A company that was told ‘you can’t make a wealth adviser out of a mortgage broker’ has reported revenue increases of over 200% per annum.
Yellow Brick Road Holdings has announced a major uplift in its wealth management business, with non-mortgage revenue equalling 32% of total revenue, up from 7% in July 2011.
“When we started Yellow Brick Road, the pundits said we couldn’t make a wealth adviser out of a mortgage broker,” YBR executive chairman
Mark Bouris said.
“It's something that our competitors have struggled with, and they said it couldn’t be done. Yet here we are with the intellectual property to recruit, train, and accredit individuals to provide the full spectrum of advice.”
YBR’s home loan business still makes up the majority of the revenue, and the company has built a home loan book worth $2.2b in just over three years. But non-mortgage revenue now makes up 32% of total revenue, up from 7% in July 2011.
The growth in wealth management versus lending is above trend because the wealth management market the company targets is underserviced, CEO Matt Lawler told
Australian Broker.
“We position our brand as providing advice to mums and dads in the suburbs so depending on what is challenging them at the time is why they come to see us. Our market is predominantly the 30 to 45 year old age market, and a mortgage is the predominant thing on their mind.
The company’s business model looks at a client’s entire financial situation, which means while the mortgage is taken care of, so are the client’s other needs including insurance, superannuation, and financial planning.
“If you think at where a lot of financial advisers position themselves, a lot of their clients are retired or nearly retired, and they have a lot of money already,” said Lawler.
“But the market that really gets forgotten is people aged 30 to 45. They probably need advice more than anybody – they’re still working and they’ve got lots of financial issues they need to deal with and a lot of the organisations around aren’t set up to deal with them in regards to all their advice issues.”
YBR, which started in 2007, has been successful while competitors failed with the joint mortgage broking and financial advice model because many brokers or advisers struggle to diversify, Lawler said.
“We started this model with the premise that if you’re going to join Yellow Brick Road you’re going to have to have the desire to deal with more than one product.
So if you’re a mortgage broker you’ve got to acknowledge and agree that you want to be more than a mortgage broker in the future.
“If someone came to us who had 10 to 15 years’ experience as a mortgage broker and expected to do the same for the next 15 years, we very quickly made those people aware of our intentions, and if it’s what they wanted to do we proceeded but if it wasn’t, they moved on.”
But does diversifying mean a lower standard of advice and mortgage broking skill?
Lawler said the one giving advice does not necessarily have to be a certified financial planner – the highest standard of adviser – but must hold an AFSL as well as be a credit representative.
YBR, which has Channel Nine as a major shareholder, provides training and support to its 174 branches across the country, and Lawler said someone new to the business does not need to know everything all at once.
“We’ve simplified the different stages that people need to go through in terms of becoming comfortable and competent in giving financial advice on broader product issues,” Lawler said.
(Continued on page 2)
#pb#
“That’s a bit of intellectual property we’ve built up over a number of years where we will provide various levels of services to the branches, be it a fully outsourced option where we get a specialist to come in to work with clients; a mentoring option where we’ll stick with them and coach them but eventually let them give clients that advice themselves; and if they are competent, we’ll act as a support network for that branch and sit behind them with all that research and infrastructure that is required to give their clients great advice.”
He also said the ‘mum and dad’ suburban clients who come to YBR usually need a lower level of financial advice.
“A lot of the perceived complexity around financial planning and mortgages can be broken down. A lot of our clients have simple, basic needs that we can help them with.
“To become a financial adviser you don’t need to move into the most complex pieces of strategy and advice that financial planning can offer, you can move step by step and our model lets brokers move into advice in a timely way, and also a protected way, because they’ve got all our support behind them.”
Lawler’s advice to mortgage brokers wanting to move into financial planning is to find a good mentor.
“Choose a partner who will help guide and support you make that transition, because it doesn’t happen overnight, it can take month or even years before you are fully competent,” he said.
“But make no doubt about it, the person has to want to make the transition, and if they’ve got the will, we’ve got the resources and support to be able to help them through this process.”
