Regulators have fined Axa’s UK wealth management operation £1.8m after finding “serious deficiencies” in its investment advice to customers that left them at risk of buying unsuitable products.
The UK’s Financial Conduct Authority identified shortcomings in the conduct of Axa advisers who sold the products to 26,000 consumers – many of whom were elderly, retired and financially inexperienced.
The failings relate to 18 months when the UK arm of the France-based insurer sold investment products worth a total of £440m through banks and building societies.
The authority found advisers sold products including shares and ISAs without clearly explaining the risks to customers. It also raised concerns about how advisers were rewarded, warning that the system created the risk that staff would try to sell unwanted products to earn bonuses.
Advisers were paid an annual salary between £23,000 and £30,000 although bonuses meant their total remuneration could reach as much as £75,000.
Until January 2011, individual advisers could still receive full bonuses even if Axa compliance staff found that two-fifths of their sales were unsuitable for investors.
Axa this year stopped offering face-to-face financial advice across bank branches with the loss of 450 jobs.
In an announcement in April, the company cited regulatory changes that banned financial advisers from accepting commission from product providers.
“Axa’s failures were avoidable, coming despite repeated warnings from the FCA’s predecessor to the industry about investment advice,” said Tracey McDermott, the regulator’s director of enforcement and financial crime, in a statement.
“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.”
However, the FCA said customers had suffered only minimal losses given the recent rally in equity markets.
The fine is low compared with several of the watchdog’s recent enforcement cases. Last week, the regulator hit Aberdeen Asset Management with a £7.2m penalty for failing to protect client money placed in money market funds.
The authority did not criticise Yorkshire and Clydesdale banks or West Bromwich Building Society, where the Axa advisers operated.
Axa said: “We take regulatory compliance very seriously and regret that the customer advice provided by the bancassurance division . . . 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.”
The company will contact affected customers and compensate those who have suffered any financial loss as a result of mis-selling. Those sold inappropriate products will be able to switch or withdraw the investment.