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RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022
SECURING
FUTURE
MOMENTUM
RATHBONES GROUP PLC
REPORT AND ACCOUNTS 2022
ABOUT RATHBONES
SR / STRATEGIC REPORT
Our purpose driven approach 1
What we do 2
Where we do it 3
How we do it 4
The value we create 5
Chair's statement 6
Group chief executive offi cer’s review 9
Investment case 14
Our market and opportunities 16
Our strategy 18
Key performance indicators 24
Stakeholder engagement 27
Group chief fi nancial offi cer's review 36
Segmental review 42
Financial position 49
Liquidity and cash fl ow 53
Risk management and control 54
Principal risks 59
Responsible business review 67
Task Force on Climate-related Financial
Disclosures summary 77
Non-fi nancial information statement 82
G / GOVERNANCE
Corporate governance report 84
Group risk committee report 110
Audit committee report 114
Nomination committee report 122
Remuneration committee report 126
Annual report on remuneration 130
Directors’ report 146
Statement of directors’ responsibilities 149
FS / FINANCIAL STATEMENTS
Independent auditor’s report to the
members of Rathbones Group Plc 151
Consolidated fi nancial statements 162
Notes to the consolidated
fi nancial statements 166
Company fi nancial statements 217
Notes to the company fi nancial
statements 220
I / FURTHER INFORMATION
Five-year record 235
Corporate information 235
Our offi ces 236
Rathbones provides individual investment and wealth management
services for private clients, charities, trustees and professional
partners. We have been trusted for generations to manage and
preserve our clients’ wealth. Our tradition of thinking, acting and
investing for everyone’s tomorrow has been with us from the
beginning and continues to drive us forward.
11.8%
(2021: 16.1%)
Underlying return on
capital employed
(ROCE)
*, 2
£64.1M
(2021: £95.0M)
Profi t before tax
83.6P
(2021: 133.5P)
Basic earnings per share
£97.1M
(2021: £120.7M)
Underlying profi t
before tax
*, 1
130.8P
(2021: 172.2P)
Underlying earnings
per share
*, 1
84P
(2021: 81P)
Dividend paid and
proposed per share
7.7%
(2021: 13.0%)
Return on capital
employed (ROCE)
*
For a full fi ve-year
record, please see
page 235
* This measure is considered an alternative performance measure (APM). Please refer to page 39
for more detail on APMs
1. A reconciliation between underlying profi t before tax and profi t before tax is shown on page 39
2. Underlying profi t after tax as a percentage of underlying quarterly average equity at each quarter end
OUR PURPOSE DRIVEN APPROACH
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OUR PURPOSE
To think, act and invest for
everyone’s tomorrow,
delivered through our
culture and values.
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See our purpose, culture and values
(p105) and our strategy (p18)
See our strategy (p18)
and business model (p2-5)
See governance (p83),
risk management (p54) and
responsible business (p67)
See stakeholder engagement (p27),
value creation for stakeholders (p5)
and our investment case (p14)
WHAT GUIDES US
Our purpose, culture and values
Our purpose represents our
commitment as a business to all our
stakeholders and wider society. It
underpins our strategy, defines our
culture and values and helps to guide
our business model.
WHO WE ENGAGE WITH
AND THE VALUE WE
CREATE FOR THEM
Our stakeholders
Our stakeholders are identified
and defined as any group that may
be impacted by what we do and how
we do it.
WHAT WE DO AND HOW
AND WHERE WE DO IT
Our strategy and business model
Our strategy is delivered through
our business model, which aims to
ensure positive interactions with
and outcomes for our various
stakeholder groups.
OPERATING
RESPONSIBLY
Our operating principles
Our governance, risk management and
responsible business frameworks help
to ensure we operate in ways that best
serve our stakeholders.
We are a leading provider of individual investment and wealth management services for private clients, charities, trustees and professional partners.
At Rathbones we have an understanding of who we are as a business supported by a strong ambition for our future.
OUR PURPOSE DRIVEN APPROACH
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 1SR
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WHAT WE DO
We are a leading provider of individual
investment and wealth management
services for private clients, charities,
trustees and professional partners.
RATHBONES HAS A BALANCED BUSINESS MODEL WHICH DELIVERS...
ASSET MANAGEMENT (FUNDS)
Rathbone Unit Trust Management is a UK active fund
manager, providing a range of single strategy funds that
are designed to meet core investment needs in the retail
client market. These funds are distributed primarily
through financial advisers in the UK. Our funds business
also manages a range of multi-asset products that provide
wealth solutions to the UK adviser market.
Our funds can also be accessed by international clients
through our Rathbone Luxembourg Funds SICAV2
(Société d’Investissement à Capital Variable) which allows
access to a similar range of actively managed funds.
WEALTH MANAGEMENT
Investment Management
Clients of this discretionary service can expect a tailored
investment strategy that meets individual objectives
backed by an investment process that aims to provide
risk-adjusted returns to meet clients’ needs today and in
the future. Within investment management, we have
several specialist capabilities including:
– Charities and not-for-profit organisations
– Our specialist ethical arm, Rathbone Greenbank
Investments
– Personal Injury and Court of Protection
– Rathbone Investment Management International
Financial Planning and Advice
Through Rathbone Financial Planning, Saunderson House
Limited and Vision Independent Financial Planning, we
provide financial planning and advisory services. We also
offer UK trust, tax and legal services through the Rathbone
Trust Company.
Complementary services
– Unitised Portfolio Service
– Managed Portfolio Service
– Rathbone Select Portfolio
– Banking and loan services
BUSINESS MODEL
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 2SR
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WHERE WE DO IT
14
UK LOCATIONS
1
AND JERSEY
2,170
EMPLOYEES
£60.2BN
MANAGED BY US FOR
OUR CLIENTS
FTSE250
COMPANY LISTED ON
THE LONDON STOCK
EXCHANGE
With 15 ofces throughout the UK and Jersey,
clients are never far away from high-quality,
personalised wealth management services.
BUSINESS MODEL CONTINUED
WHERE WE DO IT
1. 1. Includes Vision Independent Financial Planning
RATHBONES GROUP PLC REPORT AND ACCOUNTS 20222 / 3SR
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HOW WE DO IT
BUSINESS MODEL CONTINUED
WE PROVIDE CLIENTS AND ADVISERS WITH PRODUCT
AND SERVICE OPTIONALITY
– Individuals can join Rathbones either directly or through their own financial
intermediary
– Our dedicated intermediary sales team provides Rathbones’ services and
products to UK and international financial advisers, including from full
bespoke discretionary services to fund-based solutions
– Clients and advisers can singularly access investment management, financial
planning and fund solutions or opt for a combination of services and products
through our team of investment managers, fund managers and financial planners
– Our Jersey office can cater for offshore investment needs
– We can access investments across the whole market, but we also have a suite
of fund solutions through Rathbone Unit Trust Management for clients who do
not require a fully bespoke investment service.
WE HAVE A ROBUST AND COLLABORATIVE
INVESTMENT PROCESS
– We have a bespoke approach to portfolio construction supported by a central
research team and a growing ESGcapability
– Our firm-wide processes allow us to pool intellectual capital and provide
strategic asset allocation methodologies
– We operate a range of specialist mandates, including specialist investment
teams who provide services to charities, ethical investors and Court of
Protection clients
– Our internal quality assurance and performance measurement capabilities
provide a sound controlframework.
WE HAVE DIRECT RELATIONSHIPS WITH OUR CLIENTS AND
ADVISERS, OFFERED BOTH FACE-TO-FACE AND DIGITALLY
– Our service is delivered directly through investment managers who make
portfolio decisions to build lasting and trusted relationships
– Our upgraded client digital portal, MyRathbones, complements our
face-to-face service.
WE LEVERAGE OUR TECHNOLOGY AND OPERATIONAL
STRENGTHS THROUGH A MIX OF IN-HOUSE EXPERTISE
AND OUTSOURCING
– We have dedicated in-house custody and settlementservices
– We outsource selected services, where this is cost-effective, to reliable and
carefully chosen partners
– We are implementing technology solutions to deliver a stronger digital service
to stakeholders and make Rathbones much easier to do business with.
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 4SR
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THE VALUE WE CREATE
WHAT WE CONSIDER
Our attitude to
risk control
The appropriate
identification,
escalation and
management of risk.
See more about how our purpose informs our culture on page 105.
See more about our stakeholders on page 27.
Our leadership
A leadership team
that is effective,
balanced and
engages with
the business.
Our attitude
to change
Change in line with
our strategy is
delivered and
adopted across
the business.
Shareholders
Clients
Our people
Society and
communities
Partners and
regulators
FOR SHAREHOLDERS
84P
Dividends per
share in 2022
– Generally progressive dividend policy
– Successful acquisition capability of people and firms
that fit our culture.
FOR CLIENTS
93.7%
Retention rate
– Long-term relationships that build trust
– Active management of portfolios through changing
market conditions
– Specialist mandate capabilities.
FOR OUR PEOPLE
9.6%
Employee share
ownership
– Share ownership opportunities
– Empowered to make individual investment decisions
– Performance-based remuneration
– Investment in training and development
– Low employee turnover.
FOR SOCIETY AND COMMUNITIES
671
engagements
with companies
– Signatory to Principles for Responsible Investment (PRI)
for over 10 years
– A long history of corporate donations and
employee giving.
FOR PARTNERS AND REGULATORS
69%
of suppliers completing
our ESG review
– Regular meetings with regulators to ensure proactive
and transparent relationship
– Interaction with industry bodies to ensure we are
engaged with key issues
– Engagement with our delivery partners and suppliers.
BUSINESS MODEL CONTINUED
WHAT WE CONSIDER
OUR PURPOSE
Thinking, acting
and investing
for everyone’s
tomorrow
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 5SR
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A RESILIENT
CULTURE
CHAIR’S STATEMENT
DEAR SHAREHOLDER
As I look back to the start of 2022, few of us correctly
predicted the full global economic impacts of the
aftermath of the coronavirus pandemic, together with
implications of the unprovoked war in Ukraine. With UK
inflation at its highest in 40 years (more than double the
rate it was when I wrote this statement last year), the
resulting ‘cost-of-living’ crisis has highlighted even more
the importance of the work we do for our clients and all
our stakeholders.
In the face of these challenges, the reassurance and advice
that Rathbones has diligently provided our clients has
demonstrated the resilience that is part of our DNA. We
continued to invest to improve the firm’s capabilities and
made strong progress against our strategic ambitions.
Saunderson House is a new and welcome member of our
family, integrating well and improving our advisory
services. I look forward to seeing the continued future
benefits both from this acquisition and from our ongoing
investment in technology.
SHAREHOLDER RETURNS AND DIVIDENDS
Rathbones has a long and successful track record in
generating attractive returns for our shareholders. In
2022, Rathbones’ total shareholder return (TSR) was 7%
(see page 141), which compares favourably against the
FTSE All Share Index of 0.3%.
This is in part a result of our progressive dividend policy,
in place for the last 25 years. When making dividend
decisions, the board considers several factors and aims to
look beyond temporary market or economic downturns.
Given the strength of our balance sheet, and our
confidence in the long-term future of the business, the
board has recommended a final dividend of 56p per share.
This brings the total dividend for the year to 84p per
share, 3.7% ahead of 2021. The dividend will be paid on 9
May 2023, subject to shareholder approval at our 2022
Annual General Meeting on 4 May 2023, for shareholders
who are on the register on 21 April 2023.
Clive C R Bannister
Chair
FIVE-YEAR DIVIDEND GROWTH
2022: 84P
24
25
25
27
28
42
45
47
54
56
66
70
72
81
84
18 19 20 21 22
Final dividend (p
)
Interim dividend (p
)
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 6SR
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CULTURE
The board plays a critical role in setting the firm’s strategy,
purpose, business model and culture. Each director
recognises the role we have to play in setting the ‘tone
from the top’; and in monitoring how the firm’s culture
and values are ‘lived’. The board has refreshed its culture
dashboard which has been simplified to help strengthen
the firm’s culture. Importantly, the culture dashboard is
subject to regular review by the board.
Through my own engagement with employees and
through our board’s workforce engagement programme, I
am pleased to see the firm’s strong and distinctive culture
in action. This is evidenced by the continuing
commitment on the part of our employees to support our
clients and the broader community. Further information
can be found in the full corporate governance report on
pages 84-109.
RESPONSIBLE INVESTMENT
Rathbones has a long history of ethical, sustainable and
impact investment – led by Greenbank – which continues
to receive industry accolades for its purpose and
performance, and which this year celebrated its 25th
Investor Day. A quarter of a century evidences the
company’s commitment to investing in ethical,
sustainable and impact opportunities for clients.
In 2021, Rathbones announced its intention to be a net
zero emissions business by 2050 or sooner. In 2022, our
near-term targets were validated by the Science-Based
Targets initiative. The year saw an increase in our
operational emissions, mainly driven by an increase in
travel as colleagues returned to face-to-face meetings and
moving between our offices. In 2023, we will look to make
reductions in our operational footprint as we welcome
our Saunderson House colleagues to Finsbury Circus, a
much more energy efficient building. More information
on our commitment and our near-term targets is set out
on page 75 of this report.
Our responsible investment committee defines
responsible investing as ‘the purposeful integration of ESG
considerations into the investment management process’.
In 2022, we took this further and incorporated climate
risks into the management of our portfolios. We now
recognise that climate risks can materially affect the
performance of our client’s investment holdings over the
longer term. In particular, our updated voting policy
includes clear expectations of how companies will be
assessed on their own net zero strategies.
COLLEAGUES
Our colleagues are critical to Rathbones’ success, so
it is imperative that the board instils a culture that
motivates and rewards. We want all Rathbones’
employees to have the opportunity to build long-lasting
and fulfilling careers. During 2022, we conducted an
employee engagement survey where 82% of employees
responded. Our net promoter score at 39 is well above the
sector average of 22; highlighting the attractiveness of our
employee proposition. Our colleagues possess integrity
and operate in a culture which values personal
responsibility and delivery.
We are incredibly grateful to all our colleagues for their
resilience and diligence in a difficult year. We could not
have achieved sustained growth and good returns for all
other stakeholders without their efforts. The mental and
financial wellbeing of our colleagues is important and
deserves – and receives – our continual focus. The board
continued to improve wellbeing initiatives; including our
employee assistance programme, flexibility in the form of
hybrid working and provided a one-off cost of living
payment to eligible employees.
