Rathbones pauses high-risk client onboarding following FCA review

Rathbones has paused the onboarding of new clients that require enhanced due diligence (EDD) after a regulatory review found compliance and oversight shortcomings at the wealth management firm.

Following engagement with the Financial Conduct Authority (FCA), Rathbones undertook a Skilled Person Review, which identified areas of concern around the implementation and embedding of Consumer Duty, alongside aspects of the group’s compliance, oversight, and assurance arrangements.

In response to the findings, Rathbones has paused taking on new clients that need EDD for up to 12 months to focus on implementing changes to its procedures and controls.

Over the past 12 months, the wealth manager’s relevant gross inflows from EDD clients were around £370m.

It has also paused the acceptance of inflows into general investment accounts from some existing EDD clients, affecting approximately 4,700 clients.

Over the past 12 months, relevant gross inflows from these clients totalled around £530m.

The wealth management group has begun working to address the recommendations in the review, which is expected to take two years, alongside a targeted review of some of its clients to assess whether they have received good outcomes.

Rathbones expected to incur costs of around £60m in relation to the actions taken in response to the review, which will be recognised as non-underlying expenses over the next two years.

The group’s shares fell by as much as 18 per cent following the review outcome and actions announcement.

"We are committed to operating to the highest standards on behalf of our clients,” said Rathbones chief executive officer, Jonathan Sorrell.

“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."

Rathbones noted that it was reviewing aspects of its pricing and, in the interim, planned to halt charging investment management fees on cash balances within clients’ discretionary portfolios from 1 July, resulting in an expected impact of around £9m on underlying profit before tax for 2026.

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