Compensation due for mis-sold AXA customers
AXA customers who were given 'unsuitable advice' when buying investments from the firm will be entitled to compensation after it was fined £1,802,200 by the Financial Conduct Authority.
The unsuitable advice includes not confirming the amount of risk the customer was happy with, not fully explaining the risk of the investment to a customer, and not making sure the customer could manage financially if the investment fell in value.
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."
In its investigation, the FCA found that AXA failed to have "effective controls" over bonuses to its sales advisers, leading to "inappropriate investment recommendations" made to customers from advisers in order to gain bonuses.
Up to 26,000 could be affected, with the unsuitable advice having been given between 15 September 2010 and 30 April 2012 in Clydesdale Bank, Yorkshire Bank, and West Bromwich Building Society branches, according to the FCA.
These customers had low levels of investment experience, and were typically in or nearing retirement.
The financial regulator found "serious defects" in how AXA advised customers, which included:
- Not ensuring customers could manage financially if their investment fell in value.
- Not confirming how much risk customers were prepared to take, and not fully explaining to them the level of the risk they were undertaking.
- Not having enough information from customers before making investment recommendations.
- Not telling customers how product charges would affect their returns.
- Not properly explaining to customers why the products were suitable for them.
AXA has agreed to fully compensate any customer who suffered loss as a result of its failings, and those who were sold unsuitable products will be able switch or withdraw their investment. It will contact all affected customers.
The FCA said, currently customer losses may be low, but has acted to avoid potential losses in the future.
An AXA spokesperson said: "AXA UK has fully co-operated 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."
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.