Could the Mutual Model Be Your Competitive Edge in Client Retention?

In an industry constantly facing upheaval and transformation, financial advisers are always on the lookout for innovative strategies to enhance their service offerings.

One such strategy, often overlooked yet incredibly impactful, is the mutual model. Globally, mutual insurers collectively represent US$10 trillion in total assets, and serve 889 million members/policyholders, generating premium income of US$1.4 trillion.

So, what exactly is a mutual company? Unlike traditional shareholder companies driven by profit maximisation and shareholder interests, mutuals are owned by their members—i.e., policyholders in the context of insurance. This structure means that the company’s goals are directly aligned with those of its members.

The Power of Mutuals

By owning a part of the company, members develop a deeper investment in its success, fostering a stronger, more personal connection. For advisers, this translates into clients who are more engaged and committed, fostering enhanced loyalty and long-term relationships.

Additionally, a primary benefit for members in a Mutual company is profit sharing. Instead of profits being distributed to external shareholders, they are returned to the members. This customer-centric focus ensures that members directly benefit from the company’s success, naturally building trust and satisfaction as clients see tangible returns from their engagement. Notably, mutual life insurers have proven to be resilient through global crises, with a growth rate of 23% compared to the industry average of 7% through and post the GFC. Moreover, while total industry premiums fell by 1.5% during Covid, mutual life insurers experienced premium growth of 1.5%.

As today’s financial advisers grapple with numerous challenges, from regulatory changes to increasing demands for personalised advice, the Mutual model stands out as a sustainable, client-centric alternative. It not only addresses these issues but also positions advisers to grow their businesses effectively.

Five Reasons to Incorporate Mutuals in your Advisory Toolkit

1. Long-term Relationships

By design, mutuals are conducive to long-term relationships. The inherent focus on member benefits and satisfaction leads to sustainable pricing and product design, and therefore higher client retention rates. For advisers, this means a strong and stable client base, reducing the constant need to acquire new clients and allowing for deeper, more meaningful client relationships.

2. Profit Sharing as an Incentive

The profit-sharing aspect of mutual companies is a powerful incentive for clients. Advisers can offer this unique value proposition to their clients, enhancing their service offering and increasing their competitiveness, which in turn can lead to increased loyalty and satisfaction.

3. Customised Solutions

Mutual companies tailor their products and services to meet the specific needs of their clients. For instance, at PPS Mutual, our products are designed to cater specifically to professionals like doctors, lawyers, accountants and engineers. This focus ensures that clients receive offerings that are relevant and valuable to their unique circumstances.

By offering specialised products that address the unique risks and needs of these professionals, advisers can provide unmatched value and service.

4. Improved Client Satisfaction and Retention

The alignment of interests in a mutual company leads to improved client satisfaction. Happy clients are more likely to stay, refer others, and increase their involvement with the company. For advisers, this means a more stable client base, less turnover, and a steady stream of new business through referrals.

5. Extra Tool in Your Kit

Adopting the Mutual model can be seen as an extra tool in an adviser’s kit. It allows advisers to move up the scale, elevating their business and the value they bring to clients, setting them apart from their peers in a competitive market.

Future-Proofing Your Advisory Business with Mutuality

Mutuality is an underrated tool available to advisers, offering a pathway to more stable, trust-based client relationships, enhanced satisfaction, and business growth.

At PPS Mutual, we understand the power of this model and work closely with accredited advisers, providing them with the training and support needed to offer clients access to specialised products.

The effectiveness of the Mutual model is evidenced by PPS Mutual’s success in Australia since inception in 2016, with close to 12,000 members and a lapse rate of just 5.1% against the average of 15.6%. This is driven by our long-term approach, ensuring the quality of our risk pool by abstaining from takeover terms, soft underwriting, special deals, waiving or discounting loadings, or beating or matching premiums.

Additionally, we’ve assigned $7.9 million in profit shares to our members since inception – showing tangible benefits that resonate with clients and advisers alike; and we benefit from strong in-built earnings growth due to the age demographic of our professional members, with 50% of members aged 40 or younger.

Clearly, as advisers face the challenges of an evolving industry and shifting client expectations, the Mutual model offers a viable and attractive solution. It is a model built on trust, alignment, and mutual benefit—principles that are more crucial than ever in today’s financial landscape.