Before the Referral Becomes a Retainer: A Pre-Acceptance Discipline

Referrals are rarely neutral. A recommendation from an accountant, a consultant or another intermediary can arrive with an implicit promise of quality, a familiar route of communication and, sometimes, a commercial arrangement that is only partly visible to the client. None of that makes the referral unwelcome. It does mean the receiving firm should apply the same discipline it would apply to any other new instruction.

The central question is not whether the introducer is trustworthy. It is whether the firm can demonstrate, on its own file, that it knows who the client is, who is paying, who is advising and who is responsible. A short pre-acceptance routine answers those questions before the retainer begins.

Start with the introducer, not the instruction

Identify the introducer’s role in plain terms. Is the person a finder who makes an introduction and steps back? A co-adviser who will remain involved in the work? An authorised intermediary with its own regulatory obligations? Or simply a contact who happens to know the client? The answer affects the firm’s conflict checks, its engagement terms and the client’s expectations.

Ask for the introducer’s regulatory status where relevant, and record it. Confirm whether the introducer will communicate with the client on the firm’s behalf, receive copies of advice, or attend meetings. If the introducer expects to influence the scope or the fee, that expectation should be documented rather than discovered later.

Verify the client independently

Anti-money laundering checks belong to the firm accepting the instruction. They cannot be delegated to an introducer simply because the introducer already holds a file. Obtain evidence of identity, ownership and control in line with the firm’s usual risk assessment. Where the client is a company or other entity, identify the beneficial owners and understand the source of funds or wealth where required.

The introducer’s file may be useful context, but it is not a substitute for the firm’s own records. A brief note explaining what was relied on, what was checked independently and why any residual risk was accepted will make the position clearer if the matter is reviewed later.

Test for conflicts and confidentiality

Run a conflict check against existing clients, former clients and the introducer’s own interests. Consider whether the introducer has a commercial interest in the outcome, whether the firm has an existing relationship with a competing party, and whether confidential information held by the firm could become relevant.

Confidentiality needs the same attention. If the introducer will receive information about the client’s matter, the client should understand that from the outset. Information barriers may be appropriate where the firm acts for other parties connected to the introducer. The point is not to assume a conflict exists, but to show that the question was asked and answered.

Put the fee arrangement in writing

Referral fees, introducer commissions and shared billing arrangements should be documented clearly. The client should know who is paying the firm, who is invoicing whom and whether any payment is being made to or received from the introducer. An undisclosed commission can damage trust even where the underlying advice is sound.

The engagement letter should reflect the actual arrangement. If the introducer will pay the firm’s fees, say so. If the client will pay and the introducer will receive a separate fee, say that too. Where the firm’s professional rules require particular disclosures, make them in the client-facing terms rather than in an internal note.

Confirm who acts for whom

The client must understand that the firm acts for the client, not for the introducer. That sounds obvious, but referral relationships can create ambiguity. The client may assume the introducer has already approved the scope, or that the firm is reporting to the introducer as well as to the client.

Use the engagement letter to set out the client, the scope, the person responsible for instructions and the communication route. If the introducer is to receive updates, record the client’s consent and the limits of what may be shared. If the introducer is not to receive updates, make that clear internally so that informal communication does not undermine the position.

Record the decision

A pre-acceptance note should capture the introducer’s role, the client verification steps, the conflict check, the fee arrangement, the communication protocol and any conditions attached to acceptance. It need not be long. It should be specific enough that a reviewer can see why the firm accepted the work and who approved it.

Where the referral is declined, a short record of the reason is equally useful. It shows that the firm considered the relationship rather than simply failing to respond.

Keep the relationship under review

Referral relationships drift. An introducer who once passed on occasional instructions may become a significant source of work, or may begin to expect preferential treatment. A short annual review can test whether the arrangements still match the file.

Sample a handful of referred matters, check that engagement letters and disclosures were issued as intended, refresh conflict checks and confirm that fee arrangements remain accurately described. If the firm has a referral policy, test whether it is being followed in practice. The aim is not to make referrals cumbersome, but to keep them transparent. A well-documented introducer relationship is easier to defend, easier to explain to the client and less likely to become an awkward question at the worst possible moment.