CHAIR’S STATEMENT CONTINUED
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 7SR
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BOARD COMPOSITION AND SUCCESSION
2022 was a year of change for the board. As planned,
James Dean stepped down at the Annual General Meeting
(AGM) in May, having served nine years on the board,
where he made a huge contribution as a non-executive
director and the chair of the audit committee. As part of
the board's succession plans, Iain Cummings succeeded
James as chair of the audit committee.
In July, Colin Clark, senior independent director
and non-executive director, stepped down from
the board. Colin joined the board in 2018 and helped
oversee the appointment of a new chair. His extensive
industry knowledge and experience have been much
valued. I am pleased that Sarah Gentleman, chair of the
remuneration committee, assumed the role of senior
independent director.
During the year, the nomination committee spent time to
identify the diversity, skills and experience required by
the board to deliver our strategy and to continue to guide
the executive team appropriately.
We currently meet the Hampton-Alexander requirement
for at least one third of the board to be female and the
Parker Review recommendation that all boards should
have at least one ethnic minority director. While we are
content with the progress made in this area, we
acknowledge that there is more to be done to drive greater
diversity – principally of thinking – in our business at both
board and executive level.
LOOKING AHEAD
Whilst every year has a strong focus on clients and client
outcomes, this was particularly true in 2022. We will
continue that work into 2023 and beyond to ensure that
we offer the best service and value for money that we can,
as our business model continues to support our
stakeholders through this period of uncertainty.
From a strategic perspective, the focus for 2023 remains
to deliver further returns from the acquisition of
Saunderson House, to foster sustained organic growth
across the business, at the same time delivering on our
digital transformation agenda. The delivery of these
objectives will allow us to improve operating margins by
the end of 2024.
CHAIR’S STATEMENT CONTINUED
There remain significant opportunities in the private
client wealth management sector in the United Kingdom,
and with a strong balance sheet and professional
colleagues, Rathbones is well placed to take advantage
of the opportunities that lie ahead. Difficult as current
markets may appear, Rathbones possesses extraordinary
positional assets – our brand, our people, our
competencies and our clients.
Finally, on behalf of the board, I would like to thank
our clients, shareholders and colleagues for their
commitment to achieving our goals in what has been
a very challenging year.
Clive C R Bannister
Chair
28 February 2023
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 8SR
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A STRONG AND
ESTABLISHED
BUSINESS
GROUP CHIEF EXECUTIVE OFFICER’S REVIEW
INTRODUCTION AND MARKET OVERVIEW
As a market facing business, our performance this year has
inevitably been impacted by the many well chronicled
events of 2022. Clients have observed financial markets
that we have not seen in a long time, and alongside many,
our active orientation towards growth stocks dampened
investment performance over this financial year. Despite
these external market pressures, Rathbones delivered a
resilient financial performance in the year, benefiting from
a diversified business model that meets client needs no
matter what market conditions we face.
The UK wealth and asset management sector remains
fundamentally attractive with embedded structural
growth underpinned by strong long-term trends. The
progress we have made this year, in terms of growing
our financial planning offering and taking strides to
continually improve our customer experience, positions
us well despite short-term market fluctuations. Our model
responds positively in times like these by providing
reassurance and consistency to our clients and supporting
high client retention rates of 93.7%.
FINANCIAL PERFORMANCE AND
FUND FLOWS
Market movements in investment values to 31 December
2022 adversely impacted total funds under management
and administration (FUMA), which closed the year at
£60.2 billion, down from £68.2 billion in the same
period last year. This comprised £45.1 billion in our
Investment Management business (FY 2021: £50.3 billion),
£11.0 billion in Rathbones Funds business (FY 2021:
£13.0 billion) and £4.1 billion in Saunderson House
(FY 2021: £4.9 billion).
Profit before tax totalled £64.1 million (2021: £95.0 million)
and underlying profit before tax totalled £97.1 million
(2021: £120.7 million). This resulted in an underlying
operating profit margin of 21.3% (2021: 27.7%) (see page
24), which was in line with expectations after planned
investment in change and technology. Further information
on our financial performance can be found on pages 49-52.
Markets were heavily driven by macroeconomic themes
in the year, which changed rapidly and were often difficult
to navigate for long-term investors. Investment
performance in our investment management business
reflected this volatility and fell 11.3%, much more in line
with the MSCI PIMFA Private Investor Balanced Index
which fell 10.2% in the year, a favourable outcome against
the FTSE 250, which was down 19.7%.
Despite the challenging market, net inflows in the period
have been positive, highlighting the attractiveness of our
propositions and our clients’ willingness to invest. Total
discretionary and managed net inflows were £1.3 billion
in 2022 (2021: £1.8 billion), representing a growth rate
of 2.6%. External inflows of £0.4 billion into our risk
targeted multi-asset fund range (a central part of our
managed offering to the adviser market) were resilient
in the period (2021: £0.5 billion). This fund range also
underpins our offering for those clients wishing to invest
smaller values.
Paul Stockton
Group Chief Executive Officer
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 9SR
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GROUP CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
As expected, the asset management industry experienced
significant outflows in the year as investors exercised
caution across growth and fixed income mandates.
Nevertheless, a net outflow of £0.4 billion in our single-
strategy fund range was low when compared with the
market. Rathbones was also ranked in 8th position for
total net sales in the UK in the most recent Pridham
Report (2021: 5th position).
STRATEGIC UPDATE
Our strategy is driven by four pillars: enriching the client
and adviser proposition and experience, supporting and
delivering growth, inspiring our people, and operating
more efficiently. Our focus on delivering against this
strategy has driven positive changes within the business
during the year, with the main highlights outlined
throughout this report.
Aside from using technology to improve how our clients
access portfolio information and interact with us, our
proposition focus in 2022 was to streamline the way in
which we work with external financial advisers and
networks directly. In May 2022 we launched a revised
‘Reliance on Adviser’ proposition which improved
administrative processes and simplified our overall
operating model to make Rathbones easier to do business
with. As the new proposition removes duplication of
documentation and simplifies client onboarding, this
provides benefits for both investment managers and
advisers to foster stronger relationships and support
growth. Since launch, the proposition has been well
received by existing advisers and introduced 40 new IFA
relationships to Rathbones.
The Defaqto discretionary fund manager satisfaction
study (published February 2022) is based on feedback
from adviser firms that have outsourced their client
investment assets to third-party discretionary managers.
The study received nearly 300 responses and measured
which DFMs were being recommended and how satisfied
the advisers were with their preferred DFM providers. The
study showed that bespoke services are still the most
popular form of DFM with 65% of advisers opting for this
service. Rathbones, among some peers, received most
nominations as a preferred provider from advisers for
bespoke DFM which rewards our continued investment in
this area. At 31 December 2022, the amount of adviser
linked FUMA across Rathbones was £10.7 billion (31
December 2021: £11.4 billion).
The acquisition of Saunderson House in 2021 was an
important step to add financial advice capability to the
group. In June 2022 we launched new advice and
investment propositions that brought together the best of
Saunderson House and Rathbones, delivering stronger
discretionary services together with wealth planning and
ongoing advice and point in time advice services. We
begin 2023 with one leadership team across Saunderson
House and Rathbone Financial Planning with the division
now comprising 303 people in total, in seven offices and
with 72 financial planners. We now have a sizeable UK
market presence that is working more effectively in target
segments and across the group. During 2023, the focus
will be on transitioning Saunderson House clients to new
propositions to support the benefits that were highlighted
at the time of acquisition. Other work to integrate support
teams into Rathbones has been largely completed,
creating a vibrant combined culture that has offered many
employees the opportunity to work across a wider group.
Despite volatile markets since the acquisition, the
accretion of c.10% and a return on invested capital of
12% by the end of 2024 remains our target.
Vision remains an important part of our financial advice
proposition as an independent specialist financial advice
network focusing on high-net-worth private clients. In
2022, FUMA in Vision was £2.6 billion at 31 December
2022 (2021: £2.7 billion) with 131 financial planners
(2021: 131), including 15 new IFAs and another 9 going
through the onboarding process. We anticipate further
recruitment in Vision in 2023 as the business continues
to grow and leverage its strong relationship with the
Rathbones Group.
During the year, we developed the ‘Rathbone Select
Portfolio Service’ further. The aim of this service is
to deliver a high-quality, ‘self-select’ investment service
for smaller value portfolios. It provides cost effective
solutions for our clients with portfolios below £150k,
recognising the importance of an entry point to
Rathbones to suit the needs of the next generation of
wealth. Following a successful pilot, in 2022 Rathbone
Select Portfolio Service has been rolled out to all offices,
now serving c.3,000 clients. In 2023, we will continue
to offer the service to clients with less to invest, adding
capacity by delivering a diversified and economical
solution for clients.
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 10SR
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“ OUR ASPIRATION IS TO
EMBED A DIGITAL EXPERIENCE
THAT COMPLEMENTS AND
ENHANCES OUR VALUED
FACE-TO-FACE CLIENT
INTERACTION. OUR DIGITAL
PROGRAMME WILL PROMOTE
GROWTH AND IMPROVE THE
CLIENT EXPERIENCE.”
GROUP CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
Find out more
about our strategy
on our website
AN UPDATE ON OUR DIGITAL PROGRAMME
Our objectives for 2022 were to make positive strides
to better employ technology, not only to improve client
experience, but to streamline processes and drive
greater productivity across the business that will
support growth. Technology can also boost employee
morale and create the time and resources to invest in
future growth initiatives.
Our aspiration is that over the medium term we embed
a digital experience that complements our face-to-face
services, offering a broader set of communication and
service delivery options for clients, advisers and other
new relationships.
The first stage in our digital delivery was the launch
of the MyRathbones client portal and app in 2021.
We significantly developed MyRathbones’ capability in
2022 and over c.33,900 clients (around 50% of our client
base) interact with the portal, which we expect to grow
further in 2023. The strong app rating that it has achieved
reflects a high-quality user experience and a sensitivity to
client needs, now incorporating secure messaging and
sharing investment content on a proactive basis.
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 11SR
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ONGOING SERVICE IMPROVEMENT
In a volatile market we have seen some of the benefits
of the more diversified investment approach we take,
that supports our bespoke discretionary investment
service. Investment in our research capability over
recent years has improved the quality and depth of
our investment process, the support that is offered to
investment teams, and the production of topical output
that we share with clients. Overall, our research team now
consists of 45 research professionals with our investment
managers also contributing to research and asset
allocation across the group.
Our ambition is to cater to client needs across the ESG
spectrum, whether their interest in ESG factors is driven
simply by financial materiality or by specific sustainability
preferences. To support all areas of responsible
investment, in 2022 we integrated an expanded ESG
research data set into the investment process across the
group and improved our ESG reporting. We believe that
clear and ongoing communication to clients on the ESG
characteristics of our investments is as important as being
clear on other value-based components of investment
decision-making.
External market conditions were not kind to any
portfolio that excluded oil and/or mining companies
and also some banks, particularly in the first quarter
of 2022. This inevitably impacted performance in
specialist ethical and sustainable portfolios at Rathbone
Greenbank Investments as £2.0 billion of funds under
management at 31 December 2022 fell 13.0% from
£2.3 billion in 2021. We continue to believe that this
longer-term proposition has growth potential to capture
future opportunities.
Rathbones has received recognition from a variety of
sources in 2022. We were included in a select group of
firms to have received Five Stars in the Investment
Providers category at the 2022 Financial Adviser Service
Awards, representing ‘excellent service’. Our ‘Votes against
slavery’ collaborative engagement programme has also
won Stewardship initiative of the year at the PRI awards.
The campaign that was led by Rathbones included 122
asset managers, pension funds and institutional investors
with assets under management totalling £9.6 trillion and
targeted FTSE 350 companies failing to comply with
Section 54 of the Modern Slavery Act 2015. We were also
listed as the top DFM provider for bespoke portfolios in
The Citywire New Model Adviser Top 100. Prestigious
awards such as these highlight the commitment we have
to our clients and the wider community and affirms the
high-quality service we provide.
GROUP CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
The deployment of our InvestCloud client lifecycle
management system has progressed well this year,
resulting in the deployment of prospecting capability to
a pilot group in the fourth quarter. We also completed
work to upgrade our data management capability and
streamline key client processes in preparation for the
more extensive launch of on-boarding and suitability
functionality in 2023. This investment in our digital
platform will improve productivity as well as enhance the
experience for clients, investment managers and planners.
In our Funds business we successfully delivered on the
first phase of the Charles River’s portfolio management
solution. Deployed in November 2022, this is an
important additional capability to strengthen investment
processes and improve efficiency.
In 2023, we will continue to deliver on our technology
plans, including the further deployment of InvestCloud
and have a clear roadmap to enhance our digital
capabilities further. Our digital and data strategy
programmes remain critical to client engagement
and productivity.
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 12SR
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GROUP CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
Our most recent client experience survey, undertaken in
October 2022, shows a strong level of satisfaction. We will
continue to prioritise client engagement to demonstrate
and be accountable for the choices we make to help our
clients grow their wealth.
OUR PEOPLE
As a people led business, our strategy sets a culture that
drives performance and builds long, rewarding careers for
our colleagues. Aside from our commitment to diversity,
equality and inclusion, we continue to invest in training
and career development, building leadership skills and
proactively managing succession. We obtain regular
feedback from employees, now running regular surveys
covering various topics. Engagement scores throughout
2022 remained high, with our survey scoring 8/10, higher
than the financial services benchmark of 7.8, with an
employee response rate of 82%.
Ensuring employee wellbeing has always been important
at Rathbones. Considering the challenges facing many
individuals during the current cost of living crisis, our
financial wellbeing offerings have proved ever more
valuable this year, including one-off discretionary
payments to eligible colleagues. More information can be
found on pages 71 and 89.
Furthering our diversity, equality and inclusion agenda,
we launched many initiatives during the year, noting in
particular our four inclusion networks across the group,
which have the aim of challenging us to attract a diverse
range of talent, create a more gender balanced Rathbones
and leverage the skills and abilities of all colleagues from
different backgrounds. More information on these
important initiatives can be found on page 22 and in our
responsible business review on pages 67-76.
RISK MANAGEMENT AND REGULATION
Risk management practices continue to be embedded
across the business as we remain conscious of the impact
of the changing risk landscape to our firm and industry,
particularly in an uncertain economic climate. We
continue to respond appropriately to regulatory changes
and acknowledge recent FCA and PRA consultation
activity and statements. Consumer Duty rules are
expected to come into force during the summer of 2023
and we have been working hard to respond accordingly,
developing plans for implementation later this year.
OUTLOOK
The business starts 2023 with good momentum as our
client propositions and focus on service continue to
promote opportunities for growth.
