The AFS Conference for 2007 was held at the Majestic Hotel Harrogate, between 3rd and 5th October. Nearly 250 attendees, their partners and exhibitors gathered to enjoy a range of influential speakers and to debate key issues for the sector, as well as to network with colleagues in friendly societies and meet organisations that support them.

The Annual General Meeting also enabled attendees to hear what the Association and its Committees had being doing on their behalf over the last 12 months, and to agree the composition of the Board for the next 12 months.

Growing recognition for the vital role of friendly societies in delivering good value financial services to all sections of the population was reflected in both in the size of the audience and in the quality of the speakers.

Key messages from the speakers include:

Sarah Wilson, FSA Director for Treating Customers Fairly

In the course of her wide-ranging presentation Sarah Wilson described the regulator’s view on challenges facing consumers and the industry. She then looked at common themes in regulating Friendly Societies, especially with regards to strategy, governance and financial management.

Challenges facing the industry include:

• ensuring that consumers of financial services are capable and confident;
• that they have clear and understandable information;
• that firms are soundly-capitalised; and
• that a risk and principles-based regime is successful.

The FSA’s response to these challenges is two-fold, namely its Financial Capability and TCF initiatives. Sarah described the success so far of these two initiatives, and challenged the industry to adopt a radical corporate culture of treating customers fairly, especially with regards to customer communication. Arrow risk assessments and thematic visits will sharpen up on TCF as we approach the March and December 2008 deadlines.

Sarah then turned to the three areas raised by Ian Tower in his 2005 address to the AFS annual conference, namely:

• member firms’ strategic responses to the current marketplace;
• their governance processes; and
• their financial management regimes.

Progress since 2005 is reflected in implementation of the Annotated Combined Code, Friendly Society ICAS returns (which show an improving risk management culture), and independent input to the running of With Profits funds. Members were exhorted to further embed good practices into their corporate culture, and to maintain an innovative approach to strategic change (for example to make as much success of the opportunities posed by the Retail Distribution Review as we have with CTFs!).

Oliver Stones and Robert Merrifield, Citi Quilter

Oliver reminded the conference that Basel II aims to ensure that capital allocation is more risk-sensitive, that it separates operational risk from credit risk, and reduces the scope for ‘regulatory arbitrage’. The intent of this third pillar is to make banks’ risk exposure more transparent, and to increase the number of disclosures that they must make.

Oliver then gave a fascinating exposé of the recent turmoil in the Fixed Interest markets, linking it to the US housing market and dilatory action by the Bank of England. Markets now appear to be correcting themselves since the US Federal Bank cut rates by 50bps. The outlook for gilts is good and inflation appears subdued, but beware false dawns!

Robert, somewhat pressed for time before lunch, gave an equally compelling presentation on the changing shape of the UK market. The benign environment of lower inflation and interest rates which has driven growth over the past ten years is coming to an end, and risk is now re-entering the investment equation. He gave an interesting analysis of the huge variations in sector weightings making up different international indices, and the changes in them over the last 20 years. This led to the inescapable conclusion that the UK stock market is international as it is British. Investors and their advisers should now consider structured products, absolute return, UCITS III funds, and derivatives.

Professor Nigel Waite, Executive Director, Financial Services Research Forum “Welfare and the Consumer Society”

Nigel’s main theme was how Friendly Societies are here to make people’s lives better, and to fulfil the strategic imperatives of creating and sharing value. In so doing he returned to the topic of a speech he gave to the AFS conference at the beginning of the decade.

He weaved together a number of increasing trends to create the backdrop in which we operate, for example wealth (and waistbands!); single person-households; people in work; obsession with property; flexible, transient lives; social inequalities; environmental concerns, youth unemployment and truancy.

Nigel then turned to the vitally important factor of trust, and despite its slippery, qualitative nature described the five main factors of trust: benevolence; expertise; integrity; shared values, and communications. The Forum’s Trust Index showed very slight increases in trust amongst consumers in 2007, which is maintained by reliability; notification of better products; no hidden charges etc. Friendly Societies are well-placed to build trust by offering lower costs; inclusiveness; innovation, and advice for the ordinary man in the street.

