How Bouris will take on the big four

The mortgage manager and television host has rearranged Yellow Brick Road to build a suite of products that will challenge the major banks.

Nine Network viewers will have to wait until the second half of this year to view the 2014 Celebrity Apprentice series because host Mark Bouris has been working on his new plan to challenge the big four banks.

And when the market saw what Bouris plans to do, his Yellow Brick Road shares jumped some 14 per cent.

Bouris is the first CEO in Australia to fathom a way to combine a major television network (Nine), a non-big-four bank (Macquarie), and patient investors to create a significant financial product distribution network that is opening a branch a week. It will have 250 branches by the end of 2014-15.

Opening such a distribution network so quickly has been costly, and Yellow Brick Road has accumulated losses of $22.5 million. But it forecasts going into the black in 2014-15 because the older branches are now producing profits, which are offsetting the costs of opening new ones.

The key to the Bouris model is to have the Nine network as a 16.7 per cent shareholder and to have an advertising deal that is linked into the show he hosts -- Celebrity Apprentice -- that provides very favourable rates. Macquarie, which owns 14.8 per cent of Yellow Brick Road, provides home finance securities that Yellow Brick Road markets under its own brand. It is also marketing a wide range of other products, including mortgages from other banks, through its branches.

I previously alerted readers to the potential power of the linking of  Bouris, Nine and Macquarie in 2012. (Mark Bouris' extreme CEO makeover, November 13, 2012.)

But now Bouris is going one step further and plans to buy a mortgage aggregator which works with a distribution network covering a series of independent operators with large client bases. Bouris' plan is to leave these businesses marketing under their own brand and offer them additional products -- many of which they can badge with their own name. And, if they wish they can enhance the value of their brand via the low advertising rates arrangement with the Nine Network.

Yellow Brick Road will end up with a much larger business. In mortgages it will be about the same size as Bank of Queensland and about half Mortgage Choice. But among the non-bank entities, Yellow Brick road has a full suite of products that advisers can promote to clients.

It’s not easy to start a business from scratch, let alone to use media links to build quickly.