As set out in 2022, investment in our medium-term
strategy will continue in 2023, most notably to complete
the integration of Saunderson House and the investment
in technology, to embed a digital capability that improves
client experience. We remain on track to invest a total of
£40 million in this programme, continuing to target a
return to more usual ‘high-20s’ underlying operating
margin levels by the end of 2024, as benefits from recent
acquisitions and planned investment are achieved.
The wealth management sector continues to offer a
significant long-term opportunity which Rathbones has
the brand, momentum and balance sheet strength to
benefit from.
Paul Stockton
Group Chief Executive Officer
28 February 2023
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 13SR
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AN ESTABLISHED BUSINESS WITH
STRONG CHARACTERISTICS
The wealth market is attractive to investors as embedded structural growth is
underpinned by strong long-term trends. Established businesses like Rathbones are
in a strong position to take market share.
WE HAVE SCALE AND EXPERTISE, A COMMITTED
CLIENT BASE AND A CONTINUOUS FOCUS ON DIGITAL
£60.2BN
managed by us
for our clients
OVER 20 YEARS
of ESG experience through
Rathbone Greenbank
Investments
4TH
largest charity fund
manager in the UK
RESPECTED
asset management
business
C.555
investment managers
and financial planners
C.45
research professionals
93.7%
client retention rate
50%
clients using app
OUR TRACK RECORD
OF DELIVERING M&A
AND INTEGRATION
IS STRONG
INVESTMENT CASE
Benefits from
digital investment
Regulatory
changes encourage
individuals to plan
for retirement
Increased savings
and advice
need as life
expectancy rises
Consolidation
opportunities
Growing interest
in responsible
investing
Intergenerational
wealth transfer
UK WEALTH
INDUSTRY
Growing demand for
financial planning
Jupiter private client business
Vision Independent Financial
Planning (FUMA)
Speirs & Jeffrey (FUMA)
Barclays Court of
Protection Team
Saunderson House (FUMA)
0.0
6.7
£1.9BN
£925M
£6.7BN
£440M
£4.7BN
14 15 18 20 21
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 14SR
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INVESTMENT CASE CONTINUED
A RESILIENT
FIVE-YEAR FINANCIAL
PERFORMANCE RECORD
TOTAL FUMA (£BN)
£60.2BN
44.1
50.4
54.7
68.2
60.2
18 19 20 21 22
OPERATING INCOME (£M)
£455.9M
312.0
348.1
366.1
435.9
455.9
18 19 20 21 22
UNDERLYING PBT (£M)
£97.1M
91.6
88.7
92.5
120.7
97.1
18 19 20 21 22
UNDERLYING EPS (P)
130.8P
142.5
132.8
133.3
172.2
130.8
18 19 20 21 22
FULL-YEAR DIVIDEND (P)
84P
66
70
72
81
84
18 19 20 21 22
SR
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RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 15
OUR MARKET
AND OPPORTUNITIES
The UK wealth sector is attractive and underpinned by
strong long-term trends including an increasing savings
need as individuals live longer and an increasing need for
financial advice as individuals are given more flexibility
around financial decisions. The industry continues to
evolve to deliver returns for a wide range of clients.
£2.1TRN
2024F
£1.6TRN
2020
SECTOR ASSETS ARE
ESTIMATED TO BE NEARING
£2.1 TRILLION BY 2024
Sources: PAM Directory and
Oliver Wyman estimates
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 16SR
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OPPORTUNITIES WHAT THIS MEANS FOR THE INDUSTRY OUR RESPONSE
UK AND GLOBAL
ECONOMY
The current macroeconomic environment, both at home and abroad, is
facing headwinds. The effects of the war in Ukraine, global supply chain
problems, post pandemic challenges, inflation and a cost of living crisis
have an impact on clients’ ability or willingness to commit new savings.
General market sentiment remains nervous about the potential for
recession in many economies.
We continually re-position portfolios and our teams have spent
considerable time talking clients through market movements and
continuing to help them plan their futures for the longer term. Market
corrections can be painful, but we believe that the wealth and asset
management industry remains attractive for the long term.
DEMOGRAPHICS
Demographic trends including increased life expectancy and age
distribution are driving an increased savings need across the population.
The demise of defined benefit pension schemes and pension freedoms
allow individuals more flexibility but bring with them an increasing need
for advice.
We have expanded our advice offering through the acquisition of
Saunderson House and we work with clients to support them in their
retirement planning and in discussions around inter-generational wealth
transfer. Our services are designed to invest for clients’ futures.
CONSOLIDATION
OPPORTUNITIES
The wealth management sector remains highly fragmented and benefits
of scale remain strong both in terms of operating leverage and service
diversification. There remains a long tail of sub-scale wealth managers
who may have experienced greater operational strain through the
pandemic.
We have a strong track record of M&A and will continue to look for
inorganic growth opportunities that fit our culture but maintain strict
acquisition criteria. We also continue to selectively recruit individuals
and teams to the business.
TECHNOLOGICAL
INNOVATIONS
Clients are becoming more and more accustomed to using technology to
communicate and manage their financial affairs. Keeping pace with this
change is fundamental to remaining competitive and sustaining a quality
service, particularly as inter-generational wealth transfer accelerates.
We are in the midst of a multi-year plan to enhance the digital client
experience and provide seamless multi-channel communication to
clients. This includes upgrading client relationship management tools
and ensuring we build relationships with the next generation of clients
using relevant technology to facilitate retention of investment portfolios.
RESPONSIBLE
BUSINESS/ESG
The role of the wealth management industry continues to expand,
extending to broader issues. This wider role is expected to become even
more important in future years as social and environmental issues
become increasingly important to our stakeholders
Alongside our responsible business programme, we continue to broaden
our existing ESG proposition and investment range, ensuring they
remain relevant for our clients. It is also a priority of ours to maintain
dialogue with companies we invest in to support more sustainable
long-term performance.
OUR MARKET AND OPPORTUNITIES CONTINUED
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 17SR
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OUR STRATEGY
We launched our medium-term strategy for the business in October 2019, to support our purpose of thinking,
acting and investing for everyone’s tomorrow. Our four strategic priorities are set out here.
How we plan to achieve this
Penetrating specialist markets
Focusing on specialisms, building on
existing capabilities andleveraging
Rathbone Greenbank Investments.
Driving organic growth
Managing client-facing capacity,
structuring distribution, driving growth
through financial planning and building
our Funds business.
Link to KPIs
– Total funds under management
andadministration
– Investment management net organic
growth rates
– Underlying operating margin
– Dividend per share
– Underlying earnings per share
– Return on capital employed.
Link to risks
Sustainability
2022 activities
– Delivered phase 1 of our digital
transformation programme,
streamlining processes to drive
productivity and support
growth, including Prospecting
and Charles River
– Stewardship events focusing on
targeted client groups, including
entrepreneurs and the professional
services market.
2023 focus
– We will continue to progress our
digital programme in line with plan
– We will harness digital and planning
to increase organic growth
– Transitioning Saunderson House
clients onto new propositions.
How we plan to achieve this
Enhancing valued services
Enhancing the experience for private
clients and providing adedicated
service for financial advisers.
Deepening investment skills
Developing our investment expertise,
broadening capability and coverage,
andincorporating ESG factors.
Link to KPIs
– Number of Investment
Management clients
– Employee turnover.
Link to risks
Suitability / Advice / Sustainability /
Regulatory compliance and legal /
People
2022 activities
– Invested in digital programme
and MyRathbones to enhance
client experience
– Defaqto Discretionary Fund Manager
Satisfaction Study: Rathbones
received most nominations as
a preferred provider from advisers
for bespoke DFM
– Rathbones was awarded five stars:
excellent service in the 2022
Financial Adviser Service Awards
– Improved client retention in 2022.
2023 focus
– Further updates to MyRathbones
– Refreshing our brand.
ENRICHING THE CLIENT AND ADVISER
PROPOSITION AND EXPERIENCE
SUPPORTING AND DELIVERING GROWTH
See our remuneration
objectives on pages 133 to 135
OUR STRATEGY
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 18SR
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OUR STRATEGY CONTINUED
INSPIRING OUR PEOPLE OPERATING MORE EFFICIENTLY
How we plan to achieve this
Our culture and corporate values
Becoming a more diverse and inclusive
organisation, continuing to listen
to our people and improving our
commitments to them.
Link to KPIs
– Percentage of shares held by current
employees
– Employee turnover
– Performance-related variable
employee costs.
Link to risks
People / Change
2022 activities
– Launched four inclusion networks
across the group to challenge us
to attract a diverse range of talent
– Offered help to support financial
wellbeing, including one-off
discretionary payments to
eligible employees.
2023 focus
– To establish a new diversity, equality
and inclusion (DE&I) committee
which, together with our new
strategy and enhanced focus on
DE&I, will ensure we achieve our
commitments to greater inclusion
across the group.
How we plan to achieve this
Driving productivity
Providing a quality client
experience andmaking us easy
todo business with.
Link to KPIs
– Underlying operating margin
– Return on capital employed
– Common Equity Tier 1 ratio.
Link to risks
Information security and cyber /
Technology / People / Processing /
Change
2022 activities
– Launched a revised ‘Reliance on
Adviser’ proposition which improved
administrative processes and made
Rathbones easier to do business with
– Developed further the ’Rathbone
Select Portfolio Service’ to provide
cost-effective solutions for smaller
value portfolios.
2023 focus
– Continue to progress our digital
transformation to increase time
available to investment managers
to focus on portfolio performance
and winning new clients.
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 19SR
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8.3/10
OVERALL SATISFACTION
SCORE ACCORDING TO MOST
RECENT CLIENT SURVEY
OVER
380
EMPLOYEES HAVE
COMPLETED THE
CISI QUALIFICATION ON
RESPONSIBLE INVESTING
SINCE 2021
EXPERIENCEENRICHING
OUR STRATEGY: ENRICHING THE CLIENT AND ADVISER PROPOSITION AND EXPERIENCE
RESPONSIBLE INVESTMENT PROPOSITION
Our ambition is to cater to the needs of all clients – whether their
interest in ESG factors is driven simply by financial materiality
or by specific sustainability preferences. During 2022 we have
spent considerable time looking at our responsible investment
spectrum in terms of the propositions we offer. This can range
from a baseline of ‘low ESG integration’ propositions,
which allow flexible responsible investment and ESG integration
more linked to financial outcomes, to ‘high ESG integration’,
which is more bespoke and linked to clients’ comprehensive
ethical, sustainable and impact preferences. To support all areas
of responsible investment, in 2022 we integrated anexpanded
ESG research data set into theinvestment process across the
group and improved our ESG reporting to clients.
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 20SR
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19%
INCREASE IN
INVESTMENT
MANAGERS SINCE 2019
203
FINANCIAL PLANNERS
IN 2022
(INCLUDING VISION)
GROWTHSUPPORTING
OUR STRATEGY: SUPPORTING AND DELIVERING GROWTH
RATHBONE FINANCIAL PLANNING AND
SAUNDERSON HOUSE – THE JOURNEY SO FAR
We spent considerable time in 2022 building a redefined
proposition using the best of both businesses as they came
together. In June, we went live with this shared client advice
proposition, which includes initial advice and planning,
ongoing advice services and investment solutions.
We also joined the two offices under one leadership team and
one physical location. The team now comprises 303 people in
total, in seven offices and with over 72 certified planners. We
now have a sizeable presence in the UK market to benefit from
the significant opportunity.
During 2023, the focus will be on further establishing a ‘One
Rathbones’ client proposition, and offering existing Saunderson
House clients our new advisory and investment/asset
management proposition.
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 21SR
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LAUNCH OF INCLUSION NETWORKS
In 2022, we launched our new diversity, equality and inclusion
(DE&I) strategy. A key priority was to refresh the DE&I
governance structures, with the purpose of driving our strategy
forward and ensuring action-focused accountability across the
group. We launched four inclusion networks in 2022 to enable
colleagues from under-represented groups to connect and create
positive change towards greater balance at Rathbones.
From 2023, a new DE&I committee will be established which,
together with our new strategy and enhanced focus on DE&I,
will ensure we achieve our commitments to greater inclusion
across the group.
The new strategy aligns to our corporate strategy and enables us
to deliver authentic and sustainable change towards our DE&I
vision: ‘To be a business that supports and educates all our
people, one that celebrates our unique strengths and empowers
all individuals to thrive.’
SIP 47%
SAYE 63%
GROWTH IN SIP AND
SAYE PARTICIPATION
SINCE 2019
7.2%
EMPLOYEE TURNOVER
IN 2022*
PEOPLEINSPIRING
OUR STRATEGY: INSPIRING OUR PEOPLE
* Voluntary employee turnover
(excluding retirements)
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 22SR
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EFFICIENTLYOPERATING
MYRATHBONES
Our portal and app, MyRathbones, has grown considerably
since its launch at the beginning of 2021 with 50% of clients
now using it and an App store rating of 4.5. Clients are taking
advantage of its many features, including the ability to view
performance information and download client reports,
contract notes and tax packs, as well as benefiting from
leading online security.
MyRathbones is an integral part of our overall digital platform
and is at the centre of creating a blended human and digital
experience. In 2023, we will be integrating it with our
InvestCloud digital solution to further enhance our onboarding
process and suitability assessments which, in the future, clients
will be able to complete online.
Once a client or adviser has signed up to MyRathbones, they are
also able to receive interesting and relevant thought leadership
articles, enabling them to stay up to date with market activities.
OVER 1M
LOGINS TO
MYRATHBONES
DURING 2022
115,780
DOCUMENTS
DOWNLOADED
DURING 2022
OUR STRATEGY: OPERATING MORE EFFICIENTLY
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 23SR
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KEY PERFORMANCE
INDICATORS
The group considers the following financial and non-financial measures as key
performance indicators (KPIs) of its overall performance. Each KPI is aligned with at least
one of our four strategic pillars and is used to measure both the progress and success of
our strategy implementation.
Definition
Total funds under management
and administrationat the
endofthe year.
Relevance
The amount of funds thatwe
managedirectly impacts the
level ofincomewereceive.
Definition
Underlying profit after tax as
a percentage oftheunderlying
quarterly average total ofequity.
Relevance
A useful measure of financial
efficiency as it indicates
profitability after factoring
in the amount of capital
employed by the business.
1. Excluding £16.3 million of expenditure
on our digital strategy in the year,
underlying ROCE was 13.9%
Definition
Underlying profit before
tax asapercentage
ofoperatingincome.
Relevance
This measure enables the
group’s operational and
segmental performance
tobe understood, accurately
reflecting keydrivers of
long-termprofitability.
