3.6) Conflict of interest VI(C): Referral Fees

Question 1

What is substandard VI(C)?

Answer 1

Referal fees

Question 2

What is referral fees?

Answer 2

• Must disclose to employer, clients, and prospective clients any compensation, consideration or benefit received, or paid, for the recommendation of products or services.

Question 3

How is referral fees implemented for members?

Answer 3

Must be disclosed to all relevant parties (employers, clients, and prospective clients) whether paid in cash or not so that the parties can evaluate potential partiality in recommendations and full cost of services received.

Question 4

Example 50: Jackie Naidoo is a financial advisor at Bolla Bolla Inc. She receives a fee for every client whom she refers to Bolla Bolla’s asset management division
and who subsequently puts assets under their management. Naidoo does not always disclose this fact, as she is concerned that some of her clients may see
this as an unethical practice. Is Naidoo in breach of Standard VI(C)?

Answer 4

Solution: Naidoo is in breach of Standard VI(C)) by not informing her clients of this arrangement. If they know that she is getting a referral fee they will take this into account when assessing the merits of her relevant advice.