Rathbones, a FTSE 250 constituent, is facing a significant financial blow following an independent investigation by the Financial Conduct Authority (FCA), which has identified compliance deficiencies in its UK wealth management operations. The review's findings have prompted Rathbones to suspend contributions from approximately 4,700 client accounts, valued at £530 million in gross inflows, as well as halt onboarding for 'enhanced due diligence' clients for the next year.
The latter category of clients has generated around £370 million in gross inflows over the past year, representing a substantial loss for the firm. This decision is likely to have a lasting impact on Rathbones' relationships with its most valuable customers and underscores the FCA's focus on ensuring high operating standards within the UK wealth management sector.
The company has committed to a two-year remediation programme to address the review's recommendations, which will incur costs of £60 million. In addition, Rathbones will cease charging investment management fees on cash balances held within discretionary portfolios from July 1, an action expected to reduce pre-tax profit by £9 million this year.
Despite these measures, Rathbones has confirmed that its shareholder dividend remains unchanged and is proceeding with a £20 million share buyback programme. Chief Executive Officer Jonathan Sorrell stated the company's commitment to high operating standards and expressed gratitude for the FCA's engagement and client trust during this period of improvement.
The FCA's investigation highlights the increasing focus on consumer protection and compliance within the UK financial sector, with regulatory bodies working together to maintain stability and protect consumers. As such, Rathbones' actions demonstrate its alignment with these efforts, albeit at a significant financial cost.