AXA fined and reviews investment sales for advice failings
Published: 13/09/2013 Last Modified : 17/09/2013
The Financial Conduct Authority (FCA) has fined AXA Wealth Services Ltd (AXA) £1,802,200 for failing to ensure it gave suitable investment advice to its customers. The failings put a significant number of customers at risk of buying unsuitable products. Many of AXA’s shortcomings only came to light during a review by the FCA.
In addition to the fine, AXA has agreed with the FCA to contact all customers who may be affected by its failings and a third party will oversee a review of any issues identified as a result of this exercise. Any customer who suffered loss as a result will be fully compensated and those sold inappropriate products will be able to switch or withdraw their investment.
Currently, customer losses due to AXA’s failings may be low due to movements in the stock market since the advice was given. In agreeing with AXA that it will contact customers, the FCA has acted pre-emptively to ensure customers are provided with an opportunity to avoid potential losses during future stock market downturns.
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."
Between 15 September 2010 and 30 April 2012 AXA sold approximately 37,000 investment products to 26,000 retail customers through AXA’s advisers based in the branches of Clydesdale Bank, Yorkshire Bank and the West Bromwich Building Society. These customers, who tended to have low levels of experience in investments and were typically in or nearing retirement, invested £440 million with AXA.
However, the FCA, which has an objective to secure an appropriate degree of protection for consumers, found serious defects in the way AXA advised customers on investments. In particular, 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. There was an unacceptable risk of sales advisers making inappropriate investment recommendations to customers in order to qualify for bonus payments.
Customers who received investment advice between 15 September 2010 and 30 April 2012 in the branches of Clydesdale or Yorkshire Banks or West Bromwich Building Society and have any questions relating to the advice they received should contact AXA on the following number or by visiting the following website:
AXA Customer Contact Number: 08448 800482
AXA agreed to settle at an early stage of the investigation and therefore qualified for a 30% discount.
Notes for editors
- The Final Notice for AXA.
- The Authority makes no criticism or finding of a regulatory failing against Yorkshire and Clydesdale Banks, West Bromwich Financial Planning Limited (WBFP) or the West Bromwich Building Society in the Final Notice.
- Approximately 57% of AXA’s customers were over 60 years of age and approximately 47% were retired. The average investment per customer was approximately £17,000.
- AXA recommended a number of investment products to customers, including stocks and shares ISAs, OEICs and onshore and offshore investment bonds. Stocks and shares ISAs were the most common form of investment, comprising 75% of investment product sales between 15 September 2010 and 30 April 2012. The investment funds underlying the products recommended to customers were predominantly managed by members of the AXA Group.
- AXA employed the sales advisers in Yorkshire and Clydesdale Banks and WBFP employed the sales advisers in the branches of the West Bromwich Building Society. However, AXA established and maintained the sales process which all sales advisers were required to follow in these branches and had overall compliance responsibility for the investment advice they provided to customers (including because WBFP was AXA's Appointed Representative when AXA committed the failings).
- On 15 April 2013 AXA announced, for reasons unconnected to the contents of this Notice, that it was ceasing to provide investment advice in the branches of Clydesdale and Yorkshire Banks. It is continuing to support the appointed representative model with the West Bromwich Building Society while the Building Society moves to a new model.
- The FSA’s Finalised Guidance dated March 2011 titled ‘Assessing Suitability: Establishing the risks that a customer is willing and able to take and making a suitable investment selection’ and the FSA’s letter dated 14 June 2011 to chief executive officers of wealth management firms.
- On the 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA, as well as how it is different to the PRA.
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