Christiane Holstein, an analyst at Bank of America, said she expected the measures to deliver a blow to pre-tax profits of between 12pc and 15pc this year and next.
She said: “We see pausing of this activity as likely to weaken net flow momentum by up to 12 months. In addition, we expect disruption to business and investment managers will impact sales efforts and abilities to attract net new flows.”
Wealth managers have come under increased scrutiny after the FCA set out tougher consumer duty rules.
In a letter to bosses in 2023, the watchdog said the wealth management and stockbroking sector was “inherently high-risk … for enabling and/or participating in financial crime”.
In addition to the curbs on high-risk clients, Rathbones said it would stop charging investment management fees on cash balances in clients’ discretionary portfolios from July 1.
This is expected to deliver a £9m blow to its underlying pre-tax profits this year.
However, the company said its dividend policy remained unchanged and it will continue with a planned £20m share buyback programme.
Jonathan Sorrell, the chief executive, said: “We are committed to operating to the highest standards on behalf of our clients. The work we are undertaking will support and accelerate our vision to be the best wealth manager in the UK, by far.
“Our strategy is unchanged and we continue to make strong progress against the plan set out in February. I am grateful for the constructive engagement with the FCA and the continued trust of our clients as we implement these improvements.”
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