AJ Bell’s commission-free investment app needs something extra to stand out

The news: AJ Bell, which runs one of the UK’s largest investment platforms, AJBell Youinvest, will launch an app in H1 2022 called Dodl by AJBell that offers commission-free investing services.

• Initially, only UK-listed stocks will be available, but the company said it would add US listings soon after rollout.
• AJ Bell CEO Andy Bell said Dodl’s limited investment range and simplicity “will appeal particularly to those who are new to investing and want a simple way to manage their investments.”

More on this: Dodl will charge an annual fee of 0.15% of the value of a portfolio but won’t take tax wrapper charges. Users buying into funds will also have to pay annual costs for the underlying fund. Dodl’s offerings will include:

• Individual savings accounts (ISAs), lifetime ISAs, pensions, and general investment accounts
• Multi-asset funds with six risk levels
• Themed investments focused on areas like robotics, technology, healthcare, and responsible investing

Trendspotting: Offering free trades isn’t enough to launch a trading platform anymore.

Startups and incumbents alike are engaged in a race to the bottom in terms of prices to stay competitive—older digital trading platforms like TD Ameritrade and incumbent heavyweights like Fidelity have slashed their fees and are consolidating to bolster their digital capabilities. Dodl’s digital competitors are now differentiating their brands through other means.

• Robinhood, the most headline-dominating trading platform, may also be the most vulnerable. Its revenues fell sharply in Q3 2021 due to an oversized reliance on crypto trading, and its user growth also took a hit.
• Freetrade reached £1 billion ($1.28 billion) in AUA earlier this month after surpassing 1 million users. Its premium offerings, movement into pensions, and partnership with Monzo have helped sustain its growth.
• Revolut’s commission-free stock trades are limited to its much-desired US users, but its ecosystem of offerings is approaching super app status, and it’s betting heavily on crypto by bringing its exchange in-house. And pairing up with a regtech could appeal to the safety conscious.
• eToro has roughly 20 million users spread across more than 140 countries, and its wide range of assets and well-known social news feed have made it a model for successful European expansion.

The big takeaway: Dodl will face an uphill struggle in the crowded UK market. It’s counting on attracting new investors—even as competitors pivot and adopt strategies more appropriate for a maturing market: focusing on increased engagement, expanding to less tapped-out markets, and creating product differentiation.

But the wild card is whether the retail trading slowdown is about to end. The discovery of the omicron coronavirus variant could restore conditions more favorable to new entrants and increased trading volume. If lockdown restrictions are reimposed, consumer confidence plummets, and economic volatility increases, investors’ interest in trading platforms could be revived.

Dive deeper: Need more insights on how we expect digital brokers to adapt to falling trading volumes? Click here.