The Financial Adviser Standards and Ethics Authority (FASEA) will review any referral arrangement between financial planners and other service providers involving fees, such as those with accountants, as to how they are treated under the industry’s code of ethics.
During a recent SMSF Association panel discussion, FASEA chief executive Stephen Glenfield said: “This is one that we will think through a bit more as part of the guidance. In the first set of guidance we were really thinking about you getting paid a referral fee as an adviser. So it was about whether it was in the interest of the client that that referral fee was being paid.”
Glenfield hinted referral fees may not be outlawed completely from an ethics standpoint, but warned justification for the referral, apart from there being some associated remuneration, needed to be established.
“You have to ask yourself a number of questions. If the person giving you the referral is doing so because you’re just paying for it, but you’re not the right person to give that advice, is that the right thing in an ethical environment to do – to keep taking clients when you’re not the right person to give advice to [allow you] to build a business?” he said.
“I would argue that’s debatable under the code.
“[You also have to ask] does the client understand that they’ve come to you because you’ve paid for them [to do so] as opposed to being referred to you as the best person. I think there are questions to be worked through.”
He said adherence to the code of ethics should always be determined by one element alone.
“At the end of the day it all comes down to the priority of the client interest. [They should be] coming to you [because you’re] the right person to be giving advice,” he noted.
During the panel session, Glenfield also indicated that limited licensing still held a place in the financial advice sector and provided background into how the Authority marks the mandatory adviser exam.
