When Paul Osborn took over as chief executive of Foresters Friendly Society in November 2012, he had lots of obstacles to overcome. The former chartered accountant and finance director with the Southampton-based mutual, was tasked with overseeing the implementation of a new governance structure in a period when its future was in the balance.
According to Mr Osborn, in 2012 the mutual had a rocky relationship with the regulators and “was on the brink of closing down to new business” because of its governance structure. Comparing the situation there to the high-profile issues at the Co-op, he said that the moment arrived when serious changes had to be introduced to save the 180-year-old friendly society from extinction.
He added: “Foresters had similar issues in its governance to what Co-op has. We had members on the board. Two years ago, we changed that. Our board was professionalised with industry people. We had a good hard look at our business model and went from the brink of closing to being healthy again. We had to get the right skills on board, and to satisfy the regulator and members.”
Since that worrying period, the society has gone from strength to strength, with Paul Myners’ report on the Co-op reassuring everyone involved with Foresters that the tough changes were the right ones. Keeping both the regulators and members satisfied, Mr Osborn said, is one of the biggest challenges in the mutual sector.
As friendlies cannot compete with large Plcs on scale and cost, Foresters’ chief executive said it was pivotal to “differentiate the proposition” by offering strong customer service and member support, and identified four main areas in which Foresters and its rivals faced “significant” challenges.
He identified scale, keeping costs to a minimum, having enough capital to offer riskier products, ageing membership and being relevant to young people as the main obstacles. In terms of scale, Mr Osborn said the plan was to reach 100,000 members, which is not too far away considering it already has 63,172 and expects to add 25,000 once its acquisition of the Post Office Insurance Society goes through.
An ageing membership, however, poses a bigger challenge, given that Foresters’ average member is in his 60s. When Mr Osborn started as chief executive, he said he was keen to make sure branches were “relevant for the 21st century member”, but confirmed that for now the mutual’s target market will continue to be the over-50s.
Many societies, he added, had sought to reverse trends of ageing memberships by investing in the child trust sector and Junior Isas, though the fact remains that most savers and investors are older. Furthermore, whereas many competitors also offered mortgages, Foresters had stopped offering them. He said: “Some friendlies do Junior Isas to attract younger people, but from Foresters’ per-spective we consider our target market to be over 50.
“We have considered how to attract younger members and offer hardship grants and discretion-ary propositions for younger people. But most of our products are in investments and savings, which older people tend to go for. However, 50 per cent of our sales come via the internet, and younger people have shown interest in our ethical products.”
