Brewin Dolphin has been slapped with a £6m bill from the Financial Services Compensation Scheme (FSCS) as part of an industry-wide burden that will hit bonuses and could even put some smaller brokers out of business.
The FSCS has sent invoices totalling £326m to wealth management firms to collect compensation for investors in two firms that went bust.
Keydata Investment Services collapsed owing £247m after selling fraudulent bonds to more than 5,000 investors and Wills & Co ceased trading after being hit with a £1.5m fine by the Financial Services Authority (FSA) for mis-selling.
Charles Stanley was asked to pay £2.6m and Rathbone Brothers has been billed for £3.2m. The invoices, which must be paid within a month, will hit profit sharing schemes at wealth management firms, directly penalising brokers.
Brewin Dolphin said it was “extremely disappointed” by the “failure” by the FSA.
Meanwhile, Brewin Dolphin reported a 16 per cent rise in revenues from a year earlier as its investment management arm attracted new client money. A 17 per cent increase in income from investment management offset a 13 per cent decline from its corporate advisory and broking business.
The total value of its managed funds grew seven per cent from the previous quarter to £24.8bn, boosted by rising stock markets but also helped by £500m of new money.
Charles Stanley reported 14 per cent revenue growth during its third quarter to £32.3m.