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IFA takes Cofunds to small claims court over client redress bill

Cofunds has refused to pay an adviser for time spent resolving a client complaint case, saying it is the platform’s policy not to pay adviser compensation.

Essential IFA managing director Peter Herd contacted Cofunds on March 9 to arrange a £30,000 lump-sum investment into a client’s Suffolk Life pension in time for the 2011/12 tax year. Cofunds’ adviser support team gave Herd incorrect information about the form that was required alongside the client’s £30,000 cheque, which it received on March 28.

Cofunds passed the application to Suffolk Life, which returned the money on March 30 because it was not accompanied by the correct paperwork.

Herd logged a complaint with Cofunds on April 17. On May 8, Cofunds admitted its error and returned the £30,000 investment to the client, plus £15,000 as compensation for lost tax relief.

Herd requested Cofunds compensate him £1,125 in relation to his client fee and a further £680 for additional time spent in resolving the case. Money Marketing has seen an email from the Cofunds complaints team, sent to Herd on May 14, which declines both requests.

The email says Cofunds believes it is “reasonable” for the client to pay the fee from the compensation he received. It also cites Cofunds’ adviser service level agreement which states: “Cofunds will not compensate the adviser for time spent.”

Herd says: “A provider should be held liable for mistakes that result in a commercial loss to another company.” He has filed a case with the small claims court.

A Cofunds spokeswoman says it took all necessary steps to correct the situation for the client.

She says: “We have received a claim from the IFA but it would not be appropriate to comment about it at the current time.”


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. Cofunds need to understand that many advisers now charge by the clock and have records of time spent chasing providers. Like the disclaimers in Car Parks denying liability, Cofunds terms are likely to be unenforceable where clear evidence if maladministration can be shown.
    Some of our clients have questioned our bills and when we have asked why we have shown that much of it was due to chasing providers. It has had consequences for these providers that they are perhaps not aware of.
    Good luck Peter.

  2. Good on you and good luck Peter.

    I agree providers need to up their game, as why should the adviser community continually pay for other company mistakes. They need to be more careful about the guidance and advice they offer over the phone, at the end of the day we as avisers only call to clarify important processes so that time is not wasted correcting errors….isn’t that what professionalism is all about.

  3. Well said Sam Caunt and good luck Peter Herd.

    Providers should realise the consequences of their maladministration and Cofunds cannot be allowed to just make up their own rules contrary to fairness and British Law.

    I would be very interested in the outcome of this case. MoneyMarketing please make sure that you follow it up.

  4. I am completely with you on this one and have had positive experience of the small claims court !

    I reckon they’ll settle beforehand

    Well done Peter !

  5. We do not use Cofunds because of a similar situation where they returned an ISA form and cheque the day before the deadline; the information they said was missing had crossed in the post (as they had been promised).

    Hope you succeed although I think Derek above is right -they will probably settle before you get there.

  6. Becoming a headcase IFA 14th June 2012 at 2:11 pm

    I took one of the companies that has offices in Ireland to the small claims court three years ago, because I had provided them with exactly what the application asked for and then their compliance department wouldn’t accept it. The compliance officer kept moving the goalposts when I argued with them so I said I would get the extra paperwork they demanded but would charge them for my time, which I did.

    After they refused to pay I went the small claims court route and won the case. I didn’t get a lot but it was the principle that counted and it must have cost them a bit to send a solicitor to the court.

    Some of these companies just want to take the micky.

  7. Matthew Whiting 14th June 2012 at 2:40 pm

    Does this mean that Claims Management Companies should be suing banks for their fees instead of taking their fees from the clients?
    At the end of the day CMC’s are simply helping clients where banks have got things wrong! And this client did get compensation (which they were obviously entitled to). Not blaming the IFA here, but what is good for the goose…..

  8. Julian Stevens 14th June 2012 at 8:33 pm

    On the very rare occasions on which Skandia mess up, they always admit it and pay compensation. Add to that their very helpful help team and a first class broker consultant and there’s very little reason to look at any of their competitors.

  9. Cofunds attitude is disgusting, is out of sync with their competitors and probably not legal. I for one will not use them until they change their policy on this. because if this happened to my client I would expect to be paid for the time I spent.

  10. Not that I am in anyway supportive of Cofunds, mostly because of their lack of transparency and average service, but makes you wonder what the name and wording on the form said.

    Surely someone who charges 3.75% to advise a client to make a pension contribution and some advice on how it should be invested would take the time to read a form whilst completing it for his client.

    Whilst this article gives only a few details, I personally find it staggering that Cofunds would have paid $15000 compensation, especially directly to the client. Surely any compensation payment should have been made atleast in part to the pension which is where most of the tax relief would have been received. Would the client not have received tax relief in the following finanical year?

  11. To Bob

    Cannot go into details but if the payment had been paid into a pension in 2012 2013 it would have resulted in an unauthorised payment charge as the payment could not be backdated.

    The actual charge for advice was 3% and not 3.75% e.g. 3% of £37,500 being grossed up contribution after basic rate tax.

    As for reading the terms and conditions I would challenge anybody to find documentation on Co-funds website that clearly states that they don’t pay compensation to advisers were errors are made. I only found this document after requesting it from co-funds after my initial claim was refused and reference was made to it. Needless to say neither myself or the client has signed to say that we agree with these terms and conditions

  12. You do not need to sign to agree to someones Terms & Conditions. As soon as you start trading with them you are complying to them

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