Results webcast

Video transcript

Speakers

• Jonathan Sorrell – Chief Executive Officer, Rathbones Plc
• Iain Hooley – Chief Financial Officer, Rathbones Group Plc

Transcript

Introduction and first-half overview

Jonathan: Good morning everyone and thank you for joining us on what I know is a particularly busy results day.

Before I hand over to Iain to present the financial results, I wanted to provide a brief overview of the first half. It has been a demanding period, but I believe we have begun to demonstrate what Rathbones is capable of. We are making encouraging progress against the strategy we set out in February. There is greater pace, action, decisiveness and momentum across the business.

As a result, the regulatory programme we announced in June will reinforce delivery of our strategy, making Rathbones simpler, stronger and better equipped for long-term growth. I will provide an update on the programme and our strategic priorities later. For now, I will hand over to Iain.

Financial highlights

Iain: Our first-half results show growth across all key measures. Funds under management and advice reached £120.7 billion at 30 June, an increase of 10.7% year-on-year and £5.1 billion since the start of 2026.

Operating income grew by 8.6% to £487.5 million, reflecting growth across fees, commission and advice income. Underlying profit before tax increased by 14.4% to £123.2 million, supported by higher income and continued cost discipline. Operating margin improved by 1.3 percentage points to 25.3%.

On a statutory basis, profit before tax increased by 15.7% to £72.1 million. Underlying earnings per share rose 17.1% to 88.5p and we have announced an interim dividend of 32p per share, representing growth of 3.2% versus the 2025 interim dividend.

Flows, assets and income performance

While the group reported net outflows of £845 million in the first quarter, performance improved significantly in the second quarter, with net outflows reducing to just £31 million.

The improvement was driven by wealth management, which delivered net inflows of £450 million during the second quarter. This reflected both reduced outflows and improving new business inflows, particularly within discretionary and managed services.

Asset management continued to face a challenging backdrop for active UK asset managers. However, multi-asset funds supporting wealth management propositions proved more resilient.

Overall, the group recorded net outflows of £0.9 billion during the first half, compared with £1 billion of outflows in the same period last year.

Costs, capital and margin outlook

We have maintained our disciplined approach to capital allocation and completed our share buyback programme, purchasing more than 3.5 million shares.

The group's regulatory capital position remains strong, with a total capital ratio of 18.3%, equating to a surplus of £166 million above minimum regulatory requirements.

Although the cessation of fees on cash within portfolios will create a headwind, the business remains on track to achieve its revised fourth-quarter operating margin target of 28.7%, subject to market, inflation and interest-rate conditions.

Regulatory programme update

Jonathan: Since our announcement on 16 June, our priority has been to mobilise the programme agreed with the FCA while continuing to support clients and colleagues.

We are approaching this work with rigour, urgency and transparency and have made good progress over the last six weeks. Early indicators are encouraging. Client reaction has been supportive, commercial activity has remained stable and we have identified no material client outflows attributable to the programme.

We have agreed a revised client risk methodology with the skilled person, KPMG, and have commenced the file review pilot phase. Following completion of that phase, we expect to move into remediation activity for the approximately 4,700 clients currently subject to restrictions.

Strategic priorities and execution

In February, we set out our ambition to become the best wealth manager in the UK by far. Our strategy focuses on four priorities:

• Being the first choice for clients
• Being the first choice for talent
• Becoming the most effective operator
• Building the most reputable brand

These priorities focus on client outcomes, people, operational effectiveness and reputation. Today represents the first opportunity to demonstrate progress against those objectives.

Client proposition and growth opportunities

We continue to invest in our investment proposition, financial planning offering and client experience.

Financial planning remains one of our most significant growth opportunities. Clients using both investment management and financial planning services continue to demonstrate stronger growth characteristics, with positive net inflows across all regions during the first half.

MyRathbones continues to perform strongly, with registrations exceeding 60,000 users and more than 30 platform enhancements delivered during the period.

AI adoption and colleague experience

AI is helping us simplify processes and improve productivity across the business.

Copilot has been rolled out widely and adoption remains strong. In marketing, for example, AI has reduced campaign delivery times from more than six weeks to approximately two weeks.

AI is also supporting suitability processes, file reviews, call transcription, software development, project delivery and data analytics. We now want to move from adoption to measurable business outcomes.

Commercial performance and operational efficiency

We have established a single wealth pipeline reporting framework, giving us a much clearer view of future business activity.

Our Cubs initiative has generated almost 8,000 client and prospect interactions, approximately 1,700 meetings, around £200 million of assets won and more than £1 billion of pipeline opportunities.

