The fallout from the heady pre-Retail Distribution Review days when the distinction between ‘sales’ and ‘advice’ was permeable and ill-defined continues.
Friday the 13th proved unlucky, or maybe more accurately simply unfortunate, for Axa Wealth, which was today slapped with a £1.8m fine relating to investment advice failings among advisers operating out of branches of Clydesdale Bank, Yorkshire Bank and West Bromich Building Society between September 2010 and April 2012.
It qualified for a 30 per cent for admitting the faults identified and settling early, without which it would have faced a fine of close to £2.6m.
Axa actually pulled out of providing advice through Clydesdale and Yorkshire this past April, with the loss of around 450 jobs. Advice is provided at West Bromich under an appointed representative arrangement, which is now on borrowed time as the society moves to a new intermediation model.
The fine relates to inappropriate advice given to around 26,000 consumers, who invested a combined £440m in a range of products including stocks and shares Isas, which represented 75 per cent of sales, Oeics and onshore and offshore investment bonds, the FCA stated.
The clients were generally older, with 57 per cent over the age of 60 and 47 per cent retired. The FCA’s review found that Axa advisers failed to assess risk properly among these clients, who later suffered heavy losses on stockmarkets.
Customers will be contacted and will be compensated, as well as being offered the change to to switch or withdraw from the products.
Aside from the obvious failings, a key detail buried in the ‘editor’s notes’ of the release is that the “investment funds underlying the products recommended to customers were predominantly managed by members of the Axa Group”.
Allied with the bonuses staff were apparently paid, this paints - but doesn’t prove - an unedifying picture of advisers pedalling products from their own group in order to qualify for lucrative incentives.
In this context, the wording used by Axa when it pulled the plug on the bank advice arms is potentially illuminating.
Paul Evans, group chief executive of Axa UK, said at the time the advisory arm had been ditched because Axa could not work out a way for the business to “balance the regulatory requirement” and still make a profit plus charge affordable fees to consumers.
Many have mourned the loss of bank advice from the market. Even Martin Wheatley this week admitted it was a concern that the advice offered to some mainstream consumers has disappeared, though he did qualify his comments by adding that much of this was probably “simply sales dressed up as advice”.
It looks to me like the FCA certainly came to that conclusion. Any other integrated firms out there that offer ‘advice’ under the new regime would do well to ensure they check their own sales process where they recommend their ‘own brand’ investments.