The Financial Conduct Authority has fined Axa Wealth Services Limited £1.8m for failing to “ensure it gave suitable investment advice to its customers”.
According to the FCA, Axa’s failings put a significant number of customers at risk of buying unsuitable products, which later suffered heavy market losses. Many of Axa’s shortcomings only came to light during a review by the FCA, the regulator added.
In addition to the fine, Axa has agreed with the FCA to contact all customers who may be affected by its failings and a third party will oversee a review of any issues identified as a result of this exercise.
Any customer who suffered loss as a result will be fully compensated and those sold inappropriate products will be able to switch or withdraw their investment, the FCA said.
The FCA said: “Customer losses due to Axa’s failings may be low due to movements in the stock market since the advice was given. In agreeing with Axa that it will contact customers, the FCA has acted pre-emptively to ensure customers are provided with an opportunity to avoid potential losses during future stock market downturns.”
Tracey McDermott, the FCA’s director of enforcement and financial crime, said: “Axa fell short of its responsibilities to its customers, many of whom were elderly, retired and financially inexperienced.
“Its failures resulted in an unacceptable risk of Axa selling products which were unsuitable for its customers. Axa’s failures were avoidable, coming despite repeated warnings from the FCA’s predecessor to the industry about investment advice.
“The FCA will continue to take tough action against firms who fail to comply with their responsibilities to ensure that consumers get a fair deal.”
Between 15 September 2010 and 30 April 2012 Axa sold approximately 37,000 investment products to 26,000 retail customers through Axa’s advisers based in the branches of Clydesdale Bank, Yorkshire Bank and the West Bromwich Building Society.
These customers, who tended to have low levels of experience in investments and were typically in or nearing retirement, invested £440m.
The FCA found serious defects in the way Axa advised customers on investments. In particular, Axa did not always:
• Confirm how much risk its customers were prepared to take with their investments and explain in clear terms the level of risk they would be taking
• Ensure that customers could manage financially if their investment fell in value
• Gather sufficient information from customers before making investment recommendations to them
• Advise customers about how product charges would affect the returns they could expect to receive from their investment
• Properly explain to customers why recommended investments were considered to be suitable for them
The FCA also found that Axa failed to have effective controls over the bonuses it paid to sales advisers. There was an unacceptable risk of sales advisers making inappropriate investment recommendations to customers in order to qualify for bonus payments.
