Put the Referral Fees standard, VI(C), into practice
The idea
Members must disclose to employer, clients and prospective clients any compensation, consideration or benefit received from or paid to others for the recommendation of products or services. Disclosure must be made before the client engages the service, not afterwards, because its purpose is to let the client evaluate the referral's objectivity and the true cost of the relationship. The arrangement need not be cash: reciprocal referrals, discounted services and in-kind benefits all qualify. The Standard does not prohibit referral fees; it refuses to let them be invisible.
A practice question
When must a referral fee be disclosed?
- Before the client engages the service — correct
- In the annual client statementWhy not: By then the client has engaged and paid, and the information can no longer affect the decision.
- Only if the fee exceeds a set amountWhy not: No threshold appears in the Standard, and a small fee still bears on objectivity.
Standard VI(C) Referral Fees requires disclosure before the client engages the recommended service, so it can inform the decision rather than explain it afterwards.
A harder one
Does Standard VI(C) apply to non-cash arrangements?
- No, only to cash paymentsWhy not: A cash-only rule would be avoided by paying in kind, which is why the Standard is drawn around consideration generally.
- Yes, reciprocal referrals and benefits count — correct
- No, unless the benefit is convertible to cashWhy not: Convertibility is not the test; a benefit that cannot be sold can still create an incentive.
Standard VI(C) covers consideration in any form, including reciprocal referrals, discounts and in-kind benefits.
The hardest tier
Why does the Standard require disclosure rather than prohibiting referral fees?
- Because referral fees are too small to matterWhy not: They are frequently substantial, and size is not what makes disclosure the right remedy.
- Because prohibition would be unenforceableWhy not: A practical objection rather than the principled one, which is that a disclosed referral can still be good advice.
- Because a referral can genuinely serve the client — correct
Standard VI(C) recognises that a referral can genuinely serve the client. Disclosure lets an informed client weigh the incentive and the true cost for themselves.
In the app: 12 practice questions on this outcome, a narrated walkthrough with diagrams, spaced review that brings it back before you forget it.
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