When a client’s needs are beyond your skill set

The quandary

Your client operates a concert-planning business with specialized insurance needs that your usual roster of insurance experts (you’re not insurance-licensed) can’t provide. However, one insurance expert offers you a name to try, saying he hasn’t heard anything negative about this professional. How do you proceed?

The expert

Natasha Knox Financial planner, Pax Planning New Westminster, B.C.

I wouldn’t consider the proffered name a recommendation because the professional hasn’t been vetted by me or anyone I trust. I would research whether this person has ever been sanctioned. Then I would contact them to introduce myself and vet them, positioning my reaching out as a way to add to my referral network.

My assessment would include how quickly they responded to me and whether they expressed interest in acquiring a new client. During our conversation, I would also assess their follow-up and client care processes, especially if my client would require an ongoing relationship. And I would note their years of experience, professional education beyond regulatory requirements, and compensation disclosure.

If I decided to refer my client to the person, I would clearly state that we don’t have a relationship and that I haven’t worked with them.

There might be some instances where I wouldn’t know enough about what a professional does to assess their fit for my client’s needs. In such cases, I would provide a referral only if someone in my network has the knowledge to make the assessment and offer me a suggestion.

I regularly schedule time to meet with other professionals so that I have a substantial referral network, because I like to give clients a few names and not every person will be the right fit. Plus, I want to establish referral relationships as a way to promote accountability to the client.

My referrals don’t involve fees, nor do I expect referrals in return.

Referrals by the book

Rule 26 in FP Canada’s Standards of Professional Responsibility says CFP certificants have an obligation to take reasonable steps to ensure a third party to whom a client is referred has appropriate qualifications to offer their services.

Guidance related to the rule says that, where appropriate, CFPs should get the client to acknowledge in writing that a referral was made on the client’s behalf and that the client consented to disclosing their name, contact information and other details.

CFPs must also disclose, in writing, contingency or referral fees that they or their firms receive.

The IAFP’s Professional Standards of Practice says financial planners should seek help from other consultants when developing recommendations related to topics outside their area of expertise. The standards cross-reference the IAFP’s code of ethics, including Tenet 2.3, which says RFPs should get a client’s permission, preferably in writing, when disclosing the client’s affairs to another person.

The MFDA, in Rule 2.4.2 Referral Arrangements, says a client must not be referred to a third party unless the MFDA member first takes reasonable steps to satisfy itself that the third party has the appropriate qualifications to provide the services, and is registered to provide the services (if applicable). A referral arrangement is defined in the rule as including direct or indirect compensation. Written disclosure of the arrangement must be provided to the client.

To contribute your own ethical dilemmas or conduct quandaries, please email Michelle Schriver by Oct. 10.