The UK’s Financial Conduct Authority (FCA) has fined AXA Wealth Services £1,802,200 for failing to ensure it gave suitable investment advice to its customers.
The FCA said the failings put a significant number of customers at risk of buying unsuitable products and that AXA’s shortcomings only came to light during a review by the regulator.
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In addition to the fine, AXA has agreed with the FCA to contact all customers affected by its failings and a third party will oversee a review of any issues identified as a result of this exercise.
The failings relate to the sale of investment products by AXA advisers working at Clydesdale Bank, Yorkshire Bank and the West Bromwich Building Society between 15 September 2010 and 30 April 2012, during which time they sold nearly 37,000 investment products to 26,000 retail customers.
Over this period customers, with low levels of investment experience and those nearing retirement, invested £440 million with AXA.
The FCA said it found serious defects in the way AXA advised customers on investments. In particular, AXA did not explain always in clear terms how much risk customers would be taking, nor did it always confirm how much risk customers were prepared to take.
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By GlobalDataOther defects included failing to ensure customers could manage financially if their investments fell in value, failing to gather sufficient customer information prior to making investment recommendations, and failing to advise on how product charges would affect returns.
he FCA said customer losses due to AXA’s failings may be low due to movements in the stock market since the advice was given. But the regulator added any customer who lost money would be fully compensated.
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," he added.
The FCA also found that AXA failed to have effective controls over the bonuses it paid to sales advisers. It said there was an unacceptable risk of sales advisers making inappropriate investment recommendations to customers in order to qualify for bonus payments.