A time-and-motion review found advisers currently spend around 46% of their time on client-facing activities. That provides us with a baseline against which we can measure future efficiency improvements.

Brand, reputation and market presence

We have strengthened the Rathbones brand through the rollout of our refreshed visual identity and increased external visibility.

Rathbones was named City AM Wealth Management Firm of the Year 2026. Share of voice more than doubled during the first half and the business became the most cited wealth management brand across tracked large language model prompts.

Employee advocacy also increased significantly, helping extend the reach and visibility of the Rathbones brand.

Closing remarks and transition to Q&A

Jonathan: To summarise, I am proud of what Rathbones has achieved so far this year. We are making good progress in executing our strategy and the business is beginning to move in the right direction.

The regulatory programme is strengthening the business through improved governance, better data, more effective processes and stronger controls. We believe Rathbones will emerge from this period as a stronger organisation, better equipped to serve clients, support colleagues and generate long-term value for shareholders.

I would like to thank colleagues across the business for their focus, dedication and commitment during the first half, as well as my colleagues on the Group Committee for their hard work and contribution.

With that, I will hand over to questions.

Questions and answers

Questioner: Starting with the regulatory review, there is always a concern that the more stones you lift, the more things you find underneath. Over the first six weeks that you have been working on this process, what has pleased you and what, if anything, has worried you? Has anything emerged that is a concern?

Secondly, in terms of the impact on the business, it is obviously encouraging that there have been no outflows to date. Do you perceive there to have been any risk to the pipeline, flows or the reputation and standing of the company?

Jonathan: On the first six weeks, I think the rate of progress has been really good and, crucially, the relationship with the skilled person and the regulator is very positive.

I would not say there is anything that has particularly worried me. I have been pleased by the rate of progress and the clarity that we now have in terms of how things are set up, how they are going to work and how we can start to project a reasonable expectation of timing. I described, for example, on the enhanced due diligence clients, how that process is going to unfold.

There is a lot of work to do, clearly, but we are progressing on track and heading in the right direction.

In terms of the impact on the business, current assets under management have been affected only negligibly. It amounts to two pieces of business worth £1.4 million.

In respect of the pipeline, which in aggregate and before probability weighting is around £17 billion, we have removed £178 million across 28 pieces of business. That largely relates to high-risk clients with whom we cannot do business for the foreseeable future.

Taken together, I would describe the impact as negligible. We certainly do not take that for granted and I think that outcome reflects the fantastic efforts of colleagues who have been engaging openly with clients, ensuring we are transparent and that clients have as much information as possible.

Questioner: Thank you for the detail on the organic growth linked to financial planning. What percentage of capacity do you think your planners are working at currently? How high a priority is it to grow the number of financial planners? And how has the number of financial planners changed during the first half?

Jonathan: I think our financial planners are working at a very high level of capacity, so there is not a huge amount of surplus capacity.

There are clear opportunities to improve productivity, as there are for our investment managers, through simplifying processes, simplifying governance and gradually introducing AI tools into areas such as suitability. Capacity utilisation is high, but there is an opportunity to make material productivity gains over the next 12 to 18 months.

The net number of financial planners has not changed materially during the year. It is actually very difficult to hire good financial planners in the market and that was one of the reasons we launched the Rathbones Institute.

We want to develop our own talent over time and build people in our mould, helping them do business to the standards and in the manner we aspire to. That is one of the principal drivers behind the Rathbones Institute.

Questioner: Are you comfortable that the remainder of your client portfolio, which has not been impacted by the FCA review, is unlikely to create issues going forward? Secondly, congratulations on returning wealth management to neutral flows. However, asset management remains disappointing. How long are you prepared to remain patient with that business?

Jonathan: If you look at the enhanced due diligence client population, we have around 9,600 clients, of which approximately 4,700 are within the scope of this review.

When you apply the new risk framework to a sample of clients, around half of them end up being classified as high risk. Therefore, I think the proportion of high-risk clients in the business will actually reduce rather than increase.

Historically, we have taken a conservative approach to risk classification. Our expectation today is that we will emerge from this process with fewer high-risk clients than we have currently.

On asset management, Rathbones Asset Management is a highly active asset management business. Our fund managers have exceptional long-term track records over 20 to 25 years, built within Rathbones rather than imported from elsewhere.

Our investment style is fundamentally based on quality and value. That has been a difficult place to be over the last year or so and, as a result, some near-term performance numbers are not especially strong. However, the long-term record remains exceptional.

