The FCA fined Axa £1.8m and said that its failings had “put a significant number of customers at risk of buying unsuitable products”, adding that many of Axa’s shortcomings only came to light during a review by the FCA.
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.”
In addition to the fine, the FCA said Axa has agreed 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. It added that 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”.
The regulator added that, while customer losses due to the company’s failings may currently be low due to movements in the stock market since the advice was given, it had “acted pre-emptively to ensure customers are provided with an opportunity to avoid potential losses during future stock market downturns”.
Serious defects
Responding to the fine, an Axa spokesperson said: “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.”
Between 15 September 2010 and 30 April 2012 Axa sold approximately 37,000 investment products to 26,000 retail customers through its advisers based in the branches of Clydesdale Bank, Yorkshire Bank and the West Bromwich Building Society. The FCA said these customers, “who tended to have low levels of experience in investments and were typically in or nearing retirement”, invested £440m with the company.
However, it said it found “serious defects” in the advice provided to these customers. Specifically it said 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; and
- Properly explain to customers why recommended investments were considered to be suitable for them.
Furthermore, the FCA found that AXA failed to have effective controls over the bonuses it paid to sales advisers, adding that 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 are advised to contact Axa on the following number or by visiting the following website:
AXA Customer Contact Number: 08448 800482
Website: www.axa.co.uk/fcafaqs