Afternoon Workshops: a) Paul Ashley, Hay Group Tomorrow’s people: Managing Talent in a Diverse World

Paul posed the leadership crisis facing senior management, namely that the baby boomer generation is getting older, and proving difficult to replace with sufficient numbers of quality Executives. This is accompanied by the up and coming ‘generation X’ (i.e., people now in their 20’s), which is shifting from ‘command and control’ to a collaborative approach to work.

Paul reflected on seismic changes in the UK corporate scene since the establishment of the FTSE 100 in 1984, and challenges facing us all in the future. A show of hands on a number of areas amongst delegates reflected the expectation that collaborative and flexible working patterns will be key to success, as will customer focus, agility and innovation.

b) Simon Walker, KPMG Principles-based regulation (PBR)

With PBR just around the corner, Simon posed four key questions:
• Who in your firm is responsible for embedding PBR?
• Do you have a PBR project?
• Will PBR change your compliance function?
• Have you noticed a change in your relationship with the FSA as a result of PBR?

Discussion was lively in helping this well-attended workshop get to grips with new responsibilities and opportunities about to be ushered in.

Mr Balls reflected on the long involvement of co-operatives and mutuals in the provision of financial services in the UK, and the Treasury’s link with this sector since 1829. Many people may view Friendly Societies and other mutuals as an anachronism, but he believes that mutuals are playing an increasingly vital role in meeting the needs of modern consumers. For instance the success of Child Trust Funds owes a lot to Friendly Societies. This is due to their mutuality (e.g., not concerned with meeting the demands of shareholders), responding to niche markets, and community involvement. Trust and reputation also play a huge role in a world where people are concerned about fair and transparent treatment.

Speaking about the mutual sector Mr Balls went on to add that, ‘the reason why you are flourishing and making such an important contribution is not primarily about history, but that you are relevant to the needs of modern consumers of financial services’.

Mr Balls pointed to the important link between CTF and financial education for children. There aren’t many times when a policymaker can touch the lives of so many people at once, but CTF is one of them. This September, 700,000 children started Primary School with a CTF in their name, with 70% opened by parents. In two years’ time a £250 top-up will be paid – another ‘universal’ moment. The Government will build on this with investment into detailed teaching and support to bring financial awareness and savings to life.

Mr Balls was pleased to have just met with Primary and Secondary School children for their respective financial education sessions at the conference, and pointed to the opportunity we have to revolutionise the degree of financial literacy of young people and adults. He concluded with an appeal for the Government and the mutual sector to continue to take the education agenda forward

Mr Balls had not however quite finished: he added a reassurance to delegates that the review of tax-exempt savings limits (which he promised when he met AFS whilst the Economic Secretary to the Treasury in January) hasn’t died a death following his move from the Treasury. He stated that the review will be completed by the time AFS meets the new Economic Secretary (on 5 November).

Many thanks to all who included feedback forms at this year's Conference. From those received it would appear that the Conference was a success and the majority of delegates were happy with the content of the Conference and felt this year's event was the best one yet. Thank you to those who have given suggestions for topics for next years speakers and workshops and the Sub Committee organising the Conference will consider these in due course.

The only item of negative feedback from some of the delegates was the style of lunch. We had purposely chosen to have a buffet lunch in the exhibition hall as it meant everyone had plenty of chance to walk around and visit the exhibitors during the Conference. We will of course reconsider this for next year bearing in mind that Exhibitors pay to have stands at our Conference and expect maximum opportunity to have access to delegates throughout the event.

2008

As mentioned in Harrogate next year's Conference will be held at the Hotel de France in Jersey. The online booking system will go live in May, but the dates for your diary are 1st-3rd October.

There are budget flights available from many airports and we suggest that in order to secure good deals the time to book is as early as possible. The Conference will commence with a Welcome Drinks Reception and Dinner at 7.30 pm for 8.00 pm on Wednesday 1st October and will end at lunchtime on Friday 3rd October, so hopefully this will give you advance notice now for those of you who want to plan your travel arrangements to secure the best deals.