It’s coincidence, but Yellow Brick Road’s announcement of an ambitious non-bank financial services strategy could hardly have been made at a better time.
As banks continue to cop flack for their apparent efforts to reintroduce conflicted remuneration to the financial planning scene, YBR has unveiled a strategy to substantially extend the reach of its financial planning services, and to provide consumers with a non-bank alternative.
Matt Lawler, chief executive officer of YBR Wealth Management, says the launch is the result of a number of factors coming together.
“We felt we needed to prove the Yellow Brick Road model,” he says.
“Markets are a whole lot better; the property market is looking more positive; interest rates are very low; and I think the major thing is there’s a financial services inquiry that’s going to be focused on competition and focused on the [question] is the financial services industry as geared up to be competitive as it has been?”
Legitimate targets
Lawler says the banks are legitimate targets and “it’s now time for competition”.
“Over the past 10 years competition has reduced, either because businesses have gone out of business because they were not able to survive, or because the banks have capitalised on the opportunity and have bought a lot of the brands and put them under their umbrella,” Lawler says.
“We think it’s time for an alternative; it’s time to give people options about where it is they align their business.”
Lawler says an acquisition spree by the banks, coupled with the requirement to make a return on investment, will lead them to focus closely on profit.
“ROE is everything for these organisations,” he says.
“What types of decisions are they going to make that focus on making money as opposed to giving great advice?
“That’s where for people who are in those models, who actually didn’t make a decision to be part of those models – [for example,] the head company they were working for was purchased – there’s an opportunity to give those people an alternative. We see that not only in the mortgage broking space but we also see it in the financial planning space as well.”
Three acquisitions
The YBR strategy involves three specific acquisitions, but Lawler cannot reveal details while negotiations continue.
One target is a mortgage aggregation business, which Lawler says has “600 to 700 brokers, and a similar philosophy to YBR about being self-determining and independent”.
He says YBR is “very confident about taking our advice model to them and giving them the opportunity to transition their businesses from single-product focus to a broader advice focus”.
The second acquisition is a mortgage manager, which offers to the market a mortgage product under its own brand.
“They create competition, they create alternatives in the marketplace, but what this will give them is the buying power and the skills to be able to move into a broader advice model,” Lawler says.
And the third acquisition is a product comparator website, which YBR will use as a customer referral tool.
Take it to the next step
“What we’ll be offering [customers] is if they want to take it to the next step and go and see somebody, then we’ll give them the option to go and see somebody, within our broad network,” Lawler says.
“You’ll get an email from, maybe, Mark [Bouris, YBR executive chairman] saying we saw you were looking at your options – did you want to see someone? We’ve got some people that you can have a chat to. It’ll be a source of financial knowledge, but that first layer: ‘I’m thinking about this, can you package up the things that I should know about it, or the first lot of things that I can do?’
“The client will say what they’re looking for, and then they’ll have a rating overview. What we’ll use it for is to create opportunities for the people that work with us.”
Meanwhile, Lawler says, “Yellow Brick Road will continue to grow – our aim is to get that to 300 branches Australia-wide”.
Lawler says then financial planning industry is moving into a phase when marketing and branding will again become important, as businesses seek to cultivate new clients.
“The last era, for me, has been one of recycling, where the money has just been moving around the marketplace from one platform to another platform,” he says.
Better basis points, better payments
“People are trying to get arbitrages of better basis points, better payments, better shelf-space fees, and that’s how they’ve made their money. But they haven’t actually created any new clients.
“What FoFA has done is refocus people on saying I need to attract people to my model. I actually need to get people to come and see me. We have that pedigree or background of branding and marketing and lead generation, and that’s going to be an important offer, which a lot of the dealer groups struggle to do – even the splits are so generous now that there’s no money in there for branding or anything like that. We would say that’s probably going to be the most important thing going into the future.”
Branding benefits
Lawler says YBR will exploit its relationship with Channel Nine to generate marketing and branding benefits for the companies in the YBR group. Channel Nine holds 16.7 per cent of YBR shares through a subsidiary called Pink Platypus
“We’ve been lucky enough to have some smart things we’ve done with Mark and Celebrity Apprentice and Nine integrating that into the show and stuff like that,” Lawler says.
“But there are other ideas we have about how you get the message out there about advice. And you have to go about it differently because it’s a crowded, noisy marketplace.”