1. Excluding £16.3 million of expenditure
on our digital strategy in the year,
the underlying operating margin
was 24.9%
Definition
Total annual dividend per share
(interimandfinal).
Relevance
Dividends represent an
important part ofthereturns
to shareholders.
54.7
68.2
60.2
20 21 22
13.6
16.1
11.8
20 21 22
72
81
84
20 21 22
25.3
27.7
21.3
20 21 22
Enriching the client and adviser
proposition and experience
Supporting and
delivering growth
Inspiring our
people
Operating more
efficiently
Alignment with
strategic pillars
UNDERLYING RETURN ON CAPITAL EMPLOYED
*, 1
11.8%
DIVIDEND PER SHARE
84P
TOTAL FUNDS UNDER MANAGEMENT AND ADMINISTRATION
£60.2BN
UNDERLYING OPERATING MARGIN
*, 1
21.3%
* This measure is considered an APM. Please refer to page 39 for more detail on APMs.
KEY PERFORMANCE INDICATORS
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 24SR
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Alignment with
strategic pillars
Definition
Performance-related variable
employee costs divided by
underlying profit before tax and
before performance-related
variable employee costs.
Relevance
Shows the extent to which
profits are shared between
employees and shareholders.
1. As a % of underlying profit before tax
and before performance related
variable employee costs
2. 3.8% of the total is due to the impact
of £16.3 million of expenditure on the
group’s digital programme in 2022
Definition
Underlying profit after tax
divided bytheweighted average
number of ordinaryshares.
Relevance
An important measure
of performance as itshows
profitability, reflecting
the effects of anynew
share issuance.
1. Excluding £16.3 million of
expenditure on our digital
strategy in the year, underlying
EPS was 153.3p
Definition
Number of permanent
employees who haveleft
during the year, excluding
retirementsand redundancies,
as a percentage of
openingheadcount.
Relevance
A measure of employee
retention, which can be
areflection of the work
environment and commitment
to the organisation.
KEY PERFORMANCE INDICATORS CONTINUED
133.3
172.2
130.8
20 21 22
5.1
8.2
7.2
20 21 22
43.7
45.6
41.8
41.6
3.8
20 21 22
Enriching the client and adviser
proposition and experience
Supporting and
delivering growth
Inspiring our
people
Operating more
efficiently
PERFORMANCE-RELATED VARIABLE EMPLOYEE COSTS
*, 1
45.6%
2
EMPLOYEE TURNOVER
7.2%
UNDERLYING EARNINGS PER SHARE
*, 1
130.8P
Definition
The number of clients whouse
ourservices.
Relevance
In an industry where scale
isimportant, thesize of
ourclient base helps to
determine marketshare.
63,700
66,500
67,700
20 21 22
NUMBER OF INVESTMENT MANAGEMENT CLIENTS
67,700
* This measure is considered an APM. Please refer to page 39 for more detail on APMs.
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 25SR
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Definition
The value of annual net inflows
from Rathbone Funds as a
percentage of opening funds
under management
inthatsegment.
See page 47.
Relevance
Measures the ability of the
Funds businessto grow.
Definition
The percentage of outstanding
shares heldbycurrent
employees of the firm.
Relevance
A direct link for employees to
the futurefinancial success of
the company asshareholders.
Definition
Common Equity Tier 1 capital
as a proportion oftotal risk
exposure amount.
See table 19 on page 50 for a
breakdown of common equity
tier 1 own funds.
Relevance
As a bank, we must maintain
certain levels ofcapital. A
higher ratio is an indicator
of financial resilience.
See page 49.
KEY PERFORMANCE INDICATORS CONTINUED
20.1
21.1
0.4
20 21 22
10.1
8.6
9.6
20 21 22
23.5
18.7
17.9
20 21 22
Enriching the client and adviser
proposition and experience
Supporting and
delivering growth
Inspiring our
people
Operating more
efficiently
RATHBONES FUNDS NET ORGANIC GROWTH RATE
0.4%
PERCENTAGE OF SHARES HELD BY CURRENT EMPLOYEES
1
9.6%
COMMON EQUITY TIER 1 RATIO
17.9%
Alignment with
strategic pillars
Definition
The value of annual net inflows
from Investment Management
as a percentage ofopening
funds under management
andadministration in that
segment.
See page 43.
Relevance
Measures the ability of the
Investment Management
business to grow inthe
absence of acquisitions.
0.1
1.8
1.1
20 21 22
INVESTMENT MANAGEMENT NET ORGANIC GROWTH RATE
1.1%
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 26SR
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STAKEHOLDER
ENGAGEMENT
APPROACH TO STAKEHOLDER
ENGAGEMENT
The firm’s stakeholders are our clients, our people, our
shareholders, our communities, regulators and partners
with an interest or concern in our purpose and strategy.
Our aim is to maintain an open and transparent approach
to stakeholder engagement based on building
constructive relationships with our key stakeholders and
ensure there is a two-way dialogue.
Across the firm, there are many examples of stakeholder
engagement influencing both day-to-day actions and
strategic initiatives. The key strategic developments set
out on pages 29-35 illustrate some of our significant
stakeholder considerations which informed the board’s
decision-making during the year and this approach is
designed to be consistent with our section 172
statement. Details of the framework through which this
is governed are set out on page 28.
OUR STAKEHOLDER RELATIONSHIPS
The firm has identified the following key stakeholder
groups and by considering their perspectives, insights
and opinions, the board seeks to ensure outcomes of
operational, investment or business decisions that are
more robust and sustainable. In doing so our board has
regard (amongst other matters) to the:
– likely consequences of any decisions in the long term
– interests of our people
– need to foster the company’s business relationships
with suppliers, customers and other key stakeholders
– impact of the company’s operations on communities
and the environment
– desirability of the company maintaining a reputation
for high standards of business conduct
– need to act fairly as between members of the company.
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 27SR
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STAKEHOLDER FRAMEWORK
What we do
Our purpose represents our commitment as a business to all our
stakeholders and wider society.
Rathbones’ outputs from engagement
Input from engagement with stakeholders
OUR PURPOSE
To think, act and
invest for everyone’s
tomorrow, delivered
through our culture
and values
See page 105
Deliver bespoke
and relevant
products
Provide inclusive
and talented
workforce to
service client
needs
Ensure sustainable
long-term
shareholder
returns
Implemented and
refined initiatives
for our responsible
business agenda
Respond to
evolving
regulatory
requirements
CLIENTS
– Client engagement allows us to anticipate
their needs and to evolve our proposition
to meet their expectations
– Client insight and feedback on service,
technology and products.
OUR PEOPLE
– Engagement helps us attract, retain
and develop our people
– Input into the sustainable employee model.
PARTNERS AND REGULATORS
– Engagement with regulators and our
partners is fundamental to the running
of the firm and servicing of clients
– Provide feedback to ensure ongoing
collaboration and anticipate any
regulatory changes
– Engagement with our suppliers and
partners supports our ability to deliver
our commitments.
SHAREHOLDERS
– Engagement is designed to ensure
confidence in the long-term success
of the firm
– Provide insight into the firm’s strategic
and investment direction.
SOCIETY AND COMMUNITIES
– We recognise our responsibility to
wider society and communities we
operate within
– Obtain specific environmental and
social perspectives.
STAKEHOLDER ENGAGEMENT CONTINUED
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 28SR
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CLIENTS
HOW THE FIRM ENGAGED
We engaged with our clients through a variety of different
methods including:
– our brand sentiment survey
– participation in the AON 2022 client experience
benchmark survey
– regular meetings held between investment managers
and financial planners
– continued use of video technology to enable virtual
engagement with clients
– user experience testing of our digital solutions
and propositions
– virtual and in-person conferences held for private clients,
intermediaries and IFAs
– regular CEO letter and research notes issued to clients to
update them on the firm and our investment proposition.
WHAT WERE THE KEY TOPICS RAISED
Clients told us that they wanted:
– practical help on how to achieve their financial goals, and
invest in line with ‘responsible’ or ESG values
– help to navigate challenging times: inflation, cost of
living crisis and market volatility
– frameworks and guidance to help make the best financial
decisions and ultimately achieve good outcomes.
HOW THE FIRM RESPONDED
– Financial awareness courses for all generations held
in person and virtually
– Development of new products and services to
meet current and future client needs including
ESG proposition
– Continued development of MyRathbones with over
50% take up by clients
– Increased electronic delivery of client reporting and
implemented encrypted email technology
– Continued to develop our ability to deliver our
proposition digitally
– Additional financial planning capability to support
client needs in conjunction with investment
management services.
OUR SURVEY RESULTS
In the face of significant political and economic challenges
in the UK leading to a market downturn, our client
experience scores have declined compared to 2020.
Whilst older clients and those with us over ten years
remain broadly positive, there are some emerging
segments that are expressing dissatisfaction (e.g. younger,
newer clients and with lower assets). It is important to
ensure that we engage with all clients and they feel that
we support them in achieving their financial goals and
objectives. We selected not to participate in 2021 allowing
more time to implement changes which may impact our
results in the future.
FURTHER LINKS TO:
Stakeholder interests and engagement (p102)
Enriching our proposition (p18)
Aligned with enriching the client and adviser
proposition and experience strategic priority
STAKEHOLDER ENGAGEMENT CONTINUED
19
20
22
55
60
39
Benchmark
36
39
50
19
20
22
Benchmark
8.2
8.4
8.6
8.9
8.8
8.3
19
20
22
Benchmark
8.8
8.7
9.0
9.1
9.0
8.7
NET PROMOTER SCORE
1
Client likelihood to recommend Rathbones
(-100% to 100%)
OVERALL SATISFACTION
1
Overall satisfaction with Rathbones
(0 to 10)
SATISFACTION WITH THEIR INVESTMENT MANAGER
Overall satisfaction with their primary investment manager
(0 to 10)
1. AON 2022 client experience survey: in the face of significant
political and economic challenges in the UK leading to a market
downturn, the overall AON benchmark has dropped and across
many core KPIs. Rathbones client experience scores are modestly
above competitor benchmark firms on 7 out of 8 core KPIs
including NPS (likelihood to recommend).
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 29SR
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PEOPLE
HOW THE FIRM ENGAGED
We engaged with our people through the following
activities:
– day-to-day interaction through our management
structures
– regular colleague opinion surveys to measure
engagement, wellbeing and opinions
– ongoing and regular virtual management briefings
– webcast, internal magazine and management blogs
– virtual presentations by the executive team to
discuss performance and the firm’s progress on the
strategic plan
– peer recognition scheme to identify colleagues who
demonstrated outstanding behaviours and conduct
aligned to our values
– workforce engagement sessions held with the non-
executive directors
– held the firm’s first senior leaders conference.
WHAT WERE THE KEY TOPICS RAISED
– How will the firm’s people strategy be developed to help
our colleagues develop their careers?
– What does the future of working style at Rathbones look
like and how will the hybrid working model evolve?
– The importance of diversity equality and inclusion (DE&I)
– How the cost of living crisis is impacting our people.
HOW THE FIRM RESPONDED
– Working with the cross industry network Inclusive
Companies to broaden our reach and appeal as part
of our commitment to attract, cultivate and retain
diverse talent
– Involved all leaders and teams in the cascade of
our strategy
– Focusing on developing our people and enabling
our culture
– Continued to develop and expand Rathbones’
mentoring programme
– Enhanced the office environment to support new
flexible working practices
– Launch of a new DE&I strategy across the firm
– Provided a one-off payment for colleagues most
impacted by the cost of living crisis, designed to
give colleagues some breathing space as they faced
rising costs.
FURTHER LINKS TO:
Responsible business review (p67)
Workforce engagement (p107)
Enabling our people (p22)
Culture (p105)
Gender pay gap report
Aligned with inspiring our people
strategic priority
EMPLOYEE RESPONSE RATE
82%
2021: 84%
OVERALL ENGAGEMENT
8.0/10
2022 BENCHMARK
1
: 7.8
2021: 8.1 (BENCHMARK 7.8)
EMPLOYEE NET PROMOTER SCORE
39
2022 BENCHMARK
1
: 22
2021: 44 (BENCHMARK 22)
I FEEL WELL COMMUNICATED WITH
7.8/10
2022 BENCHMARK
1
: 7.6
2021: 7.8 (BENCHMARK 7.6)
MY MANAGER CARES ABOUT ME AS A PERSON
8.5/10
2022 BENCHMARK
1
: 8.6
2021: 8.4 (BENCHMARK 8.6)
STAKEHOLDER ENGAGEMENT CONTINUED
1. Benchmarks are set by Peakon and relate to the broader financial
service sector clients
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 30SR
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DEVELOPING OUR GRADUATES
My experience on the graduate programme was very
positive. When I joined Rathbones, we were given a
thorough induction process which involved group tasks
and workshops and outlined what we were to expect
over the next two years.
Over the course of the rotational scheme, I was able to
experience working in five different departments
including financial planning, investment risk and
investment management. This allowed me to connect
with a wide variety of people across the business and
improve on a range of skills such as portfolio
management, teamwork and public speaking. During
this time, I have been able to complete a number of
exams such as levels of the CFA which has been a
rewarding experience.
I also benefited from taking an active position on the
graduate development board which is a committee that
provides activities and a voice for the 50+ trainee
investment managers in the company. Overall, the
graduate scheme has been a brilliant opportunity to learn
about a fascinating industry; my favourite aspect is the
ever-changing variety of the role based on changes in the
investment universe.
Since completing the scheme, I have increased my level
of responsibility and continue to benefit from new and
exciting challenges every day.
Owen Quinn
Part of our 2020 graduate cohort,
now an assistant investment manager
ENGAGING
WITH OUR
PEOPLE
STAKEHOLDER ENGAGEMENT CONTINUED
SR
G
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RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 31
SHAREHOLDERS
HOW THE FIRM ENGAGED
We engaged with our shareholders through the following
activities:
– executives held regular meetings with our investors
throughout the year
– continued to expand sell-side analyst research coverage
of the company
– we commissioned an independent analyst perception
study, to gain insight into our shareholder/investor’s
opinions. The results were presented to the board
– our AGM provided the opportunity for all shareholders
to ask questions of our board.
WHAT WERE THE KEY TOPICS RAISED
– How will the business return to operating margin growth?
– How will the company achieve further organic growth?
– How is the business positioned to manage opportunities
and challenges posed by a market downturn?
– How is the integration of Saunderson House progressing?
– What is the progress update on Client Lifecycle
Management (CLM) in terms of budget and benefits?
