Axa Wealth’s sales advisers were told to give thousands of elderly investors “a reason to buy” risky investment products without properly checking how much they could afford to lose, the FCA has revealed.
The FCA says it found “serious defects” in the way Axa advisers in Clydesdale Bank, Yorkshire Bank and the West Brom Building Society advised customers on investments.
Axa Wealth’s final notice 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 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.”