Monday, 6 December 2021

AJ Bell - Portfolio Addition

I've held my SIPP with this platform (previously Sippdeal) for the past 15 years or so and in 2011 I transferred my ISA from Interactive Investor. Over that period I have been very happy with the service provided and tend to follow news and progress especially since they went public a couple of years back.

Established in Manchester in 1995, the company has grown steadily and is now the second largest platform in the UK with a market cap of £1.5bn. They became a FTSE 250 company in December 2018.

I was very pleased that their founder and CEO, Andy Bell agreed to write the foreword to my "DIY Pensions" book.

Results

The company have recently released results for the full year to end September 2021 (link via Investegate),

This has been a record year with assets under management growing 29% to £72.8bn, profits up 13% to £55m and earnings per share up 13% to 10.67p.

As a result the dividend has been raised by 13% for the year to 6.96p and in addition there will be a special dividend of 5.0p payable in January. This gives a yield of 3.2% at the current price.

New App

In 2022, they will be launching their new low cost app - dodl - with no charges for buying/selling and an annual charge of just 0.15% compared to 0.25% + dealing for Youinvest. It will offer the full range of ISA, Lifetime ISA, Pension and General (Non-ISA) accounts and existing customers will be able to consolidate existing investments onto the new platform.


However, the range of investments will be initially limited to around 50 of the FTSE 100 shares and a further 30 or so funds including the Vanguard Lifestrategy and their own low cost index funds. US stocks will be added sometime later and other shares, investment trusts and funds according to customer demand.

This move is clearly a response to the competition from the fintech offerings from the likes of Freetrade and Revolut. In the US, the popularity of Robinhood has forced some brokers to lower their commission rates which is obviously good for investors.

The minimum charges for each account will be £1.00 per month however, unlike Youinvest, there will be no maximum cap. Charges for the average ISA with say £50,000 would be £75 p.a. compared to Youinvest charges currently £87.50 (funds) or £42 (shares/ITs) plus dealing charges. I currently pay £9.95 for each share purchase/sale.

I will need to do some analysis to see whether I would be better off with the dodl platform or carry on with Youinvest as normal...clearly it depends on the size of the portfolio and the likely frequency of trades. It will obviously be attractive to new investors with a few hundred pounds to 'invest' who will likely do a lot of buying and selling...because it's free. Whether that will produce good long term returns is debatable!

3 Yr Share Price compare HL v AJB
(click to enlarge)

Conclusion

I was surprised to see the share price fall back some 9% after the results were released. Maybe there is some concern about future profitability with the commission-free app. Anyway, I am hoping that the dip will be temporary.

This seems to be a well-run ship...record new customer numbers, record revenues and profits, new products, high retention rates year on year, 17 years of consecutive dividend growth and strong balance sheet with no borrowing.

I seem to recall being in receipt of some shares following the float but they were possibly sold to release funds for my house purchase. I have some spare proceeds from other disposals so decided to take advantage of the share price dip last week. The purchase price was 370p and the addition accounts for just 2% of my portfolio. 

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

2 comments:

  1. This is great news as I still have an ISA and SIPP with AJBell as it's been too expensive to transfer them to a cheaper provider. I think I'd be ok with the SIPP on Dodl as I don't have many investments on there so easy to transfer. I might struggle with the ISA as it could be that some of the investments I have there (investment trusts) may not be available on the app. Perhaps in the future.

    I still have some shares from the float and likely to hold longterm.

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  2. Thanks DIYIUK,

    I hold some of AJB myself but only a around 0.1% of the total assets we hold with them - since they hold the vast bulk of our investments.
    I like their service but I was slightly shocked to see that their profit margins are huge!!!
    I had a look at their annual report and found that they are a very profitable business in a profitable industry.
    Maybe I'm a but old school but I prefer the service of AJB / HL / II over the newer app based investment platforms. There's enough new ones out there to worry the old guard but I'm not the first to wonder if holding all of your investments on an app on your phone is a good idea.

    Finally, I wrote a piece on AJB and them hiking fees (didn't like it). Their profit margins are very high and customers are sitting ducks for increase in fees - at a time when their competitors are giving it away for free! Luckily, fees make up about 0.06% for my investments with AJB, so I'll admit that this fall's into "too small to care too much about" pile
    https://gentlemansfamilyfinances.wordpress.com/2020/06/11/fees-high-foe-for-some/

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