If you are going to be in active asset management, you need to remain genuinely active. We do not want to see style drift. We continue to believe strongly in the quality and value investment philosophy.

Flows follow performance over time. While it is difficult for active managers in UK retail markets at present, it remains true that sustained performance attracts flows.

We are strong believers in active management, in the team we have at Rathbones Asset Management and in their investment approach. It is simply a difficult period for that style.

The only card you can play is patience in this business. We will continue to be patient and I have a great deal of confidence in the team.

Moderator: If there are no further questions in the room, we will move to the conference call.

Questioner: My first question is about operating margin and tracking towards the revised Q4 target. What supports that margin improvement? Secondly, commission income has remained stronger than expected. How should we think about that for the rest of the year? Finally, what opportunities are there to offset the fee margin compression resulting from the removal of management fees on discretionary portfolio cash?

Iain: Q2 is seasonally stronger because we do not incur the FSCS levy, which was £5.5 million in Q1.

We will also benefit from lower technology costs once Salesforce goes live. Technology expenditure will be around £6 million lower in the second half, with much of the benefit arriving in the fourth quarter.

In addition, our continuous improvement initiatives are beginning to remove friction points and create efficiencies that should become more visible during the second half.

Commission income remains dependent on market conditions and transaction activity. We expected some moderation compared with last year, which was unusually strong, but market conditions have remained supportive and activity levels have continued.

If those conditions persist, commission income may remain elevated, although some slowing later in the year remains possible.

As for mitigating fee margin pressure, we continue to look at efficiency measures, pricing approaches and broader commercial initiatives. These will take time, but we do expect to mitigate some of the impact over time.

Questioner: Wealth management delivered stronger net flows in Q2. What drove that improvement and do you believe it is sustainable? In asset management, aside from performance, are there other measures you can take to improve flows? Finally, could you explain the targeted client review and whether it risks distracting colleagues from generating business?

Jonathan: We have now seen three consecutive quarters of higher gross inflows, increasing from around £2.1 billion to £2.2 billion up to around £2.8 billion to £2.9 billion.

There are three principal drivers. First, there was pent-up activity ahead of last year's Budget which subsequently came through. Second, following integration, increased capacity has enabled colleagues to spend more time on client-facing activity. Third, our capabilities allow us to compete for larger mandates and pools of capital, and we have successfully won a number of larger opportunities over the last nine months.

In asset management, it is not simply a matter of waiting for performance. We continue to expand our range of strategies selectively, but only in areas where we believe sustained alpha can be generated.

Most recently, we have added specialist emerging markets and Asian equity capabilities and have begun building interest in those strategies.

We are also pursuing opportunities beyond the traditional UK retail market, particularly in institutional markets in the UK and continental Europe.

Turning to the targeted client review, the process follows on from the skilled person review. A sample of files was reviewed across areas including suitability, vulnerability, change of circumstances and anti-money laundering controls.

The next stage is to review a further targeted sample, likely to be around 300 files, that exhibit similar characteristics. We expect that review work to be completed by the end of September, after which we will have a better understanding of the overall scope.

The costs of undertaking the review are insured, as is the cost of redress, subject to normal policy limits and exclusions. Insurance does not cover returned fees or regulatory fines, although we have no expectation of fines at this stage.

Importantly, we view this programme as reinforcing our strategy. I would estimate that around 90% of the work involved is activity we would have undertaken anyway.

For the targeted review specifically, we are working with EY to provide additional support and ensure the work does not become a drain on day-to-day operations.

The FCA has given us a significant amount of time and space to complete the programme. It is a two-year programme and effectively represents a full work cycle, giving us the breathing room to do this properly without it becoming a distraction to the business.

Closing remarks

Jonathan: Thank you, Shelley, and I'm now going to embarrass you thoroughly.

For those of you who do not know, Shelley is unfortunately moving on, although happily to a wonderful opportunity. Shelley has had a fantastic career at Rathbones and, over the last nearly 11 years, the firm has changed beyond all recognition.

She has been at the centre of communicating that story to the market and has done a fabulous job. On a personal note, over the past year she has nearly kept me out of trouble and has done a fantastic job supporting me as I settled into the role.

So thank you very much, Shelley, for everything you have done. Our loss is Legal & General's gain. On behalf of all of us, I would like to thank you and wish you the very best of luck.

We're only around the corner, so we will keep in touch. I think we should give Shelley a short round of applause.

Nicolas, who you all know and who is sitting next to Shelley, has very big shoes to fill. However, I know he has been very well trained and is going to do a fantastic job.

With that, thank you very much. Have a great holiday.