AJ Bell joins the app arms race

Frenetic investor activity over the past 20 months has lifted all the major investment platforms, but the real battle for the young investment pound is only just beginning. In a bid to attract more millennials to a simplified investment proposition, AJ Bell (AJB) has launched two new apps (Dodl for consumers and Touch for independent financial advisers) to try to compete against a host of new start-ups. The necessary capital expenditure is likely to sap group margins next year – an outcome sweetened, to a certain extent, by the 5p-a-share special dividend announced  alongside these results.

The cost of upscaling the apps is not going to come cheap. For example, technology expenses for the year were nearly a third higher at £25.8m. The extent to which AJ Bell has floated on the general investment tide is clear by tracking the inflow of funds. For the full-year, assets under administration (AUM) increased by 29 per cent to £72.8bn, bringing customer funds to roughly half the size of Hargreaves Lansdown's pile.     

Chief executive Andy Bell acknowledged that the company needs to adapt, even at the risk of cannibalising its own customer base. "If we don’t disrupt ourselves, then I guarantee that someone else will and we will be left high and dry,” he said. 

There is a definite sense in these results that AJB is stuck in the awkward middle ground between, on the one hand, smaller and less cost-heavy start-ups and, on the other, the platform giants that seem to be gearing up for a major scrap over market share. This thesis reinforced by Abrdn’s acquisition of Interactive Investor. Interesting times ahead for AJB. Hold.

Last IC View: Hold, 431p, 27 May 2021