The acquisition of mortgage broking business Vow Financial has added about 450 businesses and 800 individuals to the ranks of Yellow Brick Road’s mortgage brokers and financial planners.
YBR now has about 600 businesses and more than 1000 brokers and planners. Chief executive Matt Lawler (pictured) says the company is on track to post its first full-year net profit, after slashing its half-year loss to just $494,000 in the six months ended December 31, 2014, from more than $3 million the year before.
An integral part of YBR’s ascent to profitability is its ability to broaden the range of services its franchisees and practices can provide to clients. It involves training a large, and largely mortgage-focused, group of individuals to provide broader financial planning services.
And as it adds to the ranks of what it calls wealth managers, Lawler says YBR is challenging the emerging notion that the only way into the profession in future will be by gaining a financial planning degree.
Lawler says YBR takes “a gradual approach” to training its brokers to become wealth managers.
“We can’t, over a week or two weeks, turn them into financial planners,” he says.
“The first phase is that they refer to an experienced financial planner. Under that referral program they will watch and learn from that financial planner, and they will share a small portion of the revenue – they are not doing most of the work, someone else is doing the work.”
Take it further
After experiencing this first level of exposure to the financial planning process, some will want to take it further, and others will not.
“Some will decide, ‘I’ve watched this now, I like the concept, I have always wanted to do this’,” Lawler says.
“They will have seen the whites of the client’s eyes in terms of [financial planning] opening up opportunities for them, and creating a lot of value.
“So then they make the next commitment, which is to being trained.”
Lawler says YBR has “deconstructed financial planning” into simple advice and complex advice. While he’s reluctant to use the term “scaled advice” – “people’s eyes glaze over”, he says – that’s essentially what the simple advice proposition is.
“[Simple advice] is blocks of advice that support the clients we are working with,” Lawler says.
He says a typical YBR client is aged 30 to 40 years old and has significant financial commitments, including a mortgage and, often, school fees. The YBR strategy is to introduce non-mortgage elements of financial security in stages, over time.
Initially it is “simple insurance, simple superannuation”, Lawler says.
“It’s about getting clients on the path, rather than throwing the kitchen sink at them.
“For us, it means we’ve started a journey with the client. It’s simple, and it’s low-risk, but at least it gets the client on the path. We’re accrediting and training wealth managers to do that.”
Mentoring program
Lawler says the second phase of YBR advice is a mentoring program that involves an individual undertaking the necessary technical training, but then “they have a person sitting with them in every client interview”. That person is a senior financial planner from within YBR.
“They will sit and mentor the adviser until we feel they understand the process enough and the conversations enough and they know what to say and what not to say – to the point where we will allow them to become a financial planner in their own right,” Lawler says.
He says it could take several years for an adviser to get up to speed this way – to a certain extent, their development will be dictated by the demands of the clients they serve, and the clients they want to serve.
The YBR approach of on-the-job training may produce perfectly competent financial planners and, just as importantly, produce them in the numbers the YBR business model requires, but Lawler says it is under threat from proposals to raise standards of education for financial planners, contained in a recent Parliamentary Joint Committee (PJC) report.
“Everyone is saying it’s got to be graduates, it’s got to be graduates,” Lawler says.
“But an experienced banker, who has been focused on mortgages for 22 years, who has the ability to talk to clients about their situation, is in the same age demographic and has the experience of many years of being in the market – why wouldn’t they be seen as more likely to make the transition to financial planning than a 22 year old who has just done their financial planning degree – or in fact, than someone who has a degree in engineering or science?”
