Referral fee

Any compensation, consideration or benefit, cash or not, received from or paid to others for recommending products or services. Standard VI(C) requires it to be disclosed before the client engages the service.

Where you will meet it

Referral fee appears in 7 learning outcomes on the CFA syllabus. A few of them:

• Put the Referral Fees standard, VI(C), into practice
  CFA Level I · Ethical and Professional Standards

  “The Standard does not prohibit referral fees; it refuses to let them be invisible.”

• Explain what the Code and Standards expect of members ethically, covering every standard and its subsections
  CFA Level II · Ethical and Professional Standards

  “Investment Analysis covers reasonable basis, communication and records, Conflicts of Interest covers avoiding or disclosing conflicts, priority of transactions and referral fees, and the seventh group is Responsibilities as a Member or Candidate.”

• Explain the part played by outside specialists and advisers in helping wealth managers serve their clients
  CFA Level III · Private Wealth Pathway

  “Any payment or benefit received for a referral, or paid for one, must be disclosed, as appropriate, to the employer, clients and prospective clients under Standard VI(C) Referral Fees.”

• Show firm command of the Code and Standards by applying them to professional integrity cases under Standard VI, Conflicts of Interest
  CFA Level III · Ethical and Professional Standards

  “Under VI(C), any referral arrangement, such as a fee paid to a consultant for introducing a pension client, must be disclosed before the client signs up.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with R · Glossary