Shares in investment and wealth management firm Rathbones (RAT) tumbled to a 12-month low following an FCA review. The group said it would voluntarily halt onboarding of higher-risk clients for a year and warned of a hit to earnings.
Hit to earnings
The FCA review identified areas of improvement within the group’s UK wealth management business regarding ‘the implementation and embedding of Consumer Duty’. The firm acknowledged the review also identified ‘certain aspects of its compliance, oversight and assurance arrangements’.
Rathbones said it would address the review’s recommendations with a slate of changes over a two-year period. For a period of up to 12 months, it will pause onboarding of new clients who require EDD (Enhanced Due Diligence).
This will allow it to focus on changes to its procedures and controls. In the last 12 months, gross inflows from EDD clients were around £370 million.
The firm will also pause taking inflows into general investment accounts from some existing EDD clients. This affects less than 5% of its clients, who in the last 12 months generated gross inflows of around £530 million. It will also begin a targeted review of some of its clients to assess whether they have received ‘good’ outcomes.
The cost of these measures is estimated to run to £60 million, net of insurance recoveries, which will be booked over the next two years. The group’s dividend policy remains unaffected, as does the £20 million share buyback which is due to start soon.
In addition, the group is reviewing certain aspects of its pricing as part of its ongoing commitment to delivering fair value for clients. From 1 July, it will cease charging investment management fees on cash balances held within clients’ discretionary portfolios. This will reduce underlying profit before tax by around £9 million for 2026.
Read the press release here:
https://www.rathbones.com/en-gb/wealth-management/investor-relations
