In the post
Europe’s postal services sector is not necessarily one that appears on the radar screen that often.
The sector has been estimated to account for less than 1% of EU GDP, while in 2013 it employed some 1.2 million, mostly in universal postal services – ie, not in asset management.
Agriculture employed roughly ten times that number across the EU27, while many of the jobs are not necessarily high value add ones – carrying letters is rapidly being ditched for delivering
parcels as the online economy continues to take off, spurring online consumption across the region.
But while the days of handling letters may seem anachronistic, it is worth remembering that postal services organisations are also among Europe’s oldest providers of financial services, going back to the mid-19th century, when basic savings products were launched.
In terms of retail distribution, these are organisations that have significant, and ubiquitous physical presence through branches across even the smallest urban areas, and they have not rested on their laurels in terms of fighting for their survival, also in business areas such as manufacturing and distributing funds.
SAVINGS FOR THE MASSES
In the UK, the idea of postal savings goes back to 1861, when the government saw a way to fund national debt.
By the 1960s, the Post Office Savings Bank had become the National Savings Bank, later renamed National Savings & Investments, which now offers products such as tax free premium bonds, direct savings accounts, tax wrappers, income bonds and investment accounts.
It claims over 25 million customers and £110bn (€156bn) invested. However, the objective remains the same as when it was founded in the 19th century: as an executive agency of the government the money invested in NS&I products is used by the UK Treasury to help manage the national debt.
By contrast, the UK’s Post Office, as it is now called, claims to have the largest financial services retail network in the country, with more branches (post office branches) than all the UK’s banks and building societies (a type of financial institution) put together.
As a provider, the Post Office says that it offers over 170 products under four “pillars”, one of which is financial services; these include insurance, savings and lending products, including mortgages.
Financial products in the area of savings are provided by Bank of Ireland UK, which classifies the Post Office as one of its appointed representatives in accordance with distribution regulations. As a retail distributor, the onus is on deposit products and services.
Under the UK model it could be argued that a relatively strong independent asset manager has already emerged out of the country’s postal services history, particularly for doing business with institutional investors.
Hermes Investment Management was set up in 1983 to manage the BT Pension Scheme. This was and remains one of the biggest in the country because of the fact that BT is the world’s oldest telecommunications company.
From 1870 to the early 1980s, BT was part of the Post Office before being floated during the privatisation boom unleashed by Margaret Thatcher.
Today, Hermes says that it is one of the largest institutional asset managers in the UK, with £29.5bn (€42bn) of AUM, and £146.6bn (€208bn) in assets under advice.
From its origins effectively managing pension assets of part of the UK Post Office as it was, Hermes now manages money for over 360 clients in 22 locations globally.
