In today’s modern world – and particularly in a post-pandemic environment – it’s no surprise to anyone the challenges faced by financial services operators are heightened. If you look in particular at the challenges facing the superannuation sector and then turn to our friendly society colleagues, you can see significant similarities.
You may be wondering why I am discussing friendly societies? What role could they possibly play in the modern era alongside our broader financial services system? Well, for me, both as the Appointed Actuary of a number of friendly societies, and an advisor to Super Fund Trustee Boards and management, it’s all about focusing on members’ best interests and outcomes. This is something friendly societies have done well for almost 200 years.
Let’s take a look at the role friendly societies have played in Australia since their launch in the 1820s. Before there was any form of government welfare or sick pay for workers, friendly societies stepped in to support trade workers, their families and also single women, helping them avoid poverty in times of illness or when the primary breadwinner was injured or incapacitated. Their role in society grew as trade members realised the benefits of subsidising free medical care, sick pay and funeral benefits for their industry.
Working toward a common purpose
A range of interesting sounding friendly societies sprung up here in Melbourne and rural Victoria. It was clear which friendly society represented which ‘tribe’ –shoemakers belonged to the Melbourne Operative Cordwainers’ Society and the timber cutters fittingly aligned with the Melbourne Sawyers’ Friendly Society.
The dynamics of friendly societies in NSW was also interesting with the first launched by Eliza Darling, wife of Governor Darling. The Female Friendly Society of the Town of Sydney was established in 1826 to support women between 14 and 50. From there a slew of friendly societies with such unique names such as the Australian Grand Lodge of the Independent Order of Odd Fellows, United Ancient Order of Druids and The Independent Order of Rechabites aimed to entertain and support members.
Today only 12 friendly societies exist, and they face many similar challenges as super funds do in an era of historically low-interest rates and competition for investment dollars. However, the race friendly societies are running is different. Friendly societies and their related organisations today provide investment products, financial services, healthcare, retirement living, aged and home care services for around 800,000 members.
Creating stable communities
The critical strength friendly societies have is their sense of community. This is something they have held as core for centuries – and that is saying something. Their loyalty to members and vice versa has been continuously delivered through powerful relationships and relevant products.
What they are facing today is the need to be even more competitive and deliver valuable services which are in demand by members. One area they have excelled in traditionally is funeral bonds. Today 264,000 Australians hold a funeral bond with a friendly society. These bonds provide peace of mind for members, and there is enormous value in that as members can pre-pay and not load that cost onto their family when the time comes.
As Australia ages, funeral bonds from friendly societies continue to meet a fundamental need. Friendly societies’ typical tax-effective investment bonds complementing super’s offerings for those looking to further build long term sustainable financial futures.
One thing I know is any industry player with such a strong understanding of the dynamics of why member outcomes are so important is an interesting industry participant to watch and learn from.
Sean is Managing Director of McGing Advisory & Actuarial and is currently Deputy Chair of the ASFA Victorian Executive. These views are his own personal views.
Sean and the team at McGing Advisory & Actuarial provide a wide range of Superannuation support services including administration, investment, insurance, risk, governance and actuarial advice.