Key facts
- Rathbones is suspending thousands of client accounts following an FCA probe into compliance shortcomings.
- The firm expects to lose £530m in gross inflows from paused client contributions.
- A two-year remediation program will be implemented to address the FCA's concerns.
- The company anticipates £60m in costs related to the remediation efforts.
- Despite the issues, Rathbones will maintain its shareholder dividend and proceed with a £20m share buyback program.
Rathbones is set to suspend thousands of client accounts and halt new inflows from certain customer segments following an independent investigation into its UK wealth management business, prompted by concerns from the Financial Conduct Authority (FCA).
The review, conducted under the FCA's 'skilled person' powers, uncovered compliance shortcomings. As a result, Rathbones will pause contributions from approximately 4,700 clients, impacting an estimated £530m in gross inflows into general investment accounts. Additionally, inflows from high-risk clients, which totalled £370m last year, will also be affected.
The company has announced a two-year remediation program to address the review's recommendations. This includes a one-year pause on onboarding new enhanced due diligence clients, a significant segment for the firm. These measures are anticipated to incur costs of £60m.
Despite these challenges, Rathbones confirmed that its shareholder dividend will remain unchanged. The company also plans to proceed with its £20m share buyback program shortly. Furthermore, from July 1, Rathbones will stop charging investment management fees on cash balances within discretionary portfolios, a move expected to reduce pre-tax profit by approximately £9m this year.
Jonathan Sorrell, Chief Executive Officer, expressed commitment to operating at the highest standards and stated that the company's strategy remains on track. He acknowledged the constructive engagement with the FCA and the continued trust of clients during the implementation of these improvements.