Wealth manager Axa has been hit with a £1.8 million fine after the City watchdog exposed failures in its sales processes and found lucrative commission payments that encouraged potential mis-selling.
The Financial Conduct Authority (FCA) said advisers at Axa Wealth Services within banks and building societies sold £440 million worth of investment products without clearly explaining the risks involved or adequately checking if the product was suitable to customers.
It sold around 37,000 products, such as stocks-and-shares individual savings accounts (Isas) and investment bonds, between September 2010 and April 2012 to 26,000 customers - mainly those who were elderly, retired or financially inexperienced.
Axa advisers were paid up to £13,000 a year in commission payments if they met sales targets and could earn unlimited bonuses on top as a percentage of the amount invested by customers.
High performing sales advisers had the potential to treble their basic salary, to as much as £75,000 a year.
The FCA found that in 2011, 83% of sales advisers received sales bonus payments, with the average commission paid out reaching nearly £9,000 each.
It also discovered that until January 2011, advisers could still receive full bonuses even if as many of 40% of sales were found by Axa compliance staff to be unsuitable for investors.
The FCA sai d it was largely lucky that customer losses have been minimal on the products, thanks to a rally in stock markets over the past three years.
Tracey McDermott, FCA 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 advisers were based in branches of Clydesdale Bank, Yorkshire Bank and the West Bromwich Building Society, with the average investment standing at around £17,000 per customer.
Failures discovered by the FCA in the advice process included not adequately checking customer knowledge and experience of investments or whether they could manage financially if their investment fell in value, as well as failing to explain the impact of charges on investment performance.
Axa also failed to adequately monitor the sales process, according to the FCA.
An Axa spokesman said: " 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."
It will now contact all affected customers and compensate those who have suffered financial loss as a result of mis-selling and offer those sold inappropriate products the option to switch or end their investments.
The process will be overseen by an independent third party.
Customers who received investment advice between September 15 2010 and April 30 2012 in the branches of Clydesdale or Yorkshire Banks or West Bromwich Building Society can contact AXA on 08448 800482 or via www.axa.co.uk/fcafaqs.