Like pineapple on pizza, everyone has an opinion on conveyancing referral fees.
Since they were first permitted by the Solicitors’ Introduction and Referral Code 1990, debate has continued about whether it is ethical for Solicitors to pay for the introduction of work.
If you feel like stirring the pot, go to LinkedIn and post a positive view on referral fees and then brace yourself. The majority of people who comment on the platform about this topic favor banning referral payments.
Here’s a couple of comments a quick search throws up:
“All I can add to this post is that the sooner referral fees are banned the sooner these firms carrying out awful conveyancing services will go to the wall and we can return to a conveyancing industry where proper conveyancing is conducted.”
“Firstly as a department I’d get a hell of a lot more work, as referrers would actually start referring based on competency and quality. The big dogs (you all know of whom I speak) would suffer badly. Firms would then be able to price without worrying about being undercut.”
This article isn’t about whether they should be banned or not, that’s been covered elsewhere a thousand times over. Also please note I have no commercial links with panels and I work with law firms who pay referral fees and those who don’t.
Rather my question is whether the people calling for a ban have really considered what would happen if a ban came into force – the two comments above suggest perhaps not.
We’ve cleaned up the PI market
Since 1st April 2013, it has been an offence to pay or receive referral fees for personal injury cases.
Did that result in the ‘big dogs’ going to the wall? Did we see a huge volume of personal injury claims come flooding back to high street law firms? No.
Some CMCs who couldn’t adapt did disappear, some law firms did leave the market but what happened were operational changes for most and business model changes for a few.
Referral fees became marketing fees and CMCs were quick to realise that by adopting a “hot key transfer” process technically no referral was being made. Once a client confirms they want to be put in touch with a firm to pursue the claim the introducer transfers the call to the law firm without introducing them. The client gives all personal details directly to the firm – no referral is made which allows a fee to be charged.
In my own experience there is less personal injury work coming directly into high street firms now than there was before the ban. LASPO isn’t the only reason of course, but there’s no suggestion this helped.
But this wouldn’t happen in the conveyancing world
Ah but it would and the reason is simple. There’s far too much money involved for the conveyancing panels, large estate agency groups and mortgage networks to simply accept a referral fee ban and walk away. We’re talking about millions of pounds of income and the second there’s any real chance of a referral fee ban coming in, they will put the wheels in motion on plans a, b and c.
They would find a way to generate the same income as they do now and the effect on transparency could be worse than the current position. Exactly what that would look like I don’t know, perhaps like the PI market there would be a move to marketing collectives, firms paying large monthly sums to be on a panel for an estimated volume of instructions.
Or with the growing trend for more information at the start of the process, agents could use this to charge law firms for providing some initial due diligence, which of course will have a margin in for the agent. An even more basic example could be an agent requesting a monthly fee to advertise on their website or printed material.
A referral fee ban would be unlikely to cover these avenues as long as the payment was made as consideration for the provision of services.
On a local level dare I say some firms may just pay the referral fees off the books…..
Conclusion
If your foot is firmly in the camp of banning referral fees, just consider what that might mean in practice and what the real impact could be on your firm. I’m only scratching the surface here. Most importantly, pineapple on pizza is never ok.
4 Responses
There are Estate Agents and other “legal marketing companies” who already try to dress up referral fees as a “marketing fee”. We refuse to work with these companies and refuse to pay referral fees. We work on the basis that we are completely independent and our advice is therefore not compromised or have any risk of being compromised due to any outside agency influence of a referrer
There are referral fees and then there are referral fees. Paying an agent £100 for referring a case is incredibly different to paying an agent £550 for referring a case. Have referral fees but cap them at the lower figure. Agents should NOT be getting £550 for a matter. Ultimately it’s the client that pays as the Conveyancer will be under pressure to add additional extras to the bill to get the £550 back and despite what the SRA/CLC says and asks conveyancers to do, fees are not transparent!
I don’t pay referral fees.
A ban therefore has no affect upon me.
Those firms that pay them, good luck but I can’t help feeling it’s a bit sad to be so lacking in confidence that work has to be bought in.
Referral fees aren’t the issue. They alone don’t support poor quality firms, or make customers pay more.
Take a look at analogous industries. Referral fees have enabled the price comparison sites (moneysupermarket, comparethemarket, etc.) to drive down the price paid by consumers for car insurance, broadband, energy, current accounts, etc.
Conveyancing should be no different. There are elements of price, service, digital tools, etc. and a mover should pick the firm appropriate for their needs.