Trust is central to financial advisers’ professional networks and referrals from clients, whether informal or structured, say planners.

Sydney-based Steps Financial director Antoinette Mullins refers her clients to accountants, solicitors, or mortgage brokers because they are “good at what they do” but says fee-for-referral models do not work.

“Over my career I’ve tried formal arrangements, where you sign a referral agreement and pay or receive referral fees or a share in insurance or loan commissions,’’ she says.

“In my experience, this never worked – clients know when you receive a fee from another professional and question your objectivity.

“Clients know that we’ve recommended a professional simply because they’re good, and really appreciate that we don’t accept or pay any referral fees.  We love working with self-employed female business owners, so we have a large network of professional women referral partners.”

Although Standard 3 of the adviser’s code of ethics says an adviser “must not advise, refer or act in any other manner where you have a conflict of interest or duty”, advisers are still able to receive a disclosed fee for the referral, if it is not given directly to the adviser.

Mullins says advisers must take time and be patient to build strong relationships with professional partners.

“If a partner sends you a referral, thank them and make sure you look after them like that’s your only client,’’ she says.

“The first few clients prove your worth as a planner, so make sure you invest fully to make the client experience positive – that gets back to the referral partner and can make all the difference in the future.”

Michael Miller of Canberra firm Capital Advisory says a challenge in referring clients to other professionals is ensuring a duty of care.

“For example, where a client is being referred for specialist life insurance advice, the referring adviser may take responsibility for verifying and providing home loan details, superannuation balances and personal goals, while the specialist life insurance adviser may take responsibility for the health information required for an underwriting pre-assessment,’’ he says.

Advantages for advisers who refer, is that professional networks are more likely to reciprocate says Queensland-based Dalton Financial Partners director Josh Dalton.

For clients it can save time and provide vetted and established networks of professionals in related areas.

“With collaborations, clients may just deal with us as their primary adviser which means we may deal with other professionals on their behalf,’’ Dalton says.