Referral Fee Disclosure for UK Accountants

A practical guide to referral fee disclosure under ICAEW rules. Covers Section 330 requirements, client consent, and how to stay compliant.

How UK Accountants Should Handle Referral Fee Disclosure

— by Sam Green

ICAEW monitoring reviews show many firms fall short on fee disclosure. Here is a practical, step-by-step guide to getting it right, including template language for client consent letters.

Regulated vs unregulated referrals - the critical distinction

Not all referrals are the same. Understanding where yours fall on the spectrum is the first step to getting disclosure right.

At one end, there is the casual introduction. A client asks if you know a good solicitor. You mention a name. No endorsement, no fee, no ongoing arrangement. This is generally unregulated.

At the other end, there is the regulated referral. You recommend a specific financial adviser. You have a formal arrangement with that adviser. You receive a fee for every client you send. This is regulated activity under the ICAEW DPB regime.

Most referrals fall somewhere in between. The key triggers that push a referral into regulated territory are:

  • You receive a fee or commission - Any financial benefit, whether fixed, percentage-based, or ongoing trail
  • You endorse or recommend a specific firm - Going beyond simply providing a name
  • You provide advice alongside the referral - Suggesting a particular product or course of action
  • There is a formal commercial arrangement - A written agreement between your firm and the receiving firm

The presence of a fee is the clearest indicator. If you receive anything of value for making the introduction, treat it as a regulated referral. Document it accordingly.

What the ICAEW Code of Ethics requires

The ICAEW Code of Ethics addresses referral fees and conflicts of interest in Sections 310 and 330. The requirements are clear and non-negotiable.

Section 310: Conflicts of interest

A referral fee creates a potential conflict of interest. Your firm benefits financially from recommending a particular adviser. The client may not know this. Section 310 requires you to identify and manage this conflict.

Section 330: Referral fees and commissions

Section 330 is specific. If your firm receives a fee, commission, or other benefit for referring a client, you must:

  • Disclose the arrangement to the client - Before the referral, not after
  • Be transparent about the fee structure - The client must understand how you benefit
  • Act in the client's best interest - The referral must be appropriate regardless of the fee
  • Obtain informed consent - The client must agree to proceed with full knowledge of the arrangement

These are not suggestions. They are regulatory requirements. ICAEW monitoring reviewers will check whether your firm meets them.

The underlying principle is straightforward: the client has a right to know when their accountant benefits financially from an introduction. Without this knowledge, they cannot make a properly informed decision.

Step-by-step: disclosing fees to clients

Getting disclosure right is not complicated. It requires a clear process that everyone in the firm follows consistently.

Step 1: Disclose before the referral

Timing matters. The client must know about the fee arrangement before you make the introduction. Disclosing after the referral has been made undermines the principle of informed consent.

In practice, this means raising the topic during the conversation where the referral is first discussed. Do not wait until the paperwork stage.

Step 2: Explain the relationship

Tell the client about your relationship with the receiving firm. Be specific:

  • How long you have worked with them
  • Whether they are on your firm's referral panel
  • Whether there is a formal agreement in place

Step 3: Disclose the fee structure

The client needs to understand how you benefit. Cover:

  • The type of fee - Fixed amount, percentage of funds advised, or ongoing trail commission
  • The approximate amount - You do not need to state the exact figure, but the client should understand the scale
  • When it is paid - On referral, on completion, or on an ongoing basis

Step 4: Obtain written consent

Document the client's agreement to proceed. This can be a signed letter, an email confirmation, or a digital consent record. The key is that you can demonstrate the client was informed and agreed.

Step 5: Record everything

File the disclosure and consent alongside the referral record. Your records should show what was disclosed, when, how the client responded, and that they agreed to proceed.

What happens during an ICAEW monitoring review

ICAEW conducts monitoring visits to check that firms comply with the DPB regime. Understanding what reviewers look for helps you prepare.

What they inspect

  • Referral records - A sample of referrals made during the review period
  • Consent documentation - Evidence that clients were informed and agreed
  • Fee disclosure records - Proof that fees were disclosed before the referral
  • Commercial agreements - Formal arrangements with referral partners
  • Due diligence files - Records of checks on receiving firms

What they ask

Reviewers typically ask questions like:

  • How does the firm identify when a referral is regulated?
  • What process does the firm follow for obtaining client consent?
  • How are referral fees disclosed to clients?
  • Who in the firm is responsible for referral compliance?
  • How does the firm track referral outcomes?

What they expect

Reviewers want to see a consistent, documented process. They are not looking for perfection. They are looking for evidence that the firm takes its obligations seriously and has a systematic approach to compliance.

Firms that can produce clear records, demonstrate a coherent process, and show that staff understand their obligations generally have straightforward monitoring visits.

Common mistakes firms make

ICAEW monitoring data reveals the same issues appearing repeatedly. Avoid these:

  1. Not disclosing at all - The most basic failure. The client has no idea the firm benefits financially from the referral.
  2. Disclosing after the fact - The fee is mentioned after the referral has been made. This fails the "informed consent" test.
  3. Verbal-only disclosure - The partner tells the client about the fee in a meeting but does not document it. There is no evidence for the audit trail.
  4. Not recording the fee amount - The disclosure mentions a fee exists but not how much. The client cannot make an informed decision without understanding the scale.
  5. Relying on engagement letter clauses - A blanket statement in the engagement letter is not the same as informed, case-by-case disclosure for each specific referral.
  6. Inconsistent practice across the firm - One partner follows the process. Another does not. There is no firm-wide standard.

Every one of these mistakes is preventable. The common cause is a lack of clear process, not a lack of good intentions.

How to automate disclosure and consent capture

Manual processes work - until they do not. The risk with manual disclosure is inconsistency. One partner remembers to disclose. Another forgets. A third discloses verbally but does not record it.

Referral management tools like RQ build disclosure and consent into the referral workflow. When a team member creates a referral, the system prompts for consent capture and fee disclosure. The record is created automatically, with timestamps and an audit trail.

This does not replace professional judgement. It ensures the process happens consistently every time, regardless of who in the firm makes the referral.

Do I need to disclose fees for every referral?

You must disclose fees for every referral where your firm receives a financial benefit. This includes fixed fees, percentage commissions, and ongoing trail payments. If no fee is involved, disclosure of the fee is not required - but you should still consider whether client consent is needed.

What if the fee is paid by the receiving firm, not the client?

You must still disclose. The source of the fee does not change the obligation. The client has a right to know that your firm benefits financially from the introduction, even if they are not paying the fee directly.

Can I disclose verbally instead of in writing?

Verbal disclosure alone is insufficient for compliance purposes. You need a written record - whether that is a signed letter, an email confirmation, or a digital consent record. The key is that you can demonstrate what was disclosed and that the client agreed.

What if the client does not want to sign a consent letter?

If the client declines to provide written consent, you should consider whether to proceed with the referral. At a minimum, send a follow-up email confirming what was discussed and the client's decision. This creates a record even without a formal signature.

How detailed does the fee disclosure need to be?

The client should understand the type of fee (fixed, percentage, or ongoing), the approximate amount, and who pays it. You do not need to disclose the exact pound figure in every case, but the client must be able to understand the scale and nature of the arrangement.

Automate your fee disclosure process

RQ captures client consent and documents fee disclosures as part of every referral. No more manual letters, no more gaps in the audit trail.

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