Investment business predicts better than expected annual profits

Financial markets have rebounded, but remain volatile for investors, said Manchester-based investment platform, AJ Bell today.

In a third quarter trading update for the three months to June 30, it reported that total customer numbers increased to 282,619, up 26% over the past 12 months and eight per cent in the quarter, with total net inflows in the quarter of £1.2bn (2019: £1.2bn).

Total assets under administration (AUA) increased to £54.3bn, up seven per cent over the past 12 months and 12% in the quarter. The FTSE All-Share increased by 10% over the quarter.

AJ Bell’s customer growth and strong net inflows during the quarter were driven by the platform business, where customer numbers increased organically by 20,370

Total platform customers closed at 268,444, up 27% year-on-year and eight per cent in the quarter.

Advised customers of 106,335 were up 11% over the past year and two per cent in the quarter.

D2C customers of 162,109 were up 41% over the past year and 12% in the quarter.

Platform underlying net inflows, representing organic growth in the quarter, increased by 30% over the prior year to £1.3bn (2019: £1.0bn).

Advised underlying net inflows of £0.5bn was in line with the prior year.

D2C underlying net inflows of £0.8bn was up 60% on the prior year.

Platform AUA closed at £47.7bn, up 10% over the past year and 14% in the quarter.

As reported in the company’s interim results for the six months ended March 31, 2020, stock market volatility drove record levels of dealing activity by D2C customers in the first half of the financial year, generating increased transactional revenue.

Although trading volumes have now fallen from the peak levels seen earlier in the COVID-19 crisis, the number of trades placed by D2C customers in the quarter more than doubled compared with the same quarter in 2019, exceeding management’s expectations.

As a result, management currently expects profit before tax for the year ending September 30, 2020 to be at least £2.5m above current market consensus. As at July 20, 2020, company compiled consensus for profit before tax was £43.4m.

Customer dealing activity is expected to normalise in the fourth quarter of the current financial year and, therefore, management reiterates its previous guidance in respect of the year ending September 30, 2021.

The company said it is preparing to move into the £1.5 trillion retail cash savings market with the launch of the AJ Bell Cash savings hub via its D2C platform.

As part of its commitment to make it easy for people to invest, the AJ Bell Cash savings hub will enable customers to access a range of competitive notice and fixed-term savings accounts from a range of UK authorised banks.

They will be able to apply for multiple accounts quickly and easily, with no paperwork, and manage their cash savings via one online account that sits alongside their existing AJ Bell Youinvest accounts.

It will also give them peace of mind that the savings accounts they have within the cash savings hub will be covered by the Financial Services Compensation Scheme (FSCS), up to the limit of £85,000 per bank.

AJ Bell will begin testing the cash savings hub with a small group of existing customers before the end of July and expects to launch it to all AJ Bell Youinvest customers by the end of the calendar year.

Chief executive, Andy Bell, said: “Markets have rebounded from the lows seen in the previous quarter but remain volatile and this has helped increase the value of assets under administration and customer trading volumes.

“Our focus throughout the COVID-19 crisis has been on ensuring we are here for customers and advisers when they need us and this has translated into strong net inflows onto the platform and continued strong organic growth in new customers.

“The quality and commitment of our staff has enabled us to operate all services on a business as usual basis throughout the coronavirus pandemic.

“This operational resilience demonstrates the strength of our business model which has been appreciated by many customers and advisers.

“The long-term growth drivers of the platform market remain undiminished and we are well positioned within the market to benefit.”