Rathbones Group has cut its Q4 operating margin target to 28.7%, down from 30%, acknowledging that the ongoing FCA skilled person review will hit the second half of 2026.
Already, the review has cost the firm around £19m, and is expected to cost a total of £60m over the next two years, consistent with the firm’s earlier estimate.
The review was announced in June and involved pausing the onboarding of new clients who required enhanced due diligence (EDD), as well as cessing some inflows from EDD clients.
This announcement led to the shares slumping some 16% on the day and has contributed to the 11.3% downturn in share price this year.
See also: Rathbones ‘voluntarily’ halts some inflows as part of FCA review
As part of the review, actions will include “the cessation of charging fees on the cash element of portfolios, which we continue to expect will reduce income and operating profit by c.£9m over the six months”, according to Jonathan Sorrell, group chief executive at the firm.
“The cessation of charging fees on the cash element of portfolios is expected to reduce the underlying operating margin for the second half of the year by 1.3 percentage points,” leading to the slashed operating target.
That said, Sorrell argued that while this would be a near-term headwind for the firm, over the long term it was the correct decision.
“The work currently underway in relation to the FCA review is demanding, but it is the right work.
“Strengthening governance, improving processes and simplifying the organisation will leave Rathbones a stronger business than before.
“Six weeks on, we have made good initial progress, client reaction has been supportive and resilient, and our focus remains firmly on our long-term ambition to become the best wealth manager in the UK, by far,” Sorrell said.
Looking ahead, Sorrell stressed the team’s continued effort to become the first choice for clients, talent, the most effective operator and the most reputable brand in the industry.
FUMA rose by 11% to £121bn, and underlying profit was up 14% in the second quarter, according to the results, despite concerns around the review.
“The first half of 2026 has been demanding, but it has also demonstrated what Rathbones is capable of,” Sorrell said.
Group net flows for the second quarter ended roughly flat, with wealth management inflows roughly balancing outflows from the first quarter, while asset management shed another £0.4bn in Q2.
That said, while group net flows were roughly flat in Q2, in H1 as a whole net outflows came in at £0.9bn.
Rathbones’ stock price has slid 1.15% at the time of writing today following these results.
