Companies covered this week:

  • Shaftesbury final financial results ahead of acquisition
  • AJ Bell annual results
  • Apple vs Twitter

AJ Bell: Heading in the wrong direction?

The pandemic was a wonderful time for AJ Bell (LON:AJB) and its peers. People were flush with cash with nowhere to spend it and nowhere to go. Markets were thriving, but turbulent. Many millions of new investors entered the world of stock picking.

To capture some of these new market entrants, AJ Bell has spent a lot of money on new products. Investment in Dodl - a cheap, simple investment app for beginners, launched in April - and Touch - a platform for financial advisers due to launch next year - sent technology costs up 27% to £33m in the year to September.

But has this investment been worth it? Dodl has a few major issues:

  1. Dodl doesn’t stand out. The investment app market is already very crowded and incumbents are sponsored by the deep pockets of private equity. Dodl does not offer the best prices or the broadest market access. To compete, AJ Bell is having to spend a lot on marketing - £15m of marketing costs in the period were 15% higher than the same time last year.
  2. Dodl customers don’t have large enough portfolios. Customers of trading apps like Dodl tend to have very small portfolios (the stocks on offer don’t lend themselves to great diversification) and making money on small portfolios is very hard - especially when trading costs are almost negligible. The stream of new customers is slowing down with the markets. Net customer inflows fell from £7bn in the year to September 2021 to £5.8bn in the year to September 2022.

That said, Touch might yet prove an interesting innovation. Accessing larger portfolios through financial advisers could help to elevate assets under management and revenue per customer - which fell in 2022.

AJ Bell is a nice business. It has invested in helping private investors make the most of the stock markets in a responsible and strategic way and offers a broad range of products to suit many different needs. But without the exorbitant fund fees like Hargreaves Lansdown or the risky leverage business like IG, it’s less enticing for investors than it is for customers.

Shaftesbury: Retail is bouncing back, why aren’t REITs?

Shaftesbury (LON:SHB) - the retail landlord which owns 16 acres of property in…

Unlock the rest of this article with a 14 day trial

Unlock with Email
Unlock with Google

Already have an account?
Login here