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Rathbones pledges action on FSCS levy 'burden'

Rathbones pledges action on FSCS levy 'burden'

Investment and fund management firm Rathbones has pledged to take action to bring down the cost of the Financial Services Compensation Scheme (FSCS) after it saw its levy payment rise by 60 per cent in 2019.

The increase was reported in the preliminary results statement for the 2019 calendar year, released by the FTSE 250 company onto the stock exchange this morning (February 20). 

Rathbones said it had faced a charge of £4.5m for the year, compared with £2.8m last year.

The company’s chief executive, Paul Stockton, wrote: "A Financial Services Compensation Scheme (FSCS) charge of £4.5m for the year was considerable and, following recent announcements from the FSCS we can reasonably expect this charge to increase further by up to 45% in 2020.

"Along with many in the industry, we feel that the ongoing cost of this scheme falls unfairly and is becoming a disproportionate burden on participating firms. We will continue to work closely with industry bodies on this important issue."

Asset managers were asked to contribute more to the FSCS levy following a review in 2016. They are now contributing 25 per cent of the compensation cost that falls on the intermediation class.

The demise of several Sipp operators as well as discretionary fund manager Strand Capital and Beaufort Securities would have contributed to the cost in the past year. 

The £1.7m levy increase contributed to costs at Rathbones rising by £39m, leading to underlying profits falling in 2019 to £88.7m, from £91.6m in the previous year. 

In addition to the increased cost from the FSCS levy, the firm also incurred the loss of income from being forbidden to take box profits on investments, and a further £700,000 in additional regulatory costs. 

Mr Stockton said the regulatory changes and costs of recent years were now completed, which would allow him to focus on other areas. 

He said: “During the last few years, a significant amount of process has been added to meet the requirements of a number of complex regulatory compliance projects with mandatory deadlines.

"These external requirements have had to be balanced with important internal projects. In 2019, we adopted Mifid II costs and charges disclosure standards, taking care to achieve as much commonality as possible with other industry participants.

"With more of this mandatory work behind us, now is the time to move forward and look at how we can increase productivity.

"This includes new ways of working with technology, workflow tools, and re-engineering processes in order to ease client administration, improve client on-boarding and enhance our digital capabilities to create capacity for our investment managers so they can continue to meet the growing needs of our current and future clients."

The investment management business had net outflows of £600m during the year, though assets under management were £43bn, compared with £38.5bn the previous year due to positive market movements.

The company attributed the outflows to the loss of institutional and pension fund mandates.

In contrast, the unit trust business had net inflows of £943m, and the total assets under management for this business were £7.4bn.