Rathbones recorded nearly £1bn in net outflows in the first half of the year as it prepared for further costs tied to a review launched after concerns were raised by the Financial Conduct Authority.

The wealth manager said it faces a financial hit from work to improve operations after the FCA review identified compliance shortcomings, underlining how regulatory fixes can affect both costs and client activity at a time when the wider UK active asset management market remains under pressure.

Costs linked to the review, known as a skilled person review, have already reached £19m and are expected to rise to £60m, with executives confirming that estimate remains unchanged.

Those costs include stopping fees on the cash portions of portfolios, a move expected to reduce income and operating profit by £9m in the second half of the year.

Jonathan Sorrell, chief executive of Rathbones, said: “Our regulatory programme to address the recommendations from the FCA skilled person review has remained a key priority.

“Six weeks on, we have made good initial progress, client reaction has been supportive and resilient.”

Despite the measures introduced in response to the review, which included halting the onboarding of the group’s high-risk clients, Sorrell reiterated Rathbones’ aim of becoming the “best wealth manager in the UK by far”.

He said: “I’m not sure the urge is to be the largest wealth manager…it’s to be the best wealth manager.

“I think size will follow. I can’t say I spend to much time worrying about the place in the FTSE ranking.”

Shares fell 0.7 per cent in early trading to 1,706p. The stock is down 10.8 per cent since the start of the year.

Net flow troubles

The FTSE 250 group’s asset management arm continued to struggle amid industry-wide pressure on active equity strategies, resulting in £0.4bn of outflows and leaving group net outflows broadly unchanged in the second quarter. Net outflows for the first half of the year totalled £0.9bn.

Sorrell said: “We’re operating in active asset management within the retail space in the UK and it’s a very challenging environment.”

Rathbones’ wealth management channel recorded net inflows of £0.4bn in the second quarter, while its discretionary and managed channel brought in £0.5bn.

That offset net outflows of £0.4bn in the first quarter, producing “broadly neutral net flows” in wealth over the first half of the year as a whole.

Executives said that although “one quarter does not make a trend” in relation to the recovery of the wealth management business, the figures were “pleasing numbers in the context of a demanding first half”.

Higher funds and falling acquisition costs

Despite the expenses linked to the FCA probe, funds under management and administration (FUMA) rose 10.7 per cent year on year to £120.7bn, from £109bn a year earlier.

Profit before tax increased 15.7 per cent to £72.1m, from £62.3m.

Acquisition and integration costs also continued to fall as expected, declining to £9.5m from £23.2m a year earlier. Rathbones said this reflected the integration of Investec Wealth & Investment into the business, which has now been fully completed. Costs related to the acquisition remain on the group’s balance sheet, but are expected to end in 2027.

The firm completed its £50m share buyback programme and a second share buyback of up to £20m. It is also increasing its interim dividend to 31p from 32p, an increase of 3.2 per cent.