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A financial services lawyer has warned practitioners to tighten their referral systems and distribute appropriate disclaimers, stating clients may otherwise have recourse in the event of a poor referral.
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Lawyer warns accountants to 'tighten' referral systems
20 August 2015
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Speaking at a seminar in Sydney, DBA Lawyers director Daniel Butler said it is vital that accounting practices that are not applying for a limited or full AFSL or becoming authorised representatives reduce their risk of claims against them by providing written disclaimers and ensuring staff only refer other businesses approved by the firm.
“There have been firms sued over the years for a mere referral, where [the] referral has gone pear-shaped and the client has sought damages,” said Mr Butler.
Disclaimers issued by a firm need to make it clear that the business does not hold a licence and that the client is being referred on to someone who does hold a licence to give a particular type of advice.
“If you’re receiving any fee or commission [from the referral] you must also disclose that to your client because it may influence their decision about you being conflicted in relation to that referral,” he said.
Ideally, firms should provide two or three names for a referral, he added.
“It’s generally best to say to the client, ‘You seek these out and do your own due diligence to consider which relationship, which cost structure and which firm suits your needs best’.”
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He also recommends firms implement a ‘referral panel’ to ensure clients go to a firm-approved referrer.
“[You] want to have the communication process clearly documented, particularly for your staff, so that any referral is within the firm’s guidelines,” Mr Butler said.
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