Shares in the wealth management house have been hit hard by the announcement this week that it is halting – for as long as 12 months – inflows from clients requiring "enhanced due diligence." It has also instituted a voluntary pause to accepting inflows into general investment accounts from current EDD customers – about 4 per cent of the total.

UK-listed Rathbones, which has announced a temporary halt to inflows from new “enhanced due diligence (EDD) clients” – hitting its shares – announced yesterday that it intends to buy back as much as £20 ($26.8) million of stock.

On Tuesday, the UK wealth manager announced that it expects to incur costs of £60 million, net of expected insurance recoveries, from its actions relating to EDD clients.

As much as £370 million of gross inflows from EDD have entered the business over the past 12 months, Rathbones said. The firm said it will institute a voluntary pause to accepting inflows into general investment accounts from some existing EDD clients. “The group will work with these clients to meet certain requirements such that they are able to resume inflows as soon as practicable. This affects approximately 4,700, or 4 per cent, of the group’s 119,000 clients, and in the last 12 months, relevant gross inflows from these clients totalled approximately £530 million,” the business said. 

The inflow halt is being implemented, Rathbones said, after it carried out a “Skilled Person Review” and had engaged with the Financial Conduct Authority. The review “has identified areas for improvement within the group’s UK Wealth Management business regarding the implementation and embedding of Consumer Duty, as well as certain aspects of its compliance, oversight and assurance arrangements,” the firm said in its statement on Tuesday.

The firm said there will be “a voluntary pause” to accepting money into general investment accounts from some existing EDD clients. 

The 16 June announcement caused a share price slide of more than 16 per cent at one stage. Year-to-date, shares in the firm are down 14.8 per cent. 

Rathbones said it is also reviewing certain aspects of its pricing as part of its commitment to delivering fair value for clients. It also intends to cease charging investment management fees on cash balances held within clients’ discretionary portfolios from 1 July. This is expected to impact underlying profit before tax by approximately £9 million for 2026, it said.  

In its buyback announcement yesterday, Rathbones said it has agreed to manage the programme with Merrill Lynch International.

(The reference by Rathbones to the Consumer Duty refers to a programme of measures that came into force at the end of July 2023. Its purpose is to ensure that wealth managers and others in the UK financial services space do what they say they do.)

Within months of the Duty taking force, St James's Place, for example, changed its manager line-up and cut fees on two of its funds. Industry figures have told this news service how significant the Duty has been. The Duty could shape the pace and shape of wealth management consolidation and restructuring, given the costs of compliance and the need to integrate businesses smoothly. (See an article about the Duty here.)