Thursday 3 December 2020 10:08 am

Exclusive: Andy Bell warns 'we’ll all feel the pain of negative interest rates'

As the Bank of England mulls the introduction of negative interest rates AJ Bell’s chief executive has told City A.M. customers will suffer as a result. 

The central bank has already slashed interest rates to a record low of 0.1 per cent to support lending through the pandemic. 

Read more: AJ Bell assets reach £56.5bn as new customers flock to platform

“We’ve discussed how we’d deal and cope with it. I don’t have a magic wand to help customers in that environment,” Andy Bell told City A.M. “Unfortunately I think we’ll all suffer the same pain on interest rates.” 

AJ Bell warned that low interest rates would dent revenue in its annual results published today, but that it has a sufficiently diversified model to operate in such an environment.

And he told City A.M. that if the interest rate margin disappears and AJ Bell has to pay to deposit customers’ cash “then it will come through in higher charges unfortunately.” 

Read more: AJ Bell’s revenue jumps 22 per cent as investors take advantage of market volatility

Can AJ Bell sustain its record results? 

AJ Bell reported its most successful year yet as coronavirus-induced market volatility drove record numbers of customers towards its platform. 

Total customers increased by a record 63,239 in the year, up 27 per cent to 295,305, with revenue jumping 21 per cent to £126.7m. Pre-tax profit rose 29 per cent to £48.6m as total assets under administration increased eight per cent to £56.5bn. 

Market volatility has been a considerable driver of customers to AJ Bell’s Youinvest but can they sustain this level of growth? 

“There is a froth on [the coronavirus-induced volatility]. We don’t think it’ll carry on at the current level for the next 12 months,” Bell tells City A.M.

But the City veteran is bullish on the FTSE-listed firm’s prospects, pointing to the increase in market share and brand awareness, no doubt helped by its IPO in 2018, as it goes up against the likes of Hargreaves Lansdown. 

“[Next year] there’ll be a marginal fall off. I’m very confident that we are in a strong position… I’m not going to start making excuses for the next year’s figures, I’m working on them being as strong as this year,” Bell added. 

Read more: Brexit certainty helps AJ Bell boost platform assets by 27 per cent

The industry ‘needs to educate customers’ 

While AJ Bell has enjoyed a stellar year it did have one hiccup towards the end of the year. Following news of the Pfizer/Biontech vaccine and further clarity on the US election outcome, AJ Bell’s platform crashed under the weight of demand from its customers.

Bell is adamant it was not an IT problem despite reiterating in the annual results that the company is “continually investing in our technology solution”. 

Read more: Market surge crashes trading platforms on ‘busiest ever day’

Instead, Bell says, it is indicative of a communications issue within the wider industry.  “Where the industry has let itself down is communicating to customers – they expect to be able to get on [the platform] in terms of extreme market volatility.” 

“The industry needs to educate customers that that’s not the way it works… This is a one in 3 or 5 year event so something like this will happen again we just need to be a lot better prepared for it,” Bell adds.