AXA Wealth Services has been fined £1.8m by the FCA for failing to ensure it gave suitable investment advice to its customers.
The regulator says it found “serious defects” in the way Axa advisers in Clydesdale Bank, Yorkshire Bank and the West Bromwich Building Society advised customers on investments.
In particular, the FCA says 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.
It says there was an “unacceptable risk” of sales advisers making inappropriate investment recommendations to customers in order to qualify for bonus payments.
FCA director of enforcement and financial crime Tracey McDermott says: “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.”
Axa closed its bank advice arm in April this year following a strategic review of the business. At the time, Axa UK chief executive Paul Evans said it had been unable to make the service profitable in its own right whilst setting advice fees at an affordable level.
Axa subsequently revealed its bank advisers would have needed to charge a 6 per cent advice fee in order to make a profit.
An Axa spokesman says: “Axa UK has fully cooperated with the FCA and accepts the findings within its report.
“We take regulatory compliance very seriously and regret that the customer advice provided by the bancassurance division between September 2010 and April 2012 did not meet the high standards expected by the FCA.
“As the FCA has noted, customer detriment may currently be low as was the number of complaints AXA has received. We will be writing to our affected retail banking customers and will review the advice provided to them during that period should they wish us to do so.”