HOW THE FIRM RESPONDED
– Provided regular updates on the company’s financial
and strategic performance
– The progressive dividend policy was maintained
throughout the year
– An update was given on the firm’s strategic plan
and integration of Saunderson House
– Responded to several environmental, social and
governance (ESG) related questionnaires during the
year and issued our Task Force on Climate-related
Financial Disclosures (TCFD) report and responsible
business report
– Maintained meaningful dialogue with the sell-side
analyst community.
FURTHER LINKS TO:
Stakeholder interests and engagement (p102)
Group chief executive officer’s review (p9)
Enriching our proposition (p18)
Aligned with supporting and delivering growth
strategic priority
NUMBER OF
INVESTOR MEETINGS
HELD IN 2022
110
NUMBER OF
NEW INVESTORS
IN 2022*
95
STAKEHOLDER ENGAGEMENT CONTINUED
* number of new investors includes both retail shareholders and
institutional investors
82
96
110
20 21 22
87
73
95
20 21 22
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 32SR
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SOCIETY AND COMMUNITIES
HOW THE FIRM ENGAGED
We engaged with society and the communities in which
we operate through the following activities:
– we encouraged high standards of governance as an
investment manager and frequently engaged with
companies on environmental, societal, and corporate
governance concerns
– used our community investment network to support
discussion around regional charity projects and
employee matching
– worked with industry bodies to understand and respond
to the growing stakeholder expectation around
management of climate risk and emissions exposure.
WHAT WERE THE KEY TOPICS RAISED
– How has the firm responded to donation appeals across
the world?
– How do we consider our climate strategy and the
environmental impact of our operations?
– How do we best support the communities in which
we operate?
HOW THE FIRM RESPONDED
– We successfully coordinated donation appeals to support
the Disasters Emergency Committee’s response to the
crises in Ukraine and Pakistan
– We supported the communities in which we operate
through the Rathbones Group Foundation, corporate
donations and employee volunteering. In 2022 we gave
over £795,000 (2021: £418,000)
– Transitioned several of our local community investment
programmes, supported by our Foundation, to longer-
term strategic partnerships
– Expanded our stewardship team to support our
engagement activities
– Reviewed our approach to managing climate risk and
expanded the data included in our carbon reporting, to
cover our supply chain, operational footprint and the
impact of our investment portfolios. See our TCFD
report for more information
– Published our first standalone responsible business
report, where we shared more detail on our responsible
business programme and progress made.
FURTHER LINKS TO:
Responsible business review (p67)
Chair’s statement (p6)
Aligned with supporting and delivering growth
strategic priority
DIRECT ENGAGEMENT
WITH INVESTEE
COMPANIES
671
TOTAL AMOUNT
DONATED
£795K
Aligned with enriching the client and adviser
proposition and experience strategic priority
CDP SCORE
C
2021
B
2020
STAKEHOLDER ENGAGEMENT CONTINUED
226
705
671
20 21 22
£467,000
£418,000
£795,000
20 21 22
B
2022
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 33SR
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ENGAGING
OUR SUPPLIER
PARTNERS
STAKEHOLDER ENGAGEMENT CONTINUED
WORKING WITH OUR SUPPLIER PARTNERS
As with many financial service organisations our supply
chain could be considered low-risk. At Rathbones we see
the opportunities of working with our suppliers and
engaging them on issues that are material to both parties.
One example of this is the work many companies are
undertaking to reduce their environmental impact.
Having set our own net zero commitment, we review
our supply chain for material exposure. Through our
environmental, social and governance (ESG)
questionnaire we work with our suppliers to track
alignment of their activities with our priority issues.
At the end of 2022 we had reviewed 69% of our in scope
suppliers for their approach to managing ESG matters.
These reviews identify areas, such as our partners’
approach to net zero, and suppliers with whom we then
engage. Through the year we have had several
conversations with partners who are considering what
achieving net zero emissions means for them. For some
of our smaller suppliers who understandably are at the
start of their net zero journey we have been happy to
engage, sharing our experience as they start defining
their net zero programme.
Through 2023, we will continue to review and engage.
As we consolidate our supplier universe engagement
will cover a larger number of our suppliers, supporting
us as we look to make progress on our net zero targets
and as we prepare for the strengthened Modern Slavery
Act requirements.
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 34SR
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OUR PARTNERS
AND REGULATORS
HOW THE FIRM ENGAGED
We engaged with regulators and our partners through the
following activities:
– we held regular meetings with our regulators during the
year and continue to have a proactive and transparent
relationship with them
– we ensured our payment terms with all suppliers were
fair and in compliance with payment practices
– we engaged our suppliers to understand both their
exposure to environmental, social and governance
(ESG) risk (including modern slavery risk) and their
management of these matters. Our modern slavery
statement is updated annually and reviewed by
our board
– we maintained ongoing relations with our key suppliers
and partners during the year with regular board updates
– engaged with our existing lenders.
WHAT WERE THE KEY TOPICS RAISED
– How do Rathbones ensure open and clear dialogue
with regulators with timely response to requests?
– Do you provide fair and transparent terms with
all suppliers?
HOW THE FIRM RESPONDED
– Worked in close collaboration with the firm’s
regulators and responded on a timely basis
– Maintained a constructive relationship with HMRC
to help ensure alignment with the relevant
regulatory frameworks
– Reviewed our preferred, strategic and critical suppliers
for their ESG policies and processes. See page 73
– Interacted with the industry bodies and associations
we are affiliated with to ensure we were engaged with
issues impacting our industry
– Engaged with our existing lending partner
– Adhered to payment terms with suppliers.
FURTHER LINKS TO:
Stakeholder interests and engagement (p102)
Risk management and control (p54)
Responsible business review (p67)
% OF SUPPLIERS PAID WITHIN 30 DAYS
96%
% OF PAYMENTS TO SUPPLIERS MADE
IN AGREED TIMEFRAME
92%
2022
2022
96%
92%
2021
2021
94%
70%
2020
2019
2020
2019
90%
92%
63%
65%
Aligned with operating more efficiently
strategic priority
ALL RESPONSES TO REGULATORS HAVE BEEN
MADE IN LINE WITH THE AGREED DEADLINE.
STAKEHOLDER ENGAGEMENT CONTINUED
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 35SR
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RATHBONES GROUP ANNUAL REPORT 2022 / 36
GROUP CHIEF FINANCIAL OFFICER’S REVIEW
OVERVIEW OF FINANCIAL PERFORMANCE
The group’s financial performance for the year to 31 December
2022 remained resilient during a challenging year for markets
and investors. We continued to attract new business and
achieved sustained net inflows despite volatile markets.
Underlying profit before tax was £97.1 million (2021: £120.7
million), a fall of 19.6% in the year, which includes £16.3 million
of the £40 million planned expenditure on our digital strategy
which we announced in February 2022. Despite falls across all
major markets, operating income increased 4.6%
to £455.9 million (2021: £435.9 million). The underlying
operating margin, which is calculated as the ratio of underlying
profit before tax to operating income, was 21.3% (2021: 27.7%).
Operating income for the year benefited from our diversified
revenue streams with use of the group’s banking licence and a
full year’s contribution of Saunderson House which we
acquired in October 2021. Whilst fee income reduced given
lower funds under management, net interest income
contributed £18.3 million to operating income in 2022 (2021:
£3.9 million) due to the rising interest rate environment. The
increase in expenditure was in line with expectations and
largely driven by our strategic growth plan, including our digital
programme, together with the addition of Saunderson House.
The underlying operating margin rises to 24.9% when
underlying profit before tax is adjusted for £16.3 million of
operating expenses on the group’s digital programme. Agile
and phased delivery of the project has ensured good progress
with a resulting improvement in client engagement.
Statutory profit before tax for 2022 was £64.1 million
(2021: £95.0 million). This included planned deferred
acquisition and integration costs of £10.0 million relating
to Saunderson House (2021: £3.7 million), and £3.5 million
deferred acquisition costs for Speirs & Jeffrey (2021: £6.4
million). See note 3 for further detail.
The board primarily considers underlying measures of
income, expenditure and earnings when assessing the
performance of the group. These are considered to provide
useful additional information on business performance,
rather than reviewing results on a statutory basis only. These
measures are also widely used by research analysts covering
the group. A full reconciliation between underlying results
and the closest IFRS equivalent is provided on page 39.
TABLE 1. GROUP’S OVERALL PERFORMANCE
2022
£m
(unless
stated)
2021
£m
(unless
stated)
Operating income 455.9 435.9
Underlying operating expenses¹
(358.8) (315.2)
Underlying profit before tax¹ 97.1 120.7
Underlying operating margin¹ 21.3% 27.7%
Profit before tax 64.1 95.0
Effective tax rate 23.6% 20.8%
Taxation (15.1) (19.8)
Profit after tax 49.0 75.2
Underlying earnings per share¹
130.8p 172.2p
Earnings per share 83.6p 133.5p
Dividend per share²
84.0p 81.0p
Return on capital employed (ROCE)¹ 7.7% 13.0%
Underlying return on capital employed¹ 11.8% 16.1%
1. A reconciliation between the measure and its closest IFRS equivalent is
shown in table 3
2. The total interim and final dividend proposed for the financial year
FINANCIAL
PERFORMANCE
RATHBONES GROUP ANNUAL REPORT 2022 / 37
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
BUSINESS PERFORMANCE: FUNDS UNDER MANAGEMENT AND
ADMINISTRATION (FUMA)
Net inflows of discretionary and managed FUMA in Investment Management remained
positive across each quarterly trading period, despite volatile investor conditions, totalling
£0.9 billion in 2022 (2021: £1.3 billion). Direct net flows into our multi-asset fund range were
particularly robust, reflecting the diversification and perceived relative safety of these funds,
and totalled £0.4 billion in the year (2021: £0.5 billion). Taken together, this represents
a growth rate of 2.6% in discretionary and managed FUMA (2021: 4.1%).
The asset management industry saw outflows in single-strategy funds in the year, with a
13.8% reduction in industry-wide funds under management and administration. Our
single-strategy funds experienced net outflows of £0.4 billion in the year (2021: net inflows
of £1.2 billion), representing 4.5% of opening funds under management and administration,
as investors favoured value stocks over our relative overweight position in growth-oriented
stocks. As the year progressed, we saw a reduction in the level of outflows as investors began
to adopt higher risk positions as inflation and interest rate fears abated somewhat.
Uncertainty across UK and global markets, driven by macroeconomic and geopolitical
volatility, contributed to an adverse £8.4 billion market movement on asset values in the
year, resulting in FUMA closing 11.7% down at £60.2 billion (2021: £68.2 billion) (Table 2). This
compares with favourable market movements of £5.9 billion in 2021. During the latter half of
the year, our investment performance benefited from an underweight exposure to both fixed
income securities and North American equities, relative to the PIMFA Balanced index.
TABLE 2. GROUP FUMA AND FLOWS BY SERVICE LEVEL
Year ended 31 December 2022
Opening
FUMA
£bn
Net flows
£bn
Net service
level
transfers
£bn
Market &
investment
performance
£bn
Closing
FUMA
£bn
Net growth
(flows)
%
Discretionary service 49.3 0.9 (0.2) (5.7) 44.3 1.9%
Bespoke portfolios 48.0 0.8 (0.3) (5.6) 42.9 1.6%
Managed via in-house funds 1.3 0.1 0.1 (0.1) 1.4 10.3%
Multi-asset funds 2.0 0.4 – (0.2) 2.2 20.0%
Total discretionary &
managed 51.3 1.3 (0.2) (5.9) 46.5 2.6%
Non-discretionary service 1.0 (0.1) (0.1) (0.1) 0.7 (7.4%)
Total wealth management 52.3 1.2 (0.3) (6.0) 47.2 2.4%
Single-strategy funds 8.3 (0.4) – (1.4) 6.5 (4.5%)
Execution only & banking 2.7 (0.2) 0.3 (0.4) 2.4 (9.0%)
Total 63.3 0.6 0.0 (7.8) 56.1 1.0%
Saunderson House 4.9 (0.2) (0.0) (0.6) 4.1 (4.9%)
Total group 68.2 0.4 – (8.4) 60.2 0.6%
Table 2 presents separately the FUMA, and associated movements, in those services
and products which support our wealth management solutions from asset management
products and other services. Wealth management FUMA incorporates our bespoke
discretionary portfolio and managed portfolio services. It also includes direct sales into our
range of risk-targeted multi-asset funds, which are designed to be used as wealth
management solutions for clients of investment platforms and financial advisers. Asset
management FUMA includes our focused range of specialist ‘single-strategy’ funds, which
are designed to act as individual holdings within investment portfolios.
GROUP CHIEF FINANCIAL OFFICER’S REVIEW
Jennifer Mathias
Group Chief Financial Officer
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 36SR
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RATHBONES GROUP ANNUAL REPORT 2022 / 36
GROUP CHIEF FINANCIAL OFFICER’S REVIEW
OVERVIEW OF FINANCIAL PERFORMANCE
The group’s financial performance for the year to 31 December
2022 remained resilient during a challenging year for markets
and investors. We continued to attract new business and
achieved sustained net inflows despite volatile markets.
Underlying profit before tax was £97.1 million (2021: £120.7
million), a fall of 19.6% in the year, which includes £16.3 million
of the £40 million planned expenditure on our digital strategy
which we announced in February 2022. Despite falls across all
major markets, operating income increased 4.6%
to £455.9 million (2021: £435.9 million). The underlying
operating margin, which is calculated as the ratio of underlying
profit before tax to operating income, was 21.3% (2021: 27.7%).
Operating income for the year benefited from our diversified
revenue streams with use of the group’s banking licence and a
full year’s contribution of Saunderson House which we
acquired in October 2021. Whilst fee income reduced given
lower funds under management, net interest income
contributed £18.3 million to operating income in 2022 (2021:
£3.9 million) due to the rising interest rate environment. The
increase in expenditure was in line with expectations and
largely driven by our strategic growth plan, including our digital
programme, together with the addition of Saunderson House.
The underlying operating margin rises to 24.9% when
underlying profit before tax is adjusted for £16.3 million of
operating expenses on the group’s digital programme. Agile
and phased delivery of the project has ensured good progress
with a resulting improvement in client engagement.
Statutory profit before tax for 2022 was £64.1 million
(2021: £95.0 million). This included planned deferred
acquisition and integration costs of £10.0 million relating
to Saunderson House (2021: £3.7 million), and £3.5 million
deferred acquisition costs for Speirs & Jeffrey (2021: £6.4
million). See note 3 for further detail.
The board primarily considers underlying measures of
income, expenditure and earnings when assessing the
performance of the group. These are considered to provide
useful additional information on business performance,
rather than reviewing results on a statutory basis only. These
measures are also widely used by research analysts covering
the group. A full reconciliation between underlying results
and the closest IFRS equivalent is provided on page 39.
