"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." Published:- 13/09/2013
Source: fca.org.uk
OPERATIONAL PROCEDURES
1. Sales advisers asked customers to risk-rate themselves from "very cautious" to "highly adventurous", but no products were offered in the "very cautious" category.
2. A disproportionate number of customers were put into stock market-based investments which earned the advisers a commission Although nearly half of them were retired.
FINDINGS
1. AXA sold investment products through AXA’s advisers to customers who tended to have low levels of experience in investments and were typically in or nearing retirement.
2. AXA did not confirm neither how much risk its customers were prepared to take nor explain in clear terms the level of risk they would be taking.
3.AXA did not gather sufficient information from customers and ensure that they could manage financially if their investment fell in value.
4. AXA did not advise customers on product charges affecting the returns.
5. AXA did not explain to customers why recommended investments were considered to be suitable for them.
RECTIFICATION
1. 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.
2. 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.
INTERNAL ISSUES
1. Sales advisers were making inappropriate investment recommendations to customers in order to qualify for bonus payments.
OTHER ISSUES
1. AXA employed sales advisers in Yorkshire and Clydesdale Banks and West Bromwich Building Society.
2. 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.
3.The Authority made no findings on regulatory failing against the third party branches where AXA's advisers were based.
VIEWS
1. AXA's monitoring process on its advisers based in third party locations needs to be reviewed.
2. There are multiple inherent risks when advisers are given incentives for sales without proper monitoring.
3. Advisers based in proxy locations tend to quote themselves as being independent.
4. Savy customers would ask simple questions such as "who do you work for?" and "whats in it for you" would expose them as being untrue.
5. Products related to stocks and shares in some shape or form are not discrete. Advisers usually try to quote past performance but gets stuck when experienced customers asked for a worse case scenario or for a guarantee of the initial investment.
6.But the same does not apply for less-experienced customers when dealing with the advisers.
7. Instead of monitoring advisers, more effort should be directed towards keeping the product's risk and features transparent for customers.
8. There are arguments that assessment of risk should also be carried out by the person investing.
9. In this scenario, AXA has simply failed to perform "due diligence"; the duty of care owed to all with whom one has dealings.
10. With "due diligence" being a legal requirement, AXA should have taken the necessary steps to inform and to help investors identify whether if the risk is too high.
