AJ Bell/Dodl: trading app will tap new UK investors

Britain’s investment industry learned from the pandemic that the right circumstances prompt ordinary savers to invest. Encouraged by a US retail trading boom led by Robinhood, AJ Bell plans to launch Dodl, a cheap mobile-only service.

The platform group is betting that cheap and simple will entice new customers less financially savvy than its usual clients. It hopes to win over Europe’s growing army of investors trading for free on rival services.

Dodl will offer commission-free trading on UK stocks with customers paying annual management fees of just 0.15 per cent. The move will rekindle fears of a price war among UK brokers.

AJ Bell is already ahead of rivals on costs, though experience shows British savers have been more concerned with quality of service in the past.

Do not expect the UK to suddenly be gripped by the meme stock phenomenon that took off in the US last year. Encouraging large volumes of free retail trades is not in the interest of UK brokers. Unlike US counterparts, they are not permitted to make money from routing order flows to market makers.

Freetrade operates in the same space. While targeting a £650m valuation at an ongoing funding round, the UK fintech expects operating losses to grow to an expected £188m by 2023.

Competition in the UK is still heating up. Abrdn is hoping to buy retail platform Interactive Investor to gain a slice of the market. Spread betting group CMC markets plans to split off its brokerage and investments division into a separate business. Scale and breadth of offering still remain more important to retaining customers than rock-bottom fees.

Investors in platform companies want to see customers channelled into lucrative in-house funds. These now represent just over 3 per cent of AJ Bell’s retail client assets, up from less than 1 per cent in 2018.

Dodl may help to speed up those flows. AJ Bell should avoid pushing too hard, though. Rival Hargreaves Lansdown showed how not to do it with heavy promotion of discounted funds from imploding investment star Neil Woodford.

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