Investing has become a “tough sell” for younger generations grappling with the cost of living crisis, bringing to an end the coronavirus-era boom in young people jumping into the markets, according to the new head of one of the UK largest investment providers.
Michael Summersgill, who this month succeeded founder Andy Bell as chief executive of AJ Bell, said the squeeze on incomes from inflation and plunging markets this year have contributed to a significant slowdown in customer growth, especially among younger cohorts.
The FTSE 250 group last year announced a bid to target investors in their 20s and 30s with a zero-trading-fee investment app, called Dodl, capitalising on a global surge in client growth for do-it-yourself investment providers as people put their enforced lockdown savings to work in booming markets.
The 38-year-old chief executive acknowledged that the move to win young investors came too late, with Dodl launching this April into the teeth of a brutal sell-off, which has wiped 10 per cent off the average AJ Bell customer portfolio so far this year.
“Maybe if we had made some . . . decisions more quickly four years ago we would have launched into that boom period, and that would have been lovely. But no, we launched it after. It’s still a great product, but it is now a tough sale,” Summersgill said.
The new app’s average user is aged 38, lower than the typical clients on AJ Bell’s main investment platform who tend to be wealthier and closer to retirement.
Younger would-be investors are experiencing a “real squeeze” on their household finances from rising energy bills and inflation, leaving them with less money to invest at the end of the month, Summersgill added.
However, Summersgill, who took the top job after a year as deputy chief executive and a decade as chief financial officer, said the long-term demographic drivers of growth for investment platforms were still in place, such as the shift from final salary pension to individuals saving for retirement.
Despite Dodl’s bumpy start, he expressed confidence that “in five years’ time it will be in a great place”. The group did not disclose the number of Dodl customers, who will pay an annual charge of 0.15 per cent on their portfolios.
AJ Bell has continued to grow its platform both for DIY clients and financial advisers, adding £5.8bn in net new assets and 58,000 customers in the year to the end of September. However, that growth marks a sharp comedown from the £7bn of net inflows the prior year, during which a record 88,000 new customers joined the platform.
Summersgill is set to pursue a different strategy from some rivals, including market leader Hargreaves Lansdown, that are trying to add services such as financial advice for their older and wealthier clients.
“I think a number of the competitors are looking at the higher end of the [direct- to-consumer] market and saying how can we offer them supplementary services,” he said. “Whereas we are looking at the other end of the market and saying how can we go for a broader group of customers.”
He also plans to invest in branding, in a bid to change the image of investing for a new generation of customers.
“I think it is seen as this grey, dull, impenetrable world for people. If we can actually tap into some of the positive emotion . . . then I think that we could make some headway.”