The sad events at the Co-operative Bank this year are not the first financial services scandal to hit the Co-operative movements. Less publicised but no less carnal, was the behaviour of the management of Co-operative Insurance Services (CIS) who were one of the chief perpetrators of pension mis-selling in the 90s and are now a Zombie Life co within Royal London Assurance.
The idea that you put a mutual hat on and everything will be alright, does not play well to the bondholders whose trust has been betrayed, to the private clients who were parted with defined pension promises for the fools gold of a personal pension wealth management plan, nor does it play well to the co-operative organisations up and down the line left with derelict group stakeholder and group AVC plans which they bought because they were sold under the co-operative brand.
There is a simple message here (and it’s as applicable to the trustees of the HSBC staff DC scheme who were brow-beaten into buying the HSBC life platform (now withdrawn). The fiduciary obligations of a not for profit organisation are the same as for a for-profit organisation. They are not diminished by the reputation of the brand for fairness.
Indeed the hubris of the Equitable, the building societies and CIS and Co-op bank is the same. Believe your own hype and there will be plenty of counter parties who wont. Those counter parties will exploit you and bring you down.
As far as I can see, the Co-op is good with food; it has reinvented itself in a way that the Bank and the CIS did not. My dealings with senior executives in the regional co-operative movement suggest that they are every bit as good as their counterparts in the big retail chains in the for-profit sector.
This begs the question, why has the British financial services industry demutualised? With the exception of the Nationwide and Royal London and perhaps Lloyds of London, I can’t think of any major financial mutuals left.
And yet our financial system was built on mutual lines. Those who argue against the Wongas of this world, ignore the fact that the provident societies that served the function of Wonga 30 years ago, have all but disappeared. Absorbed into a financial infrastructure that sees the promotion of providence and the operation of credit mutuals as yesterday’s news. The financial infrastructure that provided protection to the poor has been dismantled by a generation that now wants it back – just as it wants branch lines abolished by Beeching back.
They will come back, but they’ll come back as peer to peer lenders (like http://www.zopa.com). The Co-operative movement – in its financial livery – never got to grips with peer to peer. Again the comparison with Equitable , Bradford and Bingley etc is instructive – neither did they.
Without being mean to the mutual industry, it’s greatest enemy has been itself, its refusal to stick with its roots and its craving to compete with the big banks and insurers on their terms.
Thankfully in the sector that I work in- UK workplace pensions, we are blessed with a resurgence of mutualism that mirrors the advance of the not-for-profit sector in Australia. People’s Pension, NOW, NEST , BlueSky and Welplan are all mutuals (albeit of different colours).
The surprising advance of mutuals to fill the gap left by the withdrawal of so many insurers and banks from workplace savings, demonstrates the hunger for mutual solutions in the UK and the luxury we have of Regulation that allows mutuals to prosper and compete.
Let’s hope that this new lot don’t get blinded by the supposed delights of demutualisation and stick to their guns.