Rathbones face another multi-million pound hit after a second Financial Conduct Authority order into the wealth manager.
Rathbone’s subsidiary, Vision Independent Financial Planning, has received a Section 166 notice from the City watchdog, which requires the FTSE 250 firm to conduct a “Skilled Person” review into the business.
The order forces businesses to appoint independent advisers to carry out a probe into the operations of the company and is used to determine whether the regulator will take enforcement action.
According to law firm Mills & Reeve, a s166 notice “provokes fear in the hearts of financial organisations as it indicates that your firm’s risk and compliance monitoring has gone awry in the eyes of the FCA.”
The provision is estimated to cost Rathbones £2.5m. The business’ future pre-tax profit is also expected to reduce by £4m from 2027 onwards due to the decline in the number of adviser firms working with them.
Rathbones will continue to manage its £1.9bn funds under management and administration (FUMA) for clients tied to the firm.
First review
Rathbones first review from the Financial Conduct Authority (FCA) is expected to rack up costs of up to £60m, after the watchdog uncovered compliance shortcoming earlier this year.
It forced the group to stop on boarding new enhanced due diligence (EDD) clients, but it expects to lift restrictions on EDD in the fourth quarter, and said it has made “good progress” to address the findings in the Skilled Person review.
Rathbones confirmed the regulatory programme in June continues on schedule, while targeted client reviews have also started. It said no “material client outflows were attributable to the programme”.
Chief executive, Jonathan Sorrell, also doubled down on his commitment to turn Rathbones into “the best wealth manager in the UK” despite the FCA reviews.
Client cash flow
Elswhere, funds under management and administration increased 7.2 per cent year on year to £121.1bn.
Despite the rise in FUMA, clients withdrew a total net £401m from the wealth manager during the period.
Its wealth management arm achieved net inflows, increasing to £24m after reporting losses of £300m the previous year.
But further growth was restricted after the FTSE 250 firm’s voluntary pause on accepting new money from enhanced due diligence (EDD) clients.
The firm also pinned the further lack of inflows on “a cautious backdrop” in the run up to the looming Autumn Budget which has caused clients to delay allocating capital to their portfolios.
Its asset management arm reported outflows of £425m, reflecting “continued pressure” on active equity investment in the UK retail market. Gross outflows reached £783m.
Rathbones shares nudged up 1.2 per cent to 1,618p. The stock is down by 15 per cent since the start of the year.