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Do I need to disclose referral fees to clients under ICAEW rules?
Category: Compliance
Yes, and this is one of the most commonly flagged issues in ICAEW monitoring reviews. Under the ICAEW Code of Ethics (Section 320), any member firm that receives a commission or referral fee for introducing a client to a third party must disclose this to the client before the referral is made. The disclosure must be specific — not buried in general terms of engagement. Your client needs to understand: who you are referring them to, that a financial arrangement exists between your firm and the receiving party, the nature of the fee (whether it is a fixed amount, a percentage of the product value, or an ongoing trail commission), and roughly how much the fee will be. Verbal disclosure alone is not sufficient. ICAEW expects firms to document the disclosure in writing and to obtain the client's informed consent, ideally with a signature or written acknowledgement. Firms that rely on blanket clauses in engagement letters often fall short during monitoring visits, because the disclosure needs to be specific to each referral arrangement. If your firm refers clients to financial advisers, mortgage brokers, or other regulated professionals and receives any form of payment for doing so, you must treat fee disclosure as a mandatory compliance step, not a nice-to-have.