Mark Bouris’s YellowBrickRoad has something of an “against market trends” philosophy, seeking to service a demand ignored by others, about its business.
The wealth management company’s core customer base is younger people who have a few tens of thousands dollars to invest while the rest of the industry goes after the older investor with hundreds of thousands.
These younger people, around 30-45 years old, probably have a home loan of $450,000 and household income of $100,000.
And YellowBrickRoad’s strategy is working. Its latest half-year results show a sharp rise in revenue, a 288% increase to $59.2 million from $15.3 million.
Overall there was a loss of $4.25 million, as the company integrated two acquisitions, Vow and Resi. The next six months should see further rises in revenue and a better bottom line as the company realises synergies and gets a full six months’ benefit from the acquisitions.
Bouris, the executive chairman of YellowBrickRoad and the host of the TV show The Celebrity Apprentice, says there are people who think: “No-one’s ever going to give me advice because I don’t deserve advice and I’m not earning enough.”
“My point to them is: ‘You do deserve advice but you just don’t know who to ask.’ That’s what we do. That’s our game,” he says. “If they take advice, and they make money out of it, they will build up their assets.”
His advice for people around their mid-20s, who despair that they will never be able to afford their own home, is to adjust their outlook.
“What they’re probably saying is that they will never get it (a home) where they want it,” Bouris told Business Insider.
“Our experience is that people are buying in conjunction with others — two or three people in the office — but they rent that to pay the mortgage,” he says.
“Then they either go to live at their parent’s place or they rent or share accommodation somewhere else.”
This gives them a position in the property market, a starting stake.
“If the mentality is: ‘I’ll never be able to afford the place I want to live in’, generally speaking that’s because their aspirations are too high relative to their earning ability. If you’re living in Sydney and want to live in Bondi, then go and rent in Bondi with two or three mates and buy in Gosford or Avoca Beach or wherever and let the equity build up.”
Bouris says a $200,000 purchase would mean borrowing 80% or $160,000. A 10% rise in the NSW market would bring growth in the valuation of $20,000. That would mean that $16,000 has been gained from the borrowed money and $4,000 from the 20% deposit.
“You just have to make sure you structure it right,” he says.
“We have a lot of customers who do this, particularly in our more regional areas.
“That’s going to be the new normal, the phenomenon.”