AJ Bell’s recent 50% annual profits rise looks hard to square with a share price drop of 16% over the past 12 months.
Where the wealth platform is making its money is the issue.
Britain’s financial regulator, the FCA, has started to investigate interest income on client cash across the sector and whether some firms are taking too much for themselves.
AJ Bell is one of the most transparent about its fees among its peer group but interest income is a big earner, nonetheless.
Even a fan such as broker Liberum cautions that if the FCA were to take a very hard line the firm could come under scrutiny.
Elsewhere, no-frills trading group Robinhood has announced its intention to launch in the UK for a third time, but AJ Bell and rival Hargreaves Lansdown seem so well entrenched that the US group will have to pay heavily to make any serious inroads.
Stock markets also have made a quiet start to 2024, which won’t help transaction revenues but this might change if interest rates do start to come down.
Liberum believes investments made to improve the brand and drive customer growth in weaker markets “should help AJ Bell emerge as a winner in the long term as markets recover in 2024 and beyond”.
Underlining that, US bank Jefferies forecasts next week’s first-quarter update will show total platform customer numbers at 485,245 and just over 500,000 in all and assets under management (AUM) at £79.8 billion.