Rathbones Shares Plunge After FCA-Prompted Review Exposes Compliance Failings

Shares in Rathbones Group (LON: RAT) have crashed more than 17% on Tuesday after the FTSE-listed wealth manager revealed a damaging regulatory review had uncovered shortcomings in its Consumer Duty compliance, wiping around 314 pence off the stock to leave it trading at approximately 1,638p — down from Friday’s close of 1,952p.

The London-based firm said it had undertaken a Skilled Person Review following engagement with the Financial Conduct Authority (FCA), which identified “areas for improvement” within its UK Wealth Management business around the implementation of Consumer Duty rules, as well as weaknesses in compliance, oversight and assurance arrangements.

In response, Rathbones outlined four remedial actions, including a two-year programme to address the review’s recommendations and a targeted client review to assess whether customers have received “good outcomes.”

More significantly for investors, the group announced a voluntary pause of up to twelve months on onboarding new clients requiring Enhanced Due Diligence (EDD), which accounted for roughly £370 million in gross inflows over the past year.

A further pause on inflows into general investment accounts from approximately 4,700 existing EDD clients — around 4% of its 119,000-strong client base — will also affect around £530 million in annual inflows.

The group expects to incur £60 million in costs, net of insurance recoveries, recognised as non-underlying expenses over two years.

Separately, Rathbones said it will stop charging investment management fees on cash balances within discretionary portfolios from 1 July, a move expected to reduce 2026 underlying profit before tax by approximately £9 million.

Chief Executive Jonathan Sorrell sought to reassure investors, saying the work would “support and accelerate” the group’s vision to be “the best wealth manager in the UK, by far,” adding that its strategy and dividend policy remain unchanged. A previously announced £20 million share buyback, now approved by the PRA, will commence shortly.