TABLE 1. GROUP’S OVERALL PERFORMANCE
2022
£m
(unless
stated)
2021
£m
(unless
stated)
Operating income 455.9 435.9
Underlying operating expenses¹
(358.8) (315.2)
Underlying profit before tax¹ 97.1 120.7
Underlying operating margin¹ 21.3% 27.7%
Profit before tax 64.1 95.0
Effective tax rate 23.6% 20.8%
Taxation (15.1) (19.8)
Profit after tax 49.0 75.2
Underlying earnings per share¹
130.8p 172.2p
Earnings per share 83.6p 133.5p
Dividend per share²
84.0p 81.0p
Return on capital employed (ROCE)¹ 7.7% 13.0%
Underlying return on capital employed¹ 11.8% 16.1%
1. A reconciliation between the measure and its closest IFRS equivalent is
shown in table 3
2. The total interim and final dividend proposed for the financial year
RATHBONES GROUP ANNUAL REPORT 2022 / 37
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
BUSINESS PERFORMANCE: FUNDS UNDER MANAGEMENT AND
ADMINISTRATION (FUMA)
Net inflows of discretionary and managed FUMA in Investment Management remained
positive across each quarterly trading period, despite volatile investor conditions, totalling
£0.9 billion in 2022 (2021: £1.3 billion). Direct net flows into our multi-asset fund range were
particularly robust, reflecting the diversification and perceived relative safety of these funds,
and totalled £0.4 billion in the year (2021: £0.5 billion). Taken together, this represents
a growth rate of 2.6% in discretionary and managed FUMA (2021: 4.1%).
The asset management industry saw outflows in single-strategy funds in the year, with a
13.8% reduction in industry-wide funds under management and administration. Our
single-strategy funds experienced net outflows of £0.4 billion in the year (2021: net inflows
of £1.2 billion), representing 4.5% of opening funds under management and administration,
as investors favoured value stocks over our relative overweight position in growth-oriented
stocks. As the year progressed, we saw a reduction in the level of outflows as investors began
to adopt higher risk positions as inflation and interest rate fears abated somewhat.
Uncertainty across UK and global markets, driven by macroeconomic and geopolitical
volatility, contributed to an adverse £8.4 billion market movement on asset values in the
year, resulting in FUMA closing 11.7% down at £60.2 billion (2021: £68.2 billion) (Table 2). This
compares with favourable market movements of £5.9 billion in 2021. During the latter half of
the year, our investment performance benefited from an underweight exposure to both fixed
income securities and North American equities, relative to the PIMFA Balanced index.
TABLE 2. GROUP FUMA AND FLOWS BY SERVICE LEVEL
Year ended 31 December 2022
Opening
FUMA
£bn
Net flows
£bn
Net service
level
transfers
£bn
Market &
investment
performance
£bn
Closing
FUMA
£bn
Net growth
(flows)
%
Discretionary service 49.3 0.9 (0.2) (5.7) 44.3 1.9%
Bespoke portfolios 48.0 0.8 (0.3) (5.6) 42.9 1.6%
Managed via in-house funds 1.3 0.1 0.1 (0.1) 1.4 10.3%
Multi-asset funds 2.0 0.4 – (0.2) 2.2 20.0%
Total discretionary &
managed 51.3 1.3 (0.2) (5.9) 46.5 2.6%
Non-discretionary service 1.0 (0.1) (0.1) (0.1) 0.7 (7.4%)
Total wealth management 52.3 1.2 (0.3) (6.0) 47.2 2.4%
Single-strategy funds 8.3 (0.4) – (1.4) 6.5 (4.5%)
Execution only & banking 2.7 (0.2) 0.3 (0.4) 2.4 (9.0%)
Total 63.3 0.6 0.0 (7.8) 56.1 1.0%
Saunderson House 4.9 (0.2) (0.0) (0.6) 4.1 (4.9%)
Total group 68.2 0.4 – (8.4) 60.2 0.6%
Table 2 presents separately the FUMA, and associated movements, in those services
and products which support our wealth management solutions from asset management
products and other services. Wealth management FUMA incorporates our bespoke
discretionary portfolio and managed portfolio services. It also includes direct sales into our
range of risk-targeted multi-asset funds, which are designed to be used as wealth
management solutions for clients of investment platforms and financial advisers. Asset
management FUMA includes our focused range of specialist ‘single-strategy’ funds, which
are designed to act as individual holdings within investment portfolios.
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 37SR
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RATHBONES GROUP ANNUAL REPORT 2022 / 38
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
Year ended 31 December 2021
Opening
FUMA
£bn
Net flows
£bn
Net service
level
transfers
£bn
Market &
investment
performance
£bn
Closing
FUMA
£bn
Net growth
(flows)
%
Discretionary service 43.4 1.3 – 4.6 49.3 3.0%
Bespoke portfolios 42.5 1.1 (0.1) 4.5 48.0 2.6%
Managed via in-house funds 0.9 0.2 0.1 0.1 1.3 19.9%
Multi-asset funds 1.3 0.5 – 0.2 2.0 40.3%
Total discretionary &
managed 44.7 1.8 – 4.8 51.3 4.1%
Non-discretionary service 1.4 (0.1) (0.3) – 1.0 (11.4%)
Total wealth management 46.1 1.7 (0.3) 4.8 52.3 3.6%
Single-strategy funds 6.3 1.2 – 0.8 8.3 18.9%
Execution only & banking 2.3 (0.2) 0.3 0.3 2.7 (8.9%)
Total 54.7 2.7 – 5.9 63.3 4.9%
Saunderson House
4.9
Total group 68.2
OPERATING INCOME
Operating income increased by £20.0 million in 2022 to £455.9 million, predominantly
due to a full year of Saunderson House income which contributed £23.4 million of this
additional income.
Investment management and funds fee income of £337.0 million in 2022 decreased by 3.5%, as
a result of lower funds under management and administration in the year. This represented
73.9% of operating income in 2022, down from 80.2% in 2021, reflecting the increase in financial
planning and advisory income of £51.6 million for the full year (2021: £29.0 million).
Net commission income fell 9% to £48.8 million in 2022 (2021: £53.6 million) despite a
broadly consistent level of transaction activity. The reduction reflects an increasing
proportion of our client base being on fee-only mandates, and therefore not being separately
charged for transactions.
Net interest income increased by 369% to £18.3 million, reflecting the Bank of England base
rates increasing from 0.25% at the start of 2022, to 3.5% by the end of December 2022, and
highlighting the benefit of our banking structure.
“ THE GROUP’S FINANCIAL
PERFORMANCE REMAINED
RESILIENT DURING A
CHALLENGING YEAR FOR
MARKETS AND INVESTORS.
WE CONTINUED TO ATTRACT
NEW BUSINESS AND ACHIEVED
SUSTAINED NET INFLOWS
DESPITE VOLATILE MARKETS.”
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 38SR
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RATHBONES GROUP ANNUAL REPORT 2022 / 39
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
UNDERLYING OPERATING EXPENSES
Underlying operating expenses increased by £43.6 million (13.8%) to £358.8 million.
Underlying operating expenses exclude expenditure falling into the categories explained on
page 40. Over half of this increase reflects a full-year of operating expenditure for Saunderson
House, acquired in October 2021, at £27.2 million (2021: £5.0 million). A further £16.3 million of
the increase is year 1 of the strategic investment in developing our digital capability.
Excluding these increases, expenditure increased by £5.1 million in the year.
Higher fixed staff costs in the year of £28.7 million, which include £12.9 million for the full year
impact of Saunderson House and £2.4 million of spend on the group’s digital strategy, are in line
with expected headcount growth and salary inflation. This was partly offset by lower variable
staff costs of £3.1 million, which was driven by reduced profit share and bonuses, reflecting the
market conditions during 2022.
Non-staff costs increased by £18.0 million in the year, which includes £5.8 million for a full year
of costs for Saunderson House and £13.5 million of expenditure on the group’s digital
programme. Excluding the impact of these, non-staff costs fell by £1.3 million in the year, mainly
due to a £2.2 million reduction in the FSCS levy (total charge in 2022 for the group of £5.3
million). Other costs remain broadly consistent with 2021, demonstrating a focus on controlling
discretionary spend in an inflationary environment.
Including Saunderson House, average headcount increased by 18.1% to 2,053 in 2022 (see note
10). The full-year effect of Saunderson House accounted for 9.2%, with the remaining headcount
increases being largely in client-facing, client experience and change delivery teams.
Total operating expenses increased from £340.9 million to £391.8 million during the year, with
£22.2 million of the increase solely due to a full-year of Saunderson House (2021: £5.0 million).
TABLE 3. RECONCILIATION OF UNDERLYING PERFORMANCE MEASURES TO
CLOSEST EQUIVALENT IFRS MEASURES
2022
£m
(unless stated)
2021
£m
(unless stated)
Operating income 455.9 435.9
– Operating expenses (excluding digital change spend)¹
(375.5) (340.9)
– Digital transformation change spend¹
(16.3) 0.0
Total operating expenses (391.8) (340.9)
Charges in relation to client relationships and goodwill 19.5 15.6
Acquisition-related costs 13.5 10.1
Underlying operating expenses (358.8) (315.2)
Profit before tax 64.1 95.0
Underlying profit before tax² 97.1 120.7
Operating margin 14.1% 21.8%
Underlying operating margin³ 21.3% 27.7%
Taxation (15.1) (19.8)
Tax on non-underlying expenses (5.3) (3.9)
Underlying taxation (20.4) (23.7)
Profit after tax 49.0 75.2
Underlying profit after tax⁴ 76.7 97.0
Weighted average number of shares in issue 58.6m 56.3m
Earnings per share (p) 83.6 133.5
Underlying earnings per share (p)⁵ 130.8 172.2
Quarterly average total equity 632.7 579.0
Underlying quarterly average total equity 650.4 599.1
ROCE⁶
7.7% 13.0%
Underlying ROCE⁷ 11.8% 16.1%
1. Operating expenses adjusted for £16.3 million of costs incurred on the group’s digital strategy in 2022
2. Operating income less underlying operating expenses
3. Underlying profit before tax as a percentage of operating income
4. Underlying profit before tax less underlying taxation
5. Underlying profit after tax divided by the weighted average number of shares in issue
6. Profit after tax as a percentage of quarterly average total equity
7. Underlying profit after tax as a percentage of underlying quarterly average total equity
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 39SR
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RATHBONES GROUP ANNUAL REPORT 2022 / 40
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
ALTERNATIVE PERFORMANCE MEASURES
Charges in relation to client relationships and goodwill (note 22)
As explained in notes 1.14 and 2.1, client relationship intangible assets are recognised when we
acquire a business or hire a team of investment managers.
The charges associated with these assets represent the proportion of the cost of securing
client contracts that is charged to profit or loss as amortisation each year over the estimated
duration of the client relationships. The quantum of the accounting charge will vary
depending on the terms of each individual acquisition or team hire and represents a
significant non-cash profit and loss item. They are therefore excluded from underlying profit,
which represents largely cash-based earnings and more directly relates to the financial
reporting period. Research analysts commonly exclude these costs when comparing the
performance of firms in the wealth management industry.
Acquisition-related costs (note 9)
Acquisition-related costs are significant costs which arise from strategic investments to grow
the business rather than its operating performance and are therefore excluded from
underlying results.
They primarily represent deferred acquisition consideration and the costs of integrating
acquired businesses.
Deferred acquisition costs are generally significant payments that are capital in nature
reflecting the transfer of ownership of the business. However, in accordance with IFRS 3, any
deferred consideration payments to former shareholders of the acquired business who are
required to remain in employment with the group must be treated as remuneration.
During 2022, £3.5 million of deferred consideration payments for Speirs & Jeffrey (2021: £6.0
million) were charged to the income statement. £6.5 million of deferred consideration
payments for Saunderson House (2021: £1.4 million) and £3.4 million of integration costs were
charged to the income statement (2021: £nil).
TAXATION
The corporation tax charge for 2022 was £15.1 million (2021: £19.8 million) (see note 11).
The effective tax rate was 23.5% (2021: 20.8%).
From 2023, the effective tax rate is expected to be 4-5 percentage points above the statutory
rate, largely due to disallowable costs for deferred consideration payments (see note 2.3).
The UK Government legislated in the Finance Act 2021 to increase the UK corporation tax rate
to 25.0% in 2023. We have reflected this rate in the deferred tax calculations.
BASIC EARNINGS PER SHARE
Basic earnings per share for the year ended 31 December 2022 was 83.6p compared to 133.5p
in 2021. On an underlying basis, earnings per share were 130.8p in 2022, compared to 172.2p in
2021 (see note 13). The decrease in the year relates to the fall in underlying profit since 2021
and an increase in the number of shares in issue.
RETURN ON CAPITAL EMPLOYED
The board monitors the underlying return on capital employed (ROCE) as a key performance
measure. For monitoring purposes, underlying ROCE is defined as underlying profit after tax
expressed as a percentage of underlying quarterly average total equity across the year.
Assessment of underlying return on capital is a key consideration for all investment
decisions, particularly in relation to acquired growth.
In 2022, underlying ROCE was 11.8% (2021: 16.1%). Underlying quarterly average total equity
increased by £51.4 million in 2022 compared to 2021, reflecting growth in retained earnings
and a full year impact of the share placing that took place in the second quarter of 2021.
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 40SR
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RATHBONES GROUP ANNUAL REPORT 2022 / 40
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
ALTERNATIVE PERFORMANCE MEASURES
Charges in relation to client relationships and goodwill (note 22)
As explained in notes 1.14 and 2.1, client relationship intangible assets are recognised when we
acquire a business or hire a team of investment managers.
The charges associated with these assets represent the proportion of the cost of securing
client contracts that is charged to profit or loss as amortisation each year over the estimated
duration of the client relationships. The quantum of the accounting charge will vary
depending on the terms of each individual acquisition or team hire and represents a
significant non-cash profit and loss item. They are therefore excluded from underlying profit,
which represents largely cash-based earnings and more directly relates to the financial
reporting period. Research analysts commonly exclude these costs when comparing the
performance of firms in the wealth management industry.
Acquisition-related costs (note 9)
Acquisition-related costs are significant costs which arise from strategic investments to grow
the business rather than its operating performance and are therefore excluded from
underlying results.
They primarily represent deferred acquisition consideration and the costs of integrating
acquired businesses.
