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Axa Wealth fined £1.8m for investment advice failings


Axa Wealth 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.

Axa Wealth’s final notice, published last week, sets out the catalogue of failures between 15 September 2010 and 30 April 2012 which put the investments of 26,000 customers at risk and led to the firm being fined.

According to the notice, 100 per cent of the 24 Axa suitability reports reviewed by the FCA did not contain sufficient information to justify the recommendations made to clients, the majority of whom were over 60 years of age.

The regulator says Axa did not do enough to make sure its advisers were properly checking customers’ investment objectives when assessing the suitability of investment products. In addition, the FCA says Axa did not monitor its investment sales adequately.

These problems were compounded by an incentive scheme which paid Axa advisers thousands of pounds in bonuses. These bonuses, which could treble an adviser’s salary, were based on sales targets and the amount clients invested.

The FCA says the bonus scheme gave rise to an “unacceptable risk” that clients would be given unsuitable investment recommendations by Axa advisers.

In addition, the regulator says Axa did not provide its advisers with enough information to check the suitability of particular investments for customers.

For example, sales advisers were told to gather information about investors’ “goals/dreams/aspirations” because these “give the customer a reason to buy, people buy on emotion”.

The template suitability report used by advisers until 31 October 2011 was also found to contain “potentially misleading” statements and included a suggestion that the risks associated with Axa’s investment products were similar to deposit accounts.

Under a section titled, Objectives, the report described customers as wishing “…to have both the security of deposit type accounts and the potential for greater returns from collective investments”.

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.”

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.”

Worldwide Financial Planning IFA Nick McBreen says: “Clearly there was inadequate care and attention paid to clients’ needs at Axa and that is unacceptable.

“This just highlights the difficulties big organisations face in monitoring the activities of their advisers.”


A catalogue of failures – why Axa was fined £1.8m by the FCA

  • 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.

A year in fines

13 September 2013 – Axa Wealth fined £1.8m for failing to ensure it gave suitable investment advice to its customers.

5 June 2013 – Sesame fined £6m for failing to ensure advice given to customers was suitable and for poor systems and controls.

10 May 2013 – JP Morgan fined £3m for systems and controls failings relating to its provision of retail investment advice and portfolio investment services.

27 March 2013 – Care Asset Management fined £56,000 for breach of rules in relation to its sale of products provided by Keydata.

13 November 2012 – Savoy Investment Management fined £412,000 for failing to take reasonable care to ensure the suitability of the investment portfolios of its wealth management clients.

20 September 2012 – Pi Financial fined £58,300 for unsuitable sales of high-risk products.


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