AJ Bell Float

Currently up 33% since launch this morning!


Nice. Must have been oversubscribed as I didn’t get the allocation I applied for but am happy I got some anyway!

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That’s a great valuation with only 183,482 customers (as of May 2018). Freetrade will have more than that before long.


I think their average AUM per customer is more than £200k or something (don’t quote me on this). That’s pretty punchy.


AJ Bell grew their customer base by about 20% between 2017 and 2018 source. Customer / AUA for AJ Bell vs HL:

HL AJ Bell
Customers 1,091,000 197,912
AUA 91.6bn 46.2bn

I suspect a large portion of the AUA is from SIPPs, AJ Bell has a good rated offering.


They have an advisory part of the business with clients at an average of £300k or so balances which pushes up their average.

Their D2C (direct to consumer) balances are around £90k, which is still high. The industry average is around £50k - and that’s across products like ISA’s, SIPP’s etc.

Most money is stored in pensions at AJ Bell:


What’s the source for that very informative screengrab @Rob14 ?

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It’s from the AJ Bell IPO prospectus, as is the lovely chart below! (There’s also a factsheet there with fast info). I’ve had a flick through and the business seems to be doing really well as is the industry in general following pension freedom’s, growing appetite for investments along with stock market growth. IFA’s are losing out. But this may be built into the valuation.

Freetrade perhaps isn’t directly comparable as the customers will be smaller and it doesn’t charge percentage fees on assets (:clap:). So AUA (assets under administration) is less important. But then Freetrade can expand to Europe and eclipse their customer numbers with younger investors who share their good experience with each other and on social media and who build their investments for 40+ years! I don’t think another XO (exection only) stockbroker has expanded into Europe…


Some interesting charts and numbers in those docs, thanks!

I guess the ii and ATS bubbles would move to the right a bit now that ATS has been bought.

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Yeah II will shift to the right after buying ATS. II acquired TD Direct a couple of years ago as well as other smaller brokers along the way. But it’s Interesting to see they’re declining, presumably these are TD Direct customers that don’t like II’s new offering.

I also noticed that AJ Bell’s IPO offering was only for AJ Bell customers (& institutional investors), you couldn’t buy from another broker!

I have a question; does assets under management matter for making a broker money?

If a broker has £1billion AUM does it make more money than a broker with £100million?

I thought they made all their money on dealing and platform (any any other) fees?

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Yes for brokers that charge a percentage fee based on your holdings. Look at custody charge on AJ Bell’s pricing page, HL’s annual account charge, or all the robo advisor services.


Ah yes of course, their platform fee is a % of your holdings. Another reason I like the Freetrade price structure. :slightly_smiling_face:


They’ve done exceptionally well and I imagine so did a few of their customers who took up their IPO offering:


It’s rare that I sell but in this case, I took advantage of the 160% gain and sold some of my shares the other week, so have got my original investment money back (to invest in something else).

What’s remaining is pure profit, which I will just hold and rake in the dividends.


Good growth but company market cap is 1.7bn ish. Even if a recession accompanied by drop in asset values doesn’t occur, I’m not sure I see them sustainably generating earnings that would justify such a valuation. With improvements in technology there is little reason for them to be able to continue to charge the transaction and platform fees they do. They would have to rebase their business model to a lower fee structure if they want to capture the wealth of new investors once the inflows run out from their ‘installed base’ of older users. This would inevitably mean optimistic earnings growth expectations are not met. Some growth can be expected with current model as the average age of their typical investor is ~45 meaning they have many years of contribution left. Average portfolio size is also close to six figures and in my opinion an investor with this size portfolio would be less inclined to transfer to a cheaper alternative as the cost saving doesn’t justify the friction to transfer, especially as the custody fee has a cap for some assets held.
I would argue they will not capture much of the younger generations investment capital who have higher awareness and are more inclined to trust Freetrade and similar. The only reason I can think of someone of my age choosing an AJ Bell or a Hargreaves in a few years when freetrade has big stock universe, limit orders etc is if they do not trust the newer companies, but in this case Hargreaves would win as it is the largest, most well known and little price difference with AJ Bell.

I think there is also the factor of the record breaking bull run which has raised and continues to raise the figure on which AJ Bell can charge a custody fee (this is capped on some shares and assets) , what they call recurring ad valorem revenue on their investor website. This is the biggest contributor to their revenue growth and so it can reasonably be said that revenue growth will slow significantly in the event of a decline in asset prices, even ignoring people panicking and withdrawing money as the % growth in ad valorem revenue exceeds net inflows suggesting much of it has come as a result of increase in asset prices.

-Good/trusted brand
-Good market position
-Demographic served average age 45, if these customers retained can count on many years of contributions from employment and perhaps also inheritance

-most of revenue growth coming from growth in custody fees on assets

  • custody fees capped on some assets, tiered on others, suggesting much of growth not accounted for by rising asset prices coming from new accounts with small size where custody fee/£1000 is higher.
    -growth in custody fee due to rising share/asset prices>growth in custody fee due to net inflows =vulnerable to correction
    -Stockbrokers who provide the same product but better and cheaper I.e. freetrade in time will capture majority of new investment capital from <35 age group within a few years
    -this would leave AJ bell with a business serving an older ‘installed base’ of users who may well continue depositing and using the service
    -revenue though could be expected to stop growing as quickly as larger portfolios have lower custody fee/£1000 and this is the main contributor to revenue growth