Deferred acquisition costs are generally significant payments that are capital in nature
reflecting the transfer of ownership of the business. However, in accordance with IFRS 3, any
deferred consideration payments to former shareholders of the acquired business who are
required to remain in employment with the group must be treated as remuneration.
During 2022, £3.5 million of deferred consideration payments for Speirs & Jeffrey (2021: £6.0
million) were charged to the income statement. £6.5 million of deferred consideration
payments for Saunderson House (2021: £1.4 million) and £3.4 million of integration costs were
charged to the income statement (2021: £nil).
TAXATION
The corporation tax charge for 2022 was £15.1 million (2021: £19.8 million) (see note 11).
The effective tax rate was 23.5% (2021: 20.8%).
From 2023, the effective tax rate is expected to be 4-5 percentage points above the statutory
rate, largely due to disallowable costs for deferred consideration payments (see note 2.3).
The UK Government legislated in the Finance Act 2021 to increase the UK corporation tax rate
to 25.0% in 2023. We have reflected this rate in the deferred tax calculations.
BASIC EARNINGS PER SHARE
Basic earnings per share for the year ended 31 December 2022 was 83.6p compared to 133.5p
in 2021. On an underlying basis, earnings per share were 130.8p in 2022, compared to 172.2p in
2021 (see note 13). The decrease in the year relates to the fall in underlying profit since 2021
and an increase in the number of shares in issue.
RETURN ON CAPITAL EMPLOYED
The board monitors the underlying return on capital employed (ROCE) as a key performance
measure. For monitoring purposes, underlying ROCE is defined as underlying profit after tax
expressed as a percentage of underlying quarterly average total equity across the year.
Assessment of underlying return on capital is a key consideration for all investment
decisions, particularly in relation to acquired growth.
In 2022, underlying ROCE was 11.8% (2021: 16.1%). Underlying quarterly average total equity
increased by £51.4 million in 2022 compared to 2021, reflecting growth in retained earnings
and a full year impact of the share placing that took place in the second quarter of 2021.
RATHBONES GROUP ANNUAL REPORT 2022 / 41
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
OUTLOOK
The Group’s financial performance remains closely linked to the behaviour of global
investment markets, which are expected to remain fragile in 2023 even as the outlook for
inflation has moderated. Income sources that include increased net interest income and
growing financial planning income support more stable operating income that not only
delivers strong returns for shareholders, but also enables us to continue to invest
productively for growth.
Employee costs in 2023 will reflect salary inflation of approximately 5-6% plus the full impact
of hiring activity in 2022. A lower rate of net hiring is expected for 2023 as we continue
implementation phases of our strategic initiatives, whilst ever focused on cost discipline
whilst in an inflationary environment.
From July 2023, the countercyclical buffer, as set by the FPC, is expected to increase to 2%
for UK exposures. The group currently expects its relevant credit exposures to require an
increase of £16 million to group capital requirement.
As set out in 2022, investment in our medium-term strategy will continue in 2023, most
notably the ongoing integration of Saunderson House and delivering technology to embed a
digital capability that improves client experience and promotes growth. We remain on track
to invest a total of £40m. From 2024, our aim remains to return to an operating margin in the
high 20’s. In light of ongoing market fragility and the continuation of the investment in our
digital programme throughout 2023, we expect to deliver a similar margin to 2022.
We continue to anticipate total integration and deferred acquisition costs of £10 million
associated with Saunderson House, which will then substantially reduce as the integration
completes in 2024. Financial synergies from the integration of Saunderson House are
expected to start in 2023, with a full annualised impact in 2024.
Rathbones is financially well placed, with a strong balance sheet to take advantage of
opportunities in 2023.
“ IN 2023, WE EXPECT A
SIMILAR OPERATING MARGIN
TO 2022, GIVEN THE
CONTINUED INVESTMENT IN
OUR DIGITAL PROGRAMME AND
INTEGRATION OF SAUNDERSON
HOUSE. FROM 2024, WE AIM
TO RETURN TO A MARGIN IN
THE HIGH-20%S, AS WE REALISE
SYNERGIES AND BENEFITS OF
OUR STRATEGIC INVESTMENT.”
GROUP CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
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RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 41
RATHBONES GROUP ANNUAL REPORT 2022 / 43
SEGMENTAL REVIEW
The group is managed through two key operating segments: Investment
Management and Funds.
TABLE 4. RECONCILIATION OF SERVICE LEVELS TO SEGMENTAL
PRESENTATION
Investment
Management
FUMA
(including
intra-group
holdings)
£bn
Intra-group
holdings¹
£bn
Investment
Management
FUMA
£bn
Funds FUMA
£bn
Group FUMA
£bn
Discretionary service 44.3 (2.3) 42.0 2.4 44.4
Bespoke portfolios 42.9 (1.0) 41.9 1.0 42.9
Managed via in-house funds 1.4 (1.3) 0.1 1.4 1.5
Multi-asset funds – – – 2.1 2.1
Total discretionary & managed 44.3 (2.3) 42.0 4.5 46.5
Non-discretionary service 0.7 – 0.7 – 0.7
Total wealth management 45.0 (2.3) 42.7 4.5 47.2
Single-strategy funds – – – 6.5 6.5
Execution only & banking 2.4 – 2.4 – 2.4
Total 47.4 (2.3) 45.1 11.0 56.1
Saunderson House 4.1 – 4.1 – 4.1
Total group 51.5 (2.3) 49.2 11.0 60.2
1. Intra-group holdings represent in-house funds held within an investment management portfolio.
INVESTMENT MANAGEMENT
The activities of the group are described in detail on pages 2 to 4. The Investment Management
segment comprises those activities described under the headings ‘Investment Management’,
‘Financial Planning and Advice’ and ‘Complementary services’ on page 2. The results of the
Investment Management segment described below include the trading results of Rathbones
Trust Company, Vision Independent Financial Planning and Saunderson House.
Investment Management income is largely driven by revenue margins earned from funds under
management and administration. Revenue margins are expressed as a basis point return, which
depends on a mix of tiered fee rates, commissions charged for transactions undertaken on
behalf of clients and the interest margin earned on cash in client portfolios and client loans.
FUNDS UNDER MANAGEMENT AND ADMINISTRATION
Year-on-year changes in the key performance indicators for Investment Management are
shown in table 5. Investment Management funds under management and administration
decreased by 10.9% to £49.2 billion as at 31 December 2022, impacted by economic
uncertainty and worldwide volatility in the markets.
TABLE 5. INVESTMENT MANAGEMENT – KEY PERFORMANCE INDICATORS
2022 2021
Funds under management and administration at 31 December
£49.2bn £55.2bn
Rate of net organic growth in Investment Management funds under
management and administration¹ 1.1% 1.8%
Rate of total net growth in Investment Management funds under
management and administration¹ 1.2% 2.1%
Average net operating basis point return² 72.4 bps
71.4
bps
Number of Investment Management clients ('000)
68 66
Number of investment managers 352 332
1. See table 6 (percentages calculated on unrounded figures)
2. See table 10
SEGMENTAL REVIEW
RATHBONES GROUP PLC REPORT AND ACCOUNTS 2022 / 42SR
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22
21
20
332
66.5
304
63.7
352
6 7.7
CHART 1. INVESTMENT MANAGEMENT –
NUMBER OF INVESTMENT MANAGERS AND CLIENTS
Number of investment managers
Number of Investment Management clients (’000)
RATHBONES GROUP ANNUAL REPORT 2022 / 43
SEGMENTAL REVIEW
The group is managed through two key operating segments: Investment
Management and Funds.
TABLE 4. RECONCILIATION OF SERVICE LEVELS TO SEGMENTAL
PRESENTATION
Investment
Management
FUMA
(including
intra-group
holdings)
£bn
Intra-group
holdings¹
£bn
Investment
Management
FUMA
£bn
Funds FUMA
£bn
Group FUMA
£bn
Discretionary service 44.3 (2.3) 42.0 2.4 44.4
Bespoke portfolios 42.9 (1.0) 41.9 1.0 42.9
Managed via in-house funds 1.4 (1.3) 0.1 1.4 1.5
Multi-asset funds – – – 2.1 2.1
Total discretionary & managed 44.3 (2.3) 42.0 4.5 46.5
Non-discretionary service 0.7 – 0.7 – 0.7
Total wealth management 45.0 (2.3) 42.7 4.5 47.2
Single-strategy funds – – – 6.5 6.5
Execution only & banking 2.4 – 2.4 – 2.4
Total 47.4 (2.3) 45.1 11.0 56.1
Saunderson House 4.1 – 4.1 – 4.1
Total group 51.5 (2.3) 49.2 11.0 60.2
1. Intra-group holdings represent in-house funds held within an investment management portfolio.
INVESTMENT MANAGEMENT
The activities of the group are described in detail on pages 2 to 4. The Investment Management
segment comprises those activities described under the headings ‘Investment Management’,
‘Financial Planning and Advice’ and ‘Complementary services’ on page 2. The results of the
Investment Management segment described below include the trading results of Rathbones
Trust Company, Vision Independent Financial Planning and Saunderson House.
Investment Management income is largely driven by revenue margins earned from funds under
management and administration. Revenue margins are expressed as a basis point return, which
depends on a mix of tiered fee rates, commissions charged for transactions undertaken on
behalf of clients and the interest margin earned on cash in client portfolios and client loans.
FUNDS UNDER MANAGEMENT AND ADMINISTRATION
Year-on-year changes in the key performance indicators for Investment Management are
shown in table 5. Investment Management funds under management and administration
decreased by 10.9% to £49.2 billion as at 31 December 2022, impacted by economic
uncertainty and worldwide volatility in the markets.
TABLE 5. INVESTMENT MANAGEMENT – KEY PERFORMANCE INDICATORS
2022 2021
Funds under management and administration at 31 December
£49.2bn £55.2bn
Rate of net organic growth in Investment Management funds under
management and administration¹ 1.1% 1.8%
Rate of total net growth in Investment Management funds under
management and administration¹ 1.2% 2.1%
Average net operating basis point return² 72.4 bps
71.4
bps
Number of Investment Management clients ('000)
68 66
Number of investment managers 352 332
1. See table 6 (percentages calculated on unrounded figures)
2. See table 10
RATHBONES GROUP ANNUAL REPORT 2022 / 44
SEGMENTAL REVIEW CONTINUED
TABLE 6. INVESTMENT MANAGEMENT – FUNDS UNDER MANAGEMENT AND
ADMINISTRATION
Year ended
31 December
2022
£bn
Year ended
31 December
2021
£bn
As at 1 January 50.3 44.9
Inflows 3.8 4.5
– organic¹
3.8 4.4
– acquired²
0.0 0.1
Outflows
(3.2) (3.6)
Market adjustment³ (5.8) 4.5
Total 45.1 50.3
Saunderson House 4.1
4.9
Total group 49.2
55.2
Net organic new business⁴
0.6 0.8
Rate of net organic growth⁵ 1.1% 1.8%
Rate of total net growth⁶ 1.2% 2.1%
1. Value at the date of transfer in/(out)
2. Value at date of acquisition
3. Represents the impact of market movements and investment performance
4. Organic inflows less outflows
5. Net organic new business (excluding Saunderson House) as a percentage of opening funds under management
and administration
6. Net organic new business and acquired inflows (excluding Saunderson House) as a percentage of opening funds
under management and administration
Table 6 reconciles the movement in funds under management and administration during the
year. Inflows of £3.8 billion are dominated by new funds into our discretionary bespoke
portfolio service, which has benefited during the year from resilient investment performance,
positive client experience, and our revised Reliance on Advisor proposition. Outflows of
£3.2 billion represent 6.4% of opening funds under management and administration, 59.0%
of which represents drawings from capital to supplement income or inter-generational
transfers. In significant contrast to 2021, the PIMFA MSCI reduced by 10.2% in 2022, driving
a £5.8 billion reduction in funds under management and administration.
In addition to the above, Saunderson House contributed £4.1 billion to closing funds under
management and advice in 2022. At the year end, FUMA on Vision Independent Financial
Planning’s discretionary wealth management platform that was not managed by the group
totalled £0.8 billion (2021: £0.8 billion).
* Index figures show how funds under management and administration would have changed between 2018 and
2022 if they had tracked each index
Table 7 provides an analysis of funds under management and new business by channel and
service level. 40% of the total £0.9 billion growth in discretionary and managed funds under
management and administration in the year was driven through direct interactions with the
client, whilst the remaining 60% includes interactions through financial adviser networks.
The group experienced net outflows from non-discretionary investment management, and
execution-only and banking mandates totalling £0.3 billion in the year.
During the year, clients continued to migrate into discretionary services from non-
discretionary (£0.1 billion). Switches into execution-only services largely reflect the transfer
of funds into probate following the death of a client (£0.3 billion).
SEGMENTAL REVIEW CONTINUED
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21
20
19
18
49.2
55.2
44.9
43.0
38.5
CHART 2. INVESTMENT MANAGEMENT – FUNDS UNDER MANAGEMENT AND
ADMINISTRATION FIVE-YEAR GROWTH (£BN)
£49.2BN
FTSE 100*
MSCI PIMFA Private Investor Balanced Index*
RATHBONES GROUP ANNUAL REPORT 2022 / 45
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TABLE 7. INVESTMENT MANAGEMENT – NEW BUSINESS BY CHANNEL
Opening FUM
(£m
)
Net flows
(£m)
Service level
transfers
(£m)
Market
movement
(£m)
2022
Gross
£bn
2022
Intra-group
holdings
¹
£bn
2022
Net
£bn
2021
Net
£bn
Bespoke portfolios 37.2 0.3 (0.4) (4.1) 33.0 – – –
Managed via in-house funds 0.6 0.0 0.1 0.0 0.7 – – –
Total
direct
37.8 0.3 (0.3) (4.1) 33.7 –
–
–
Bespoke portfolios 10.8 0.5 0.0 (1.4) 9.9 – – –
Managed via in-house funds 0.6 0.1 0.1 (0.1) 0.7 – – –
Total financial adviser linked 11.4 0.6 0.1 (1.5) 10.6 –
–
–
Total discretionary & managed 49.2 0.9 (0.2) (5.6) 44.3 (2.3) 42.0 46.6
Non-discretionary service 1.0 (0.1) (0.2) (0.0) 0.7 – 0.7 1.0
Total wealth management
50.2 0.8 (0.4) (5.6) 45.0 (2.3) 42.7
47.6
Execution only & banking 2.7 (0.3) 0.3 (0.3) 2.4 – 2.4 2.7
Saunderson House 4.9 (0.2) (0.0) (0.6) 4.1 – 4.1 4.9
Total Investment Management 57.8
0.3
(0.1) (6.5) 51.5
(2.3) 49.2
55.2
1. Holdings of the group’s in-house funds in Investment Management client portfolios and in-house funds for which the management of the assets is undertaken by Investment Management teams; the corresponding funds under
management and administration is reported within Funds
2. Direct net flows relate to direct interactions with the client, whilst net flows from financial advisor linked relate to interactions through financial adviser networks
Inflation across the world’s most advanced economies hit a rate in December 2022 not seen
since 1982. In 2022, core inflation – which excludes energy and food prices – hit a 40-year high
and continued to rise until the autumn.
