High street lender Santander has been fined £12.4m after the City watchdog uncovered "serious failings" in investment advice provided by the bank.
The Financial Conduct Authority (FCA) said Santander's advice was flawed after it found staff were not being trained properly and failed to get to grips with customers' personal circumstances and the level of risk they were prepared to take.
The bank also failed to ensure information was clear and did not make ongoing checks that investments were still suitable.
Santander said it has since closed its old bancassurance businesses and overhauled branch-based investment advice.
It will contact affected customers and compensate those left out of pocket, but the FCA said redress was likely to be minimal given that investment returns have been boosted by rising stock markets in recent years.
Around 295,000 customers – many of them pensioners – might have received unsuitable advice from Santander between January 2010 and the end of 2012, according to the FCA.
Santander sold nearly 350,000 products worth about £7bn during the three-year period.
The FCA said the advice failings meant there was a "significant risk" that customers were mis-sold unsuitable products, ranging from investment bonds and structured products to risk-rated portfolios for those with more than £50,000 to invest, known as Premium Investments.
Customers were generally aged 60 or over and the average investment was £24,000.
The poor advice came to light after former regulator the Financial Services Authority carried out a mystery shopping exercise across the industry in 2012.
It found Santander staff telling customers that investments will "likely double" and that "in 10 years it will beat cash by 87%", even though the investment term was only for five years and returns were not guaranteed.
Advisers were also incorrectly stating the level of the FTSE 100 Index was 8000 to 9000 in 2008. The FTSE 100 has never surpassed a record close of 6930.2 points in 1999, and plummeted in 2008 from around 6000 to 3800 at one stage amid the financial crisis.
In another example, an adviser recommended a 71-year-old invested £35,000 into a product with a six-year term that carried penalties for cashing in early, without checking if the customer had any health issues.
There were also significant failings surrounding Premium Investment products, which were misleadingly marketed as a bespoke wealth management service.