Rathbones is set to lose out on hundreds of millions of pounds in inflows after suspending contributions from thousands of customers following an independent investigation into its operations, prompted by concerns raised by the Financial Conduct Authority.
Skilled Person Review Reveals Compliance Shortcomings
The probe into the firm, known as a skilled person review, revealed compliance shortcomings within its UK wealth management division, following engagement with the financial watchdog. Rathbones announced it will embark on a two-year remediation programme to address the review's recommendations, and will halt the onboarding of new enhanced due diligence clients — the FTSE 250 group's high-risk clients — for the next 12 months, dealing a significant blow to the firm's ties with its most lucrative clients.
Gross inflows from these clients amounted to approximately £370m over the past year. In addition, inflows into general investment accounts from around 4,700 of these clients will be frozen, accounting for roughly £530m in gross inflows, as reported by City AM.
Costs and Financial Impact
These measures are anticipated to accumulate costs of £60m, though the shareholder dividend will remain intact while the group's £20m share buyback programme is also due to commence shortly. Rathbones will further cease levying investment management fees on cash balances within discretionary portfolios from 1st July, with pre-tax profit expected to take an estimated £9m hit this year.
CEO Statement
Jonathan Sorrell, chief executive officer, said: "We are committed to operating to the highest standards on behalf of our clients. The work we are undertaking will support and accelerate our vision to be the best wealth manager in the UK, by far. Our strategy is unchanged and we continue to make strong progress against the plan set out in February. I am grateful for the constructive engagement with the FCA, and the continued trust of our clients as we implement these improvements."
Market Reaction
The group's share price crashed 16.1 per cent in early trading to 1,636.7p, with shares down 13.4 per cent since the start of the year. The decision to suspend the onboarding of its high net-worth and complex clients could deal a significant blow to Sorrell, who took the reins in August 2025, and the broader group, having publicly declared its ambition earlier this year to become the "best wealth manager in the UK by far".
Strategic Context
The group set its sights on becoming the country's foremost wealth manager following the publication of its 2025 full-year results in February, aiming to become the first choice for both clients and talent, with Sorrell championing AI as a powerful tool enabling advisers to concentrate "on the human relationship we have with our client". Group finance director Iain Hooley also noted at the time that the group was seeking to attract older clients in order to capitalise on the "intergenerational wealth transfer that's going to happen". Analysts at the time stressed that the wealth manager must remain firmly focused on cultivating and sustaining client relationships in order to drive growth.
Analyst Views
Despite the plummeting share price and downward revision of near-term financial forecasts and profitability, Peel Hunt maintained its buy recommendation for the wealth manager, regarding Rathbone's decision as a short-term setback rather than a danger to its long-term expansion. In a note issued on Tuesday morning, analyst Rae Maile said: "It is our belief that these are not issues that have arisen recently, but which predate the appointment of the new chief executive and his new team. While dealing with these issues causes some shorter-term issues of management time, and some cost, the chief executive also makes clear that the process of change will support and accelerate the delivery of the corporate strategy." Maile added that it had already not expected "much progress" to be made to net flows in the shorter term as the new management establishes itself.
Company History
Rathbones was founded in Liverpool, tracing its history back to 1669, and its Liverpool team is based in the historic Port of Liverpool Building.
