Rathbones halts high-risk client investments as compliance review threatens nearly £1bn in inflows

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Rathbones halts risk client investments

Highlights

Rathbones is pausing new high-risk client investments for up to a year after compliance reviews, impacting nearly £1bn in potential inflows.
Shares in Rathbones dropped over 18 per cent on Tuesday, lowering its market capitalisation to about £1.5bn amid the compliance move.
Rathbones, which manages £114bn, will stop charging fees on cash in discretionary accounts from July as part of governance process improvements.

Compliance measures and financial exposure

As first reported by Financial Times, Rathbones says it is pausing new clients requiring enhanced due diligence for up to a year after identifying areas for improvement in its governance processes. The company says the voluntary move follows a skilled person review and engagement with the Financial Conduct Authority.

The UK-listed group says clients requiring enhanced due diligence accounted for £370mn in gross inflows over the past year. It is also pausing new investments into some accounts held by existing higher-risk clients, a group representing 4 per cent of its 119,000 customers.

Rathbones says those existing higher-risk clients generated about £520mn in gross inflows over the past year, and it plans to work with them to meet requirements so inflows can resume as soon as practicable. Combined, the halted activity leaves the wealth manager facing a potential hit of close to £1bn to new business.

Market reaction and wider sector context

Shares in Rathbones fall more than 18 per cent in early Tuesday trading, reducing the company’s market capitalisation to about £1.5bn. Chief executive Jonathan Sorrell says the group remains committed to the highest standards and thanks the FCA for what he describes as constructive engagement.

Rathbones, which manages £114bn, also says it will stop charging fees on cash held in clients’ discretionary accounts from July. The restrictions come after the FCA reviewed due diligence controls at financial firms last year and identified several areas of poor practice, including the treatment of politicians and other politically exposed persons.

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