FCA Referral Compliance for Financial Planning
What the FCA, ICAEW, and SRA actually expect from firms making financial planning referrals. Consumer Duty, fee disclosure, and record-keeping explained.
Financial planning referrals and compliance: what the FCA actually expects
— by Johnny Ridd
Nobody currently ranking covers the regulatory dimension of financial planning referrals properly. Here is what the FCA, ICAEW, and SRA actually expect from firms making and receiving referrals.
Most professional services firms know that referrals involving financial planning carry regulatory obligations. Fewer can explain exactly what those obligations are, or demonstrate that their processes meet them.
This is not because the rules are hidden. It is because the guidance is spread across multiple regulators, each with different frameworks, and most firms have never consolidated it into a single practical view.
This piece covers what the FCA, ICAEW, and SRA expect from firms that make or receive financial planning referrals. It is written for compliance officers, senior partners, and practice managers who need to understand the landscape, not just the headlines.
Consumer Duty and financial planning referrals
The FCA's Consumer Duty, which came into force in July 2023, changed the regulatory environment for referrals. The Duty requires firms to deliver good outcomes for retail customers across four areas: products and services, price and value, consumer understanding, and consumer support.
What many firms miss is that Consumer Duty applies to the referral itself, not just the advice that follows.
If your firm refers a client to a financial adviser, the quality of that introduction is within scope. Did you conduct reasonable due diligence on the receiving firm? Is the adviser appropriate for the client's needs? Are there financial incentives influencing the referral that the client should know about?
The Duty does not require perfection. It requires that firms act reasonably and can evidence that they did. For referrals, this means having a documented process for selecting referral partners, recording the basis for each introduction, and monitoring outcomes over time.
FCA rules on referral fees and inducements
The FCA permits referral fees, but regulates them closely. The relevant rules sit primarily within COBS (Conduct of Business Sourcebook) and SYSC (Senior Management Arrangements, Systems and Controls).
The core requirements are straightforward:
- Referral fees must be disclosed to the client before the introduction is made
- The fee arrangement must not compromise the quality of the referral or the advice the client receives
- Firms must maintain records of all fee arrangements and payments
- The fee structure should not incentivise inappropriate referrals
The practical challenge is that many referral fee arrangements are informal. A handshake agreement between a partner and an adviser. An understanding that fees will be split on a case-by-case basis. These arrangements may be perfectly legitimate, but if they are not documented and disclosed, they create regulatory risk.
Firms should have written agreements with every referral partner that receives or pays fees. These agreements should specify the fee structure, the basis for calculation, and the disclosure process. They should be reviewed periodically to ensure they remain appropriate.
ICAEW DPB requirements for accountancy firms
Accountancy firms that refer clients to financial advisers under an ICAEW DPB licence operate within a specific regulatory framework. The DPB handbook governs what firms can and cannot do when making introductions that involve regulated financial services.
The key requirements are:
- Benefits register. Firms must maintain a register of all financial benefits received in connection with referral arrangements. This includes referral fees, commissions, and any other form of consideration.
- Client consent. Informed consent must be obtained from the client before the referral is made. The client must understand that they are being introduced to a regulated adviser, what the implications are, and whether the referring firm receives a financial benefit.
- Due diligence. The firm must carry out reasonable due diligence on the receiving adviser. This includes verifying FCA authorisation, checking whether the adviser is independent or restricted, and assessing whether they are suitable for the client's needs.
- Record retention. Records must be kept for at least six years and be available for ICAEW inspection. This includes the referral itself, the consent obtained, the fee arrangement, and the outcome.
ICAEW monitoring reviews examine these areas in detail. Inspectors ask to see the benefits register, evidence of client consent, and records of due diligence on referral partners. Firms that cannot produce this evidence face sanctions.
The challenge for most firms is not understanding the requirements. It is having a process that consistently captures the evidence. When referrals happen informally, over email, the compliance evidence is fragmented or missing entirely.
SRA considerations for solicitors
Solicitors making referrals to financial advisers must comply with SRA rules on transparency and conflicts of interest. The SRA Code of Conduct requires firms to:
- Disclose any financial benefit received from a referral arrangement
- Ensure that the referral is in the client's interest
- Maintain records of referral arrangements
- Manage conflicts of interest that may arise from fee-sharing arrangements
The SRA's approach is principles-based rather than prescriptive. Firms are expected to exercise professional judgement and maintain transparency. But the expectation is clear: referral arrangements should serve the client's interest, and any financial benefit must be disclosed.
The practical problem: knowing the rules is not enough
Most compliance officers and senior partners understand their regulatory obligations around referrals. The problem is execution.
In a typical firm, referrals are made by individual partners and managers across multiple offices and teams. Each person has their own way of making introductions, their own adviser relationships, and their own approach to documentation. Some are meticulous. Others are not.
The result is inconsistency. Some referrals are fully documented with consent, fee disclosure, and outcome records. Others leave no trace beyond an email thread that may or may not be retained.
Bolted-on compliance, where the firm adds a spreadsheet or manual checklist after the referral is made, rarely works. It depends on people remembering to do it. It creates duplicate effort. And it produces evidence that is incomplete or inconsistent.
Built-in compliance is different. When consent capture, fee disclosure, and audit trails are embedded in the referral workflow itself, compliance becomes a byproduct of the process rather than a separate task. The evidence is captured automatically, consistently, and in a format that is ready for regulatory inspection.