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Citywire opportunity: Thoughts on Rathbones pocketing millions from its subsidiary Castle

ended 15. July 2026

Opportunity for CityWire coverage:

Advisers - what are your thoughts on Rathbones pocketing millions from its subsidiary Castle instead of passing on discounts to clients?

Rathbones made £7.1m in profits last year from Castle Investment Solutions, an unregulated subsidiary that provides due diligence on its panel of discretionary fund manager. 

Clients of Vision are charged an extra due diligence fee for the service, and in return, DFMs discount their fees, so the client doesn't actually pay more - but Rathbones pockets the difference. Last year it made a profit margin of 86% from Castle and £4m dividends were paid up to Rathbones.

More in depth explanation here - https://citywire.com/new-model-adviser/news/revealed-dfm-panels-confused-clients-and-rathbones-18m-profit/a2408339

This piece is just looking at the latest profits/margins etc and reflecting with advisers' thoughts.

Strong views welcomed:

  • What do you think of this arrangement? 
  • Should the other firms involved be doing due diligence anyway? 
  • Should Rathbones pass on extra discounts to clients? 
  • Is it fair game?

Responses asap this morning please.

3 responses from the Newspage community

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Editor
David StirlingVerified
Independent Financial Adviser at Mint Wealth
An 86% profit margin from a subsidiary that exists to do something most advisers would consider a basic professional obligation is quite the business model. Clients are told they are not paying more because the DFM discount offsets the due diligence fee, which is technically true and practically misleading, because the discount goes to Rathbones rather than the client. £7.1 million in profits, £4 million in dividends, and a structure carefully placed outside the regulatory perimeter. Consumer Duty asks firms to demonstrate they act in the best interests of clients. Rathbones may want to start drafting their defence now.
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Editor
Scott GallacherVerified
Director at Rowley Turton
I’m disappointed by this. The investment industry has made significant progress on transparency over the past decade, helped by Gina Miller’s work exposing hidden charges and conflicts of interest. Arrangements like this risk moving the industry in the opposite direction.

Where discounts arise because of clients’ assets, there is a strong argument that those benefits should be passed back to clients rather than retained elsewhere in the group. Even where an arrangement is disclosed, firms should ask not only whether it is permitted, but whether it is fair and delivers good value.

This also raises an important Consumer Duty question. Given the continuing debate over platforms retaining part of the interest earned on client cash, however, I am not convinced Consumer Duty alone will eliminate every practice that consumers may reasonably view as unfair.
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Editor
Nouran MoustafaVerified
Practice Principal & IFA at Roxton Wealth
This arrangement may be technically clever, but it is difficult to defend through a Consumer Duty lens. Due diligence on a DFM panel should be a core governance responsibility, not a profit centre layered onto the client journey. If a DFM is prepared to discount its fee because of scale, that economic benefit should flow to the client, not disappear into an unregulated subsidiary generating an 86% margin.

The biggest issue is not simply cost; it is whether a reasonable client genuinely understands who is being paid, for what, and how the connected companies benefit. Disclosure buried in paperwork is not the same as informed understanding. Rathbones may argue clients pay no more overall, but “no worse off” is not the same as receiving fair value. Where the group controls the advice network, the due diligence vehicle and potentially the selected DFM, the conflict must be managed exceptionally well. On these figures, the optics are poor.