacy notices or consent the transfer requires.
- Reporting to you, your attorney or executor.
- How either side ends the arrangement and who takes over unfinished work.
If the nominee needs funding to take over the book, address that before the trigger event. Our trail book finance guide covers that separate funding decision.
Death, Loss of Capacity and Your Estate
Your executor manages the estate, but appointment as executor does not authorise them to give credit assistance. They need an authorised servicing broker for that work unless they separately hold the required authority.
The contract’s named party also changes the succession steps. A sole trader’s contractual rights form part of their estate, subject to the agreement. A company’s rights remain with the company, while ownership and management succession need attention. For a trust, the trustee holds the contractual rights and the deed governs relevant control and appointment powers.
Ask your solicitor to prepare a will that deals with your business interests and an enduring power of attorney for loss of capacity. The attorney’s powers must suit the relevant state or territory. Company directorship and trustee succession also need their own arrangements.
Keep written instructions for the aggregator with these documents. Name the servicing broker, the person authorised to contact the aggregator and the documents needed to activate the arrangement. Confirm the intended recipient’s bank and entity details through the aggregator’s process.
What is Key Person Insurance?
Key person insurance is business-owned cover that pays the business when a person it depends on dies or cannot work because of an insured event. The selected benefits determine which events trigger payment.
In a business-owned arrangement, the business owns the policy and receives the benefit. Personal life cover usually supports the insured person’s family or other beneficiaries. The two arrangements fund different obligations, even when they insure the same broker.
Key person life insurance pays a lump sum for a covered death or terminal illness. Disability cover needs a separate covered trigger. Personal income protection replaces part of an individual’s income during covered illness or injury, subject to its waiting period and benefit terms. Business income cover instead pays the business under its own terms.
Policy ownership must match the intended recipient. A sole trader needs advice on structuring cover because the person and the business are the same legal entity.
Benefits of Key Person Insurance for a Brokerage
Key person business insurance gives the brokerage money to fund a documented continuity plan after an insured event. The amount needs to reflect the loss the business would bear.
Revenue cover can fund a replacement servicing broker and replace lost income while the trail book runs off. Capital arrangements can address business debts or fund an ownership buyout. A partner buying the deceased owner’s interest needs a properly structured buy-sell arrangement, with ownership and payment directions matched to that purpose.
Estimate cover from a cash-flow forecast. Project trail retained under the agreement, allow for runoff and deduct servicing costs and continuing expenses. Compare that result with the business’s obligations during the transition. Then identify any separate debt repayment or buyout amount, without counting the same need twice.
For example, a hypothetical brokerage with enough retained trail to pay its ordinary expenses can still face a shortfall from hiring a replacement broker. Insuring all future trail would ignore the income that continues. Insuring only today’s expenses would ignore the replacement cost.
Key Person Insurance Tax Treatment in Australia
Key person insurance tax treatment depends on the policy and its revenue or capital purpose. The Australian Taxation Office’s Taxation Ruling IT 155 explains that purpose determines the treatment of accident or term cover.
For term or accident cover taken out to replace lost business revenue, premiums are generally deductible and proceeds assessable as income. For capital purposes, such as funding a partner’s buyout, premiums are generally non-deductible and proceeds are generally outside ordinary income. That does not establish that every capital payout is tax-free. Capital gains tax and other provisions need separate consideration.
The ruling treats traditional life and endowment policies differently from term cover. A policy’s label alone cannot settle the deduction.
Record the purpose when taking out the cover and review it at renewal or when the business changes. Keep the supporting forecast and ownership documents. The ATO considers the surrounding circumstances, so a board minute is evidence rather than conclusive proof. Have your accountant confirm premium deductibility and payout treatment for the actual arrangement.
Getting Key Person Insurance Advice
Get key person insurance advice from a financial adviser authorised to advise on the relevant insurance products under an Australian financial services licence. A credit licence alone does not authorise life insurance advice. Use Moneysmart’s Financial Advisers Register to check the adviser and the products they can advise on.
Bring recent trail statements, the aggregator agreement and your succession plan. Include business debts, ownership documents and existing personal and business policies.
Ask the adviser to document these decisions.
- Which entity owns each policy and who receives each payout?
- What forecast or obligation supports the sum insured?
- Which definitions of disability apply, including temporary and permanent incapacity?
- What waiting periods, exclusions and claim requirements affect the plan?
- How does the payout reach the business, family or buying partner that needs it?
Have the adviser, solicitor and accountant reconcile the policy with the succession documents. Keep professional indemnity and other brokerage insurance in a separate review because those policies address different risks.
Build Your Succession File
Build a file that lets your family and servicing broker activate the arrangement without reconstructing your business. Complete these steps this month.
- Save the signed aggregator agreement and variations. Add the aggregator’s written answers on death, incapacity and exit.
- Finalise the nominated servicing broker’s agreement and required approvals. Include a backup if the nominee cannot act.
- Confirm your will, enduring power of attorney and company or trust succession arrangements with your solicitor. Record where the originals are held.
- Save insurance schedules, ownership records and the documented purpose of each policy. Name the person who starts a claim.
- List the aggregator, servicing broker, solicitor, accountant and insurance adviser with their contact details.
- Add current trail statements and a documented estimate of the book’s value. Record its assumptions and the valuation method used.
Track My Trail’s Trail Book Valuation on Elite Suite grades active loans A to E and produces a three-page report with an anonymised loan schedule. Put that report in the file so your family, servicing broker and insurance adviser work from the same estimate and assumptions. Use our guide to valuing a mortgage broker business for the wider valuation decision.
If selling becomes the preferred exit, use the trail book purchase and sale guide for that process. Review the succession file at each aggregator renewal and after a change in your book, ownership or nominated broker. Ask the nominee to walk through the file with you and identify who authorises service, who receives trail and who can release the required records.
