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MM Profile: Martin Shaw

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The chief executive of the recently created Association of Financial Mutuals feels his whole career has been leading to his current position Interview by Rachael Adams

My whole career has been leading to what I do now,” says Association of Financial Mutuals chief executive Martin Shaw. But when he graduated with an economics degree, he started off at a bank. “Graduate employment was about as good as it is today, so I took the obvious route - a trainee manager at a bank in Stockport.”

When one of Shaw’s colleagues left to join a building society he decided to follow suit. “We were all looking at building societies in light of the Financial Services Act. They sounded very exciting.”

He worked for Bradford & Bingley for almost 15 years in roles that ranged from assistant manager to IFA supervisor to overseeing employee incentive schemes.

Shaw left Bradford & Bingley just before it was demutualised. “The culture of working in a mutual was important to me. I was not convinced the organisation had a permanent future as an independent bank.” His next role was very different. “I joined the FSA and worked in consumer protection, which was interesting because my last role in running incentive schemes for staff was in some respects the antithesis of consumer protection but I had the regulatory dream of making the world a better place.”

After a short stint with the Association of British Insurers where he was director for consumer regulation, Shaw moved back to the mutual sector and joined the Association of Friendly Societies as general secretary.

“It took me back to my mutual roots. When I first joined, we were unsure the association was going to work but, by the time the opportunity came up to merge with the Association of Mutual Insurers in 2012, we were able to enter that as an equal partner.”

The merger saw Shaw become chief executive of the new trade body and also led to the AFM becoming a virtual organisation. Shaw is the sole employee and the rest of the work is outsourced to specialists, keeping overheads low.

The AFM has 56 member firms which have 20 million members. This is a considerable change from the days from the peak of the financial mutuals. “In 1995, more than half the insurance industry was mutual. Now that figure is 5 per cent. The positive is that two years ago it was 4 per cent, so you could argue mutuals have increased their market share by 25 per cent in a few years.”

However, Shaw says market share is not the primary concern for AFM members. “Mutuals do not see growth as the sole reason for business. Increased market share might look good for business analysts but it means less capital for existing members. They are there to serve member interest.”

Shaw says the fact that mutuals are not solely motivated by share price or extracting maximum revenue from customers is finding favour with the public. “It goes back to 2008 when people realised banks are motivated by big salaries and consumer need is of secondary interest. Some AFM members even reported record volumes of sales growth in 2008 as consumers realised mutuals were more focused on them.”

Retreat of the welfare state is another factor in helping mutuals thrive. “State support is dwindling, which gives us a chance to talk about our heritage. Before there was a welfare state, people turned to a friendly society for support. We can help in areas where the Government is constrained, such as in NHS funding.”

He highlights child trust funds as an example of how mutuals can fill a role that organisations motivated by maximum profit overlook. “Politicians consulted with the usual suspects - banks and large insurers but when it came to the launch, they were nowhere to be seen. Mutuals were focused on child and family savings anyway, so the product fitted perfectly with us.”

CTFs gave mutuals almost five million new customers. “Obviously, it was a real disappointment that they were pulled. Many organisations relied on that vital inflow of consumers. Junior Isas will not fill that social role that appealed to mutuals because they are more about helping the wealthy save tax. However, AFM members will tap into using junior Isas to help people with limited means save over time.”

Shaw would like to see the UK learn from Europe in its attitude towards mutuals. “Mutuals make up 50 per cent of the market in France and Germany. Even in the US, they make up 30-40 per cent but, sadly, in this country, we have not overcome some of the barriers to fostering diversity.”

Regulation is the most substantial barrier to a bigger mutual market, Shaw believes. “The sheer weight of regulation is at an unprecedented scale and it is difficult for smaller mutuals especially to manage their way through that.”

The RDR is a particularly challenging piece of regulation. “It will drive out some IFAs and encourage the ones left to focus on high-end clients. Many of our members have focused very strongly on the IFA market. If you are a mutual that provides protection, your typical customer is blue-collar and self-employed, and that may not be IFAs’ target market after the RDR. These organisations need to think about whether to change their products or their distribution patterns.”

The changing face of the regulator is also a concern for the AFM, says Shaw. “I do welcome the heightened focus on consumer protection. The absence of a dedicated consumer division has not worked. After I left the FSA, the consumer division closed down, and the formation of the Financial Conduct Authority signals a return to that. What I am worried about is the potential for overlap and the increased regulatory costs for firms as they have to satisfy two bodies.”

Shaw believes consolidation offers a solution. “The sector as a whole will grow even if the number of members does not. I think it is time for an environment where mutuals flourish.”

Born: Wolverhampton, 1963
Lives: Lincolnshire, with his wife and two children
Education: Economics at Keele University followed by an MBA from the University of Bradford
Career: 2010-present: chief executive, Association of Financial Mutuals; 2006-09: general secretary, Association of Friendly Societies; 2003-06: director, Association of British Insurers; 2002-03: senior manager, FSA; 1987-2001: executive manager, Bradford & Bingley
Likes: A well presented case, summer and sunshine
Dislikes: Bad regulation, reality TV and incongruous behaviour
Drives: Land Rover Defender
Book: This Book Will Save Your Life by A M Homes
Film: Despicable Me
Album: Probably an Eighties’ remix album
Career ambition: Doing what I am doing
Life ambition: Doing what I am doing better
If I wasn’t doing this I would be: Growing grapes and making wine

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