The Mutual Ethos – Financial Mutuals, Friendly Societies, and Building Societies
1 December, 2021
Whitecap Consulting, in partnership with the Association of Financial Mutuals (AFM), recently published a report analysing the strategic landscape for financial mutual organisations in the UK. The Whitecap team is summarising the key findings in a series of blogs.
In this article, Luke Freeman and Chloe Thompson of Whitecap Consulting compare and contrast Whitecap’s research with AFM to its analysis of the building society sector, which was published in partnership with the Building Societies Association (BSA) earlier this year. Key similarities that can be identified include the successful deployment of a range of strategies and business models; organisations being extremely purpose driven; the importance of mutuality but also evidence of the associated challenges surrounding tangibility and member benefits; the appetite for collaboration, especially on technology and lastly, the challenge of navigating digital transformation in order to stay relevant to current and prospective members.
This blog summarises the relevant elements of the report, which can be viewed in full here.
Organisations across both groups adopt a range of different strategies and business models but most remain purpose driven organisations.
Both the AFM and BSA memberships reflect divergence across the organisations when looking at their strategies and business models. However, one key characteristic the AFM membership has in common with the building society sector is that the organisations are extremely purpose driven and, in many cases, have a longstanding history and heritage to which their core purpose remains aligned.
The most prominent common challenge faced by both AFM members and building societies is associated with bringing the concept of mutuality to life for customers such that it represents a genuine source of competitive advantage.
The most prominent common challenge faced by both AFM members and building societies is associated with bringing the concept of mutuality to life for customers such that it represents a genuine source of competitive advantage. It can be difficult to illustrate mutuality in a way that resonates with current and prospective members which has led to a lack of understanding, a concern for both AFM members and the building society sector. In order to make mutuality more tangible, organisations provide benefits to members that manifest in different ways, such as stable savings rates/ investment returns, free GP access and loyalty rewards. One commonality that can be seen with member benefits is through the way that organisations deliver customer service and interact with their members as they naturally adopt a personal and empathetic approach, ensuring that they support vulnerable members and communities in times of need.
The mutual/ not-for-profit structure means that unlike shareholder owned organisations, mutuals are not subject to an imperative to seek growth for growth’s sake.
A distinctive characteristic of the mutual/ not-for-profit structure that applies to all AFM membership and all building societies means that unlike shareholder owned organisations, mutuals are not subject to an imperative to seek growth for growth’s sake. Although growth may be desirable to help ensure long-term sustainability, it is not a primary driver in the way it often is for privately owned or publicly listed organisations where there is an expectation of maximising shareholder returns and competition for invested capital. The role of mutuality across the AFM membership appears to run even deeper than it does in the building society sector, with the mutual ethos being a dominant feature in the purpose, culture, product design and service delivery of organisations of all sizes.
The mutual ethos also allows for decision making to be more consumer centric and long-term, with the interest of members being placed at the centre of all strategic decisions.
A common feature of mutuality experienced by both AFM members and the building society sector is the over-riding influence it has on internal decision making, both with regards to putting members’ interests first as well as on making decisions that may be more long-term and consumer centric than that of a shareholder driven organisation. Lastly, there is a common potential opportunity for mutuality to act as a differentiator for AFM members and building societies in the future, considering the direction that society is moving towards. The increasing focus on purpose-led organisations and conscious consumerism lends itself to the values that underpin the mutual ethos, a competitive advantage that both AFM members and building societies may be well-positioned to adopt.
Communication and relationships between organisations within the AFM membership and the building society sector are strong, but collaboration on joint business initiatives is limited.
Mutual insurers, friendly societies and building societies have much in common, and AFM and the Building Societies Association (BSA) enjoy a collaborative relationship. This has included jointly lobbying activity such as a joint manifesto for financial mutuals, which was proposed after mutuals performed strongly in the aftermath of the 2008/9 financial crisis.
Communication and relationships between organisations within the AFM membership and the building society sector are also strong, but collaboration on joint business initiatives, especially those involving technology, or in joint product development, is extremely limited. Views from outside the mutual sector are also aligned as there is a sense that there may be missed opportunities with regards to collaboration on tech, preventing organisations from modernising their customer journeys and improving their operational efficiency.
Successfully navigating the requirement for digital transformation is a key challenge that AFM members and building societies must address going forward.
The need to evolve digitally and remain relevant to current and potential members of all ages is acknowledged as a priority by the majority of CEOs across AFM members and building societies. Therefore, successfully navigating the requirement for digital transformation is a key challenge that AFM members and building societies must address in their strategic thinking going forward.
This is the second in a series of blog posts that focus on key themes addressed in the research. The topics are covered in more detail in the report which you can download via the link below.
Background to report:
Analysis of the Strategic Landscape for Mutual Insurers & Friendly Societies 2021
The research underpinning the report was conducted by Whitecap Consulting in partnership with the AFM and involved a quantitative data analysis of all 43 Mutual Insurers & Friendly Societies, interviews with 31 of the CEOs, and an online survey which received a total of 61 respondents.
The project is being conducted in partnership with the AFM with support from industry sponsors including: Altus Consulting, Benenden Health, Cirencester Friendly Society, Cornish Mutual, Fidelity International, Holloway Friendly, Milliman, Oddfellows (which includes Unity Mutual), PG Mutual, Russell Investments, and Royal London Asset Management.