Expect further consolidation in mutual sector

Expect further consolidation in mutual sector

Further consolidation within the mutual friendly society sector will take place due to the large regulatory burdens placed on institutions, following on from a major merger which completed earlier this month.

Simon Philp, Exeter Family Friendly’s distribution and marketing director, told FTAdviser that a stronger balance sheet and a greater asset base is required to face the regulatory and financial burden of doing business.

“These are all challenges that we have faced head on,” he stated, explaining that they are ahead of schedule with regards to Solvency II deadlines and are in the process or updating core operating infrastructure, moving all IT hosting online to improve capacity and performance.

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“Many however won’t be in a position to make these enhancements, some will be too small to invest, whilst some may not have the capability to identify gaps and spot opportunities,” said Mr Philp.

“As a result, there is certainly the possibility of further consolidation within the friendly society sector and we have been open in our desire to talk to other like minded organisations who are looking to gain scale and be part of a stronger, challenger organisation.”

Simon Markey, chief executive of recently merged mutual Onefamily, opined in February that consolidation has to happen at a faster pace for the mutual market to thrive, adding that his firm will be actively looking for acquisitions later this year.

Martin Shaw, chief executive of the Association of Financial Mutuals, commented that its membership is likely to fall in the coming months.

“Within five years time the stronger will have gotten stronger and market share will increase, but the overall number of players will shrink rapidly,” he said.

James Wright, the West Brom’s director of sales and marketing, suggested that while consumers are increasingly demanding direct access to their accounts via digital channels, the death knell need not be sounded for the traditional building society branch.

“What is needed is a flexible approach to the role branches play - this includes working towards full integration with your different service channels. It will require considerable investment and system changes for the smaller providers, but it is necessary in order to keep pace.”

He added: “Of course it’s a challenge on resources for smaller building societies to keep ahead of the game, but it would be wrong to stand still and not react to changing consumer trends.”

Speaking to FTAdviser, Robin Fieth, the Building Societies Association’s chief executive, admitted that small firms have “had to lump” the new regulatory framework, and was calling for a second phase of work looking at what is appropriate for building societies and mutuals.

“The amount of time devoted to regulation is disproportionate and many of our smaller members have been complaining, but it is actually the case across the board in terms of our membership.”