Does the future of wealth lie in mutual structures?

4 October 2019

With the benefit of hindsight the end of the era during which mutual groups dominated the life insurance space has been a disaster, according to former financial adviser and founder of Alliton Capital, Barry Daniels.

Pointing to the recent success of mutual in overseas jurisdictions, Daniels said that, in hindsight, the post mutual era had been a disaster with the major banks announcing they were jettisoning their wealth/insurance arms and many like AMP restructuring and downsizing their adviser networks.

“Industry and consumers are justified in asking what exactly has been the benefit of industry vertical integration and government intervention,” he said.

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Daniels has produced a white paper in which he is arguing that the re-emergence of the mutual insurance model represents the answer to the industry’s future viability.

“For mutual companies to succeed they need to be aligned with the best interests of their policyholder members. What’s more, mutual companies are owned by their policyholders, not shareholders – and that’s a very important and crucial distinction,” Daniels said.

“Mutual companies share their profits with policyholder members, look after their interests and needs first and develop products and services accordingly. This differs from the current bank owned model that sells and markets products to generate profits/dividends for their shareholders without necessarily benefiting policyholders.”

To sustain his argument Daniels points to the success of the mutual model in other jurisdictions with the mutual and cooperative insurance market being deemed by the Cooperative and Mutual Insurance Federation to be the fastest-growing part of the global insurance industry.

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Absolutely. We need more tied agency structures, with the handy under the radar Intra-Fund Advice racket as well, to help compete against the Union Super Funds. We could even do with some of those old interest free business "loan backs" as well. Would create an unstoppable Mutual Fund sales force. lol

“Mutual companies share their profits with policyholder members, look after their interests and needs first and develop products and services accordingly."
As a person who worked with MLC, AMP and Colonial Mutual dealing with customer complaints in the early and late 80's, the mutuals were rife with dishonest practices and misrepresentation.
Thank goodness they and their shoddy practices are history.
The banks had to get out because they didn't supervise their advisers adequately and relied on the same remuneration structures which the mutuals had relied upon - recruiting a lot of their managers from the ranks of those who had tolerated and tacitly encouraged the abuses on the 80's and before.
The industry is definitely over-regulated now and helping a client with confidence is increased dramatically in difficulty.
Ethics, principles, values - they are the way forward, rather than a "back to the future" approach.

Good comments Steve - seems to be what the public wants.

Yep. The low income earners are quickly discovering that due to the massive amounts of red tape being slapped on advisers, no one can afford to talk to them. They are being ditched at a rate of knots, creating a massive stockpile of small orphan accounts within most of the established fund managers. Simply pathetic. But not to worry, we are educating these individuals, one by one, in whose best interest this is - the particular entities who created (& want) this situation to continue. Its certainly NOT in the best interest of people seeking advice, that's for sure.

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