Rathbones, the British wealth manager, has described its first half as demanding, with the ongoing Financial Conduct Authority (FCA) investigation into its wealth management services remaining a key priority. The probe, which was announced in 2023, continues to cast a shadow over the firm's operations and financial performance.
FCA Investigation Details
The FCA is investigating Rathbones' compliance with rules on financial promotions and client communications. The investigation focuses on whether the firm provided suitable advice and adequately disclosed risks to clients. Rathbones has stated that it is cooperating fully with the regulator and has set aside provisions for potential fines.
First Half Financial Performance
Rathbones reported a 5% decline in pre-tax profit to £45.6 million for the six months ended June 30, compared to £48.0 million in the same period last year. Revenue rose 8% to £289.5 million, driven by higher fee income from managed assets. However, costs increased due to regulatory expenses and investment in technology.
Total funds under management and administration reached £108.1 billion, up from £104.3 billion at the end of 2023, supported by net inflows and market gains. Net inflows amounted to £1.2 billion, reflecting client confidence despite the regulatory uncertainty.
Impact on Client Sentiment
According to Rathbones, the FCA probe has not significantly deterred clients, but it remains a concern. Chief Executive Paul Stockton said, “The FCA investigation is a key priority for us, and we are working diligently to resolve it. While the first half was demanding, our underlying business performance was resilient.” He added that the firm is focused on improving compliance and client outcomes.
Costs and Provisions
Rathbones incurred £8.2 million in costs related to the investigation during the first half, including legal fees and internal reviews. The firm has set aside a provision of £15 million for potential fines and remediation, but the final outcome remains uncertain. Stockton noted, “We cannot predict the timing or outcome of the investigation, but we are prepared for a range of scenarios.”
Strategic Initiatives
Despite the regulatory headwind, Rathbones continues to invest in its business. The firm completed the integration of the wealth management business of Investec, acquired in 2023, and launched a new digital platform for clients. These initiatives aim to enhance efficiency and client experience.
Outlook
Looking ahead, Rathbones expects the second half to remain challenging due to the investigation and broader economic uncertainty. However, the firm is confident in its long-term strategy and market position. Stockton concluded, “We are focused on resolving the FCA matter while continuing to deliver for our clients and shareholders.”
