​Matt Lawler: Moving Beyond Mortgages

by Adam Smith11 Apr 2014
Yellow Brick Road’s CEO says the company has done what pundits said it couldn’t

The convergence of financial services is a common topic in the mortgage broking industry, and lenders and aggregators seem convinced that the roles of brokers and planners will move closer together. What few seem to be pushing, however, is a truly blended model that sees brokers become planners. One company, though, says it’s possible.

Yellow Brick Road, the brainchild of Apprentice host and former Wizard head Mark Bouris, has claimed it is indeed possible to make advisers out of brokers. The franchise operation claimed revenue increases of more than 200% per annum, and has said the result lends validation to its one-stop-shop model. YBR also saw a major rise in its wealth management business, with non-mortgage revenue equalling 32% of total revenue, up from 7% in July 2011. Bouris, the company’s executive chairman, has said that YBR has found success in doing what many in the industry have warned against: turning brokers into advisers.

“When we started Yellow Brick Road, the pundits said we couldn’t make a wealth adviser out of a mortgage broker,” Bouris said. Bouris claimed the company has found a way to effectively lead brokers through the transition.

“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.”

The company still holds firm to its mortgage broking roots. YBR’s home loan business makes up the majority of the revenue, and the company has built a home loan book worth $2.2bn in just over three years. But non-mortgage revenue now makes up 32% of total revenue, up from a mere 7% in July 2011. Obviously, something appears to be working.

Matt Lawler, former NAB exec and YBR’s CEO, said the above- trend growth in the company’s wealth management arm is because the market YBR is targeting is severely underserviced.

“We position our brand as providing advice to mums and dads in the suburbs, so 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,” he said.

This sets YBR apart from other providers of wealth advice, Lawler said.

“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, 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,” he said.

Bouris agreed, and said the company has been intentional in building its retail footprint in underserviced areas.

“For the past three years we have been focused on building a recognised brand and distribution footprint that is entrenched in the hard working Australian communities that need financial advice and services the most,” Bouris said.

And advisers helping clients source a home loan are perfectly placed to deal with the broader spectrum of those clients’ financial needs, Lawler said. He argued that the home loan process was an opportune time to address other areas, such as insurance, superannuation and financial planning. 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. Lawler said brokers who join YBR are buying into the model from the very beginning.

“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,” he said.

This also means that the model doesn’t fit everyone, Lawler conceded.

“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.” 

One of the common criticisms levelled at the one-stop-shop model – and in particular, at duel licence holders – is that diversifying into advising on both sides of the balance sheet results in a lower standard of advice all round. In other words, broker/planners become a jack-of-all-trades and master of none. But Lawler said the level of advice – and the expertise required to give that advice – is completely scalable. Yellow Brick Road advisers must hold AFSLs and be credit representatives, but don’t necessarily have to be certified financial planners. Lawler said the company provides a high level of support to its 174 branches, and that someone new to the industry need not master every aspect of credit and wealth advice 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.

This, Lawler suggested, is where scalability comes into play. The company provides different levels of support to its franchisees depending upon their needs, he said.

“That’s a bit of intellectual property we’ve built up over a number of years where we will provide various levels of service 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 said.

Moreover, Lawler 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,” he said.

And as those needs grow more complex, Lawler said YBR can help its franchisees gain mastery.

“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,” he said.

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 months 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.”