Lesson 1 – Understanding Referral Fees and Referral Arrangements

1.1 What is a referral?

A referral occurs when MyEstate introduces, recommends or passes a customer’s details to another business that may provide a related service.

This may happen through:

• A verbal recommendation;
• An email introduction;
• A website link;
• A preferred-provider list;
• A leaflet;
• A quotation;
• A button within an online application;
• An internal transfer to a connected business; or
• Sending the customer’s contact information to the provider.

1.2 What is a referral fee?

A referral fee is money or another benefit received because MyEstate introduced a customer to a third-party provider.

The payment may be:

• A fixed amount for each introduction;
• A payment for each customer who instructs the provider;
• A percentage of the provider’s fee;
• A commission based on the value of the transaction;
• A payment for each completed transaction;
• A monthly or annual payment;
• A marketing allowance;
• A rebate;
• Free or discounted services;
• Hospitality or gifts;
• Reciprocal referrals; or
• Another commercial benefit.

The arrangement is still relevant where the benefit is paid to:

• MyEstate;
• A director;
• An employee;
• A group company;
• A parent or subsidiary company;
• A franchise business;
• A connected person; or
• Another business linked to MyEstate.

1.3 Payment is not always described as a referral fee

A commercial arrangement may use another name, such as:

• Introduction fee;
• Marketing fee;
• Commission;
• Administration payment;
• Partnership payment;
• Lead-generation fee;
• Success fee;
• Rebate;
• Revenue share; or
• Service credit.

The label does not determine whether disclosure is required. Staff should consider the substance of the arrangement.

1.4 Direct and indirect benefits

Direct benefit

A conveyancer pays MyEstate £150 whenever a referred customer instructs the firm.

Indirect benefit

An insurance provider does not pay MyEstate in cash but provides free advertising or discounted insurance to the business in return for referrals.

Both arrangements may influence the recommendation and should be disclosed in accordance with MyEstate’s policy and applicable rules.

1.5 No payment does not always mean no conflict

A recommendation may still involve a connection even where no immediate payment is made.

For example:

• The provider is owned by a MyEstate director;
• The provider is part of the same corporate group;
• The businesses refer customers to each other;
• A staff member’s relative owns the provider; or
• MyEstate has another commercial relationship with the provider.

The relationship should be reported internally and disclosed where it could affect how the customer understands the recommendation.

Lesson 1 key point

A referral arrangement includes any financial, commercial or connected-party benefit that could influence, or appear to influence, a recommendation.