Property consultant Alex Goldstein questions whether referral fees are in a client's best interest

On my travels, I often hear of conveyancing solicitors having to give away a sizeable portion of their fee to other associated professionals, as a kick back fee to say "thank you” for sending a client their way or agents demanding that their EPC consultant or photographer gives them a referral fee for the business.

Whilst, in theory, they declare this to the client, I question if this is the case and if clients understand it all.

The problem is the potential lack of full disclosure, though it runs deeper than this. If you were a client who was referred to a mortgage broker for example, how can you be sure that the broker in question is the best possible fit for your needs and requirements?

Could there be a more appropriate broker out there who would do a better job but because they won’t offer a kick-back they don’t get a look in?

I regularly get mortgage brokers throwing themselves at me, all offering bigger referral fees than the last and every time I politely decline, much to their annoyance.

The fact that there is a monetary sum or a form of incentive running behind the scenes means that the agent always feels obligated to point clients in a particular direction, whether this is the right decision or not.

This, of course, comes back to whether the agent and indeed mortgage broker in this example were looking in the clients’ best interests?

No more is this more prevalent than in the sports sector, which I have had the privilege to work in for a number of years. I regularly hear of sports agents pushing their clients in a particular direction, all because they stand to gain a significant kick back fee.

Regrettably, the former Welsh football captain Craig Bellamy recently wrote about his “trusted advisors” who suggested various directions for his finances. Craig now owes £1.4m to HMRC and was recently declared bankrupt.

This is a sad fall from grace, given that at the peak of his career he was earning £1.8m per year. I just wonder if his circumstances would be different if he had been given the right advice from the outset with zero kick backs running behind the scenes?

So the next time you get pointed in a particular direction, just make sure there isn’t an incentivised bias at play. If there is, just make sure you walk away and they can take their toddler tantrum and pink crayons with them.

Alex Goldstein is an independent bespoke property consultant in Yorkshire and London, www.alexgoldstein.co.uk. Tel: 01423 788377