The macro-economic environment has shifted significantly more than many commentators
expected twelve months ago. The market generally expected the US Federal Reserve to raise
interest rates by just 0.75% throughout 2022, in comparison to an actual increase in rates of 4.25%
- the sharpest increase since the early 1980s. It is highly unusual for equity markets to fall over the
first 12 months of a rate tightening cycle, but we saw an inflationary bear market emerge.
There have been two key equity market sector trends. First, the underperformance of cyclical
sectors and the outperformance of steadier defensive ones, particularly those able to pass on
higher input costs to customers. Second, the de-rating of expensive ‘Growth’ companies,
particularly technology stocks yet to make a profit, and the resilience of cheaper sectors such
as financials, energy and healthcare. A global benchmark of ‘Value’ companies ended the year
down 6% compared to the 28% loss in ‘Growth’ companies.
Overall, 2022 was another strong year for our specialist teams. Rathbone Greenbank
Investments continued to grow its net new business, despite the segment being most
impacted by market volatility, and reached funds under management and administration of
£1.9 billion at 31 December 2022 (2021: £2.2 billion). The Personal Injury and Court of
Protection business ended 2022 with £1.0 billion of funds under management and
administration (2021: £1.0 billion).
Rathbone Financial Planning also saw a strong year in 2022, increasing net new business
growth by 26% from 2021, and maintaining funds under management and administration
broadly in line with 2021 of £1.6 billion as at 31 December 2022, despite market falls.
As at 31 December 2022, Vision Independent Financial Planning advised on client assets
of £2.6 billion (2021: £2.7 billion). Despite net new business inflows of £0.3 billion in the year,
market movements offset this, resulting in a £0.1 billion reduction in total client assets at
the year end.
SEGMENTAL REVIEW CONTINUED
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TABLE 7. INVESTMENT MANAGEMENT – NEW BUSINESS BY CHANNEL
Opening FUM
(£m
)
Net flows
(£m)
Service level
transfers
(£m)
Market
movement
(£m)
2022
Gross
£bn
2022
Intra-group
holdings
¹
£bn
2022
Net
£bn
2021
Net
£bn
Bespoke portfolios 37.2 0.3 (0.4) (4.1) 33.0 – – –
Managed via in-house funds 0.6 0.0 0.1 0.0 0.7 – – –
Total direct 37.8 0.3 (0.3) (4.1) 33.7 –
–
–
Bespoke portfolios 10.8 0.5 0.0 (1.4) 9.9 – – –
Managed via in-house funds 0.6 0.1 0.1 (0.1) 0.7 – – –
Total financial adviser linked 11.4 0.6 0.1 (1.5) 10.6 –
–
–
Total discretionary & managed 49.2 0.9 (0.2) (5.6) 44.3 (2.3) 42.0 46.6
Non-discretionary service 1.0 (0.1) (0.2) (0.0) 0.7 – 0.7 1.0
Total wealth management
50.2 0.8 (0.4) (5.6) 45.0 (2.3) 42.7
47.6
Execution only & banking 2.7 (0.3) 0.3 (0.3) 2.4 – 2.4 2.7
Saunderson House 4.9 (0.2) (0.0) (0.6) 4.1 – 4.1 4.9
Total Investment Management 57.8
0.3
(0.1) (6.5) 51.5
(2.3) 49.2
55.2
1. Holdings of the group’s in-house funds in Investment Management client portfolios and in-house funds for which the management of the assets is undertaken by Investment Management teams; the corresponding funds under
management and administration is reported within Funds
2. Direct net flows relate to direct interactions with the client, whilst net flows from financial advisor linked relate to interactions through financial adviser networks
Inflation across the world’s most advanced economies hit a rate in December 2022 not seen
since 1982. In 2022, core inflation – which excludes energy and food prices – hit a 40-year high
and continued to rise until the autumn.
The macro-economic environment has shifted significantly more than many commentators
expected twelve months ago. The market generally expected the US Federal Reserve to raise
interest rates by just 0.75% throughout 2022, in comparison to an actual increase in rates of 4.25%
- the sharpest increase since the early 1980s. It is highly unusual for equity markets to fall over the
first 12 months of a rate tightening cycle, but we saw an inflationary bear market emerge.
There have been two key equity market sector trends. First, the underperformance of cyclical
sectors and the outperformance of steadier defensive ones, particularly those able to pass on
higher input costs to customers. Second, the de-rating of expensive ‘Growth’ companies,
particularly technology stocks yet to make a profit, and the resilience of cheaper sectors such
as financials, energy and healthcare. A global benchmark of ‘Value’ companies ended the year
down 6% compared to the 28% loss in ‘Growth’ companies.
Overall, 2022 was another strong year for our specialist teams. Rathbone Greenbank
Investments continued to grow its net new business, despite the segment being most
impacted by market volatility, and reached funds under management and administration of
£1.9 billion at 31 December 2022 (2021: £2.2 billion). The Personal Injury and Court of
Protection business ended 2022 with £1.0 billion of funds under management and
administration (2021: £1.0 billion).
Rathbone Financial Planning also saw a strong year in 2022, increasing net new business
growth by 26% from 2021, and maintaining funds under management and administration
broadly in line with 2021 of £1.6 billion as at 31 December 2022, despite market falls.
As at 31 December 2022, Vision Independent Financial Planning advised on client assets
of £2.6 billion (2021: £2.7 billion). Despite net new business inflows of £0.3 billion in the year,
market movements offset this, resulting in a £0.1 billion reduction in total client assets at
the year end.
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Saunderson House closed the year with funds under management and administration of
£4.1 billion (2021: £4.9 billion). £0.5 million of the fall in the year was driven by adverse market
movements. Client attrition was largely in-line with expectations, reflecting net outflows of
£0.2 billion, as focus switched to existing client migration rather than new client wins. The
new Saunderson House proposition is now fully developed, and as at the year-end
approximately one third of clients, by asset value, had been contacted to initiate the process
of switching to the new proposition.
FINANCIAL PERFORMANCE
Underlying profit before tax in Investment Management reduced by 28.2% in the year to
£70.7 million, reflecting an underlying operating margin of 18.0%, which, when adjusted for
£16.3 million of operating expenses to deliver the group’s digital strategy, rises to 22.1%.
Lower average funds under management and administration on our principal charging dates
during 2022 (see table 9) impacted investment management fee income, causing a 4.6%
reduction compared to 2021.
Net commission income fell by 8.8% to £48.9 million (2021 £53.6 million), as the proportion
of our client base becomes increasingly fee-only.
The increase in base rates set by the Bank of England from 0.25% at the start of 2022 to 3.5%
by December 2022 contributed an additional £13.9 million to net interest income in the year.
Fees from advisory services and other income increased 88.3% to £51.4 million, reflecting a
full-year’s impact of Saunderson House, which contributed £23.4 million of additional
revenue. Rathbone Financial Planning, Vision, and the Trust business have contributed an
additional £0.7 million to advisory income year-on-year.
Underlying operating expenses during the year were £322.3 million; an increase of 17.4% on
the prior year, largely reflecting the impact of Saunderson House and £16.3 million of costs
incurred on the group’s digital strategy in 2022 (see table 11).
TABLE 8. INVESTMENT MANAGEMENT – FINANCIAL PERFORMANCE
2022
£m
2021
£m
Net investment management fee income¹ 274.9 288.1
Net commission income 48.9 53.6
Net interest income 17.8 3.9
Fees from advisory services²
and other income 51.4 27.3
Operating income 393.0 372.9
2022
£m
2021
£m
Underlying operating expenses³
,
⁴ (322.3) (274.5)
Underlying profit before tax 70.7 98.4
Underlying operating margin⁵ 18.0% 26.4%
1. Net investment management fee income is stated after deducting fees and commission expenses paid to introducers
2. Fees from advisory services includes income from trust, tax and financial planning services (including Vision
and Saunderson House)
3. See table 11
4. Included within underlying operating expenses are £16.3 million of costs relating to the group’s digital strategy,
of which £1.5 million relates to asset management
5. Underlying profit before tax as a percentage of operating income. Excluding £16.3 million of expenditure on
our digital strategy in the year, the underlying operating margin was 22.1%
TABLE 9. INVESTMENT MANAGEMENT – AVERAGE FUNDS UNDER
MANAGEMENT AND ADMINISTRATION
2022
£bn
2021
£bn
Valuation dates for billing
– 5 April
47.9 45.5
– 30 June
43.8 47.8
– 30 September
43.2 48.8
– 31 December
45.1 50.3
Quarterly average¹ 45.0 48.1
Average FTSE 100 level² 7,282 7,066
1. Quarterly average funds under management and administration excluding Saunderson House
2. Based on the corresponding valuation dates for billing
TABLE 10. INVESTMENT MANAGEMENT – REVENUE MARGIN
2022
bps
2021
bps
Basis point return¹ from:
– fee income
61.1 59.9
– commission
10.8 11.1
– interest
0.5 0.4
Basis point return on funds under management and administration 72.4 71.4
1. Operating income (see table 8), excluding interest on own reserves, interest payable on Tier 2 notes issued,
interest payable on lease assets, fees from advisory services and other income, divided by the average funds
under management and administration on the quarterly billing dates (see table 9)
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Fixed staff costs of £109.5 million increased by 22.6% year-on-year, reflecting the growth
in headcount and a full year’s cost for Saunderson House of £15.9 million (2021: £3.0 million -
acquired in October 2021). Variable staff costs totalled £66.9 million in 2022, an increase of 8.1% on
2021, driven by the inclusion of Saunderson House staff, as well as new employee share plans.
Other operating expenses of £145.9 million include property, depreciation, settlement,
IT, finance and other central support services costs.
The basis point return on funds under management and administration increased by 1.0 in
the year to 72.4, as adverse market movements reduced the value of client portfolios, thereby
increasing the proportion of funds in lower value, but higher cost tiers.
TABLE 11. INVESTMENT MANAGEMENT – UNDERLYING
OPERATING EXPENSES
2022
£m
2021
£m
Staff costs¹
– fixed
109.5 89.3
– variable
66.9 61.9
Total staff costs 176.4 151.2
Other operating expenses 145.9 123.3
Underlying operating expenses 322.3 274.5
Underlying cost/income ratio²
82.0% 73.6%
1. Represents the costs of investment managers and teams directly involved in client-facing activities
2. Underlying operating expenses as a percentage of operating income (see table 8)
FUNDS
Funds’ financial performance is principally driven by the value and growth of funds under
management. Year-on-year changes in the key performance indicators for Funds are shown
in table 12.
FUNDS UNDER MANAGEMENT
From setting sales records in 2021, 2022 was a tough year for the industry. Net retail
redemptions in the asset management industry totalled £25.7 billion, as reported by the
Investment Association (IA), down £69.3 billion from £43.6 billion of net sales in 2021.
Industry-wide funds under management fell 13.8% to £1.4 trillion at the end of the year.
Gross sales in Rathbone Unit Trust Management (‘the company’) fell 30% from £4.4 billion to
£3.1 billion in 2022. Rising inflation and interest rates coupled with concerns about equity
market valuations and the conflict in Ukraine left investors unsure where to turn. The impact
of this meant growth focused, single-strategy funds, including Rathbones’ biggest funds,
struggled for performance and sales growth in 2022.
Many investors also decided to withdraw their cash leading to increased gross redemptions
of £2.9 billion (2021: £2.3 billion), which adversely impacted total funds managed by the
Company over the course of the year. In addition to this, £0.2 billion of ‘Other funds’ (table 13)
were transferred out from the Company to an independent Authorised Corporate Director as
a result of a strategic decision, but continued to be managed by the Group.
Muted 2022 inflows combined with severe market movements, especially in corporate bonds and
growth-oriented securities, which affected our mix of products, meant total funds under
management fell to £11.0 billion at the end of 2022, a decrease of 15.4% during the year (see table 14).
TABLE 12. FUNDS – KEY PERFORMANCE INDICATORS
2022 2021
Funds under management at 31 December¹ £11.0bn
£13.0bn
Rate of net growth in Unit Trusts funds under management¹ 0.4% 21.1%
Underlying profit before tax² £26.4m
£22.4m
1. See table 14
2. See table 16
TABLE 13. FUNDS – FUNDS UNDER MANAGEMENT BY PRODUCT
2022
£m
2021
£m
Rathbone Global Opportunities Fund 3,361 4,334
Rathbone Multi-Asset Portfolios 3,043 2,679
Rathbone Ethical Bond Fund 2,169 2,802
Rathbone Income Fund 741 825
Offshore funds 549 661
Rathbone Active Income Fund for Charities 216 245
Rathbone High Quality Bond Fund 206 291
Greenbank Multi-Asset Portfolios 168
105
Other funds¹ 149 500
Rathbone Core Investment Fund for Charities 147 156
Rathbone Strategic Bond Fund 138 200
Rathbone Global Sustainability Fund 69 116
Rathbone UK Opportunities Fund 49 76
11,005 12,990
1. £213 million of ‘Bespoke’ other funds transferred out during the year post the switch of Authorised Corporate
Director (ACD) from Rathbone Unit Trust Management Limited to Evelyn Partners, an independent ACD
SEGMENTAL REVIEW CONTINUED
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Fixed staff costs of £109.5 million increased by 22.6% year-on-year, reflecting the growth
in headcount and a full year’s cost for Saunderson House of £15.9 million (2021: £3.0 million -
acquired in October 2021). Variable staff costs totalled £66.9 million in 2022, an increase of 8.1% on
2021, driven by the inclusion of Saunderson House staff, as well as new employee share plans.
Other operating expenses of £145.9 million include property, depreciation, settlement,
IT, finance and other central support services costs.
The basis point return on funds under management and administration increased by 1.0 in
the year to 72.4, as adverse market movements reduced the value of client portfolios, thereby
increasing the proportion of funds in lower value, but higher cost tiers.
TABLE 11. INVESTMENT MANAGEMENT – UNDERLYING
OPERATING EXPENSES
2022
£m
2021
£m
Staff costs¹