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Petra, a relevant provider, refers clients who need wills to a law firm run by her brother-in-law, which pays her A$200 for each referral. Standard 3 of the Code says 'You must not advise, refer or act in any other manner where you have a conflict of interest or duty.' Petra … (i) breaches Standard 3 by making these referrals while she receives the payment. (ii) would remove the conflict by telling each client about the payment before referring them.
Statement (i) is true: Standard 3 of the Financial Planners and Advisers Code of Ethics 2019 prohibits referring where the adviser has a conflict of interest, and a payment for each referral, on top of a family link, gives Petra a personal interest in where her clients go. The payment is also a third-party benefit, which Standard 7 allows only where the Corporations Act 2001 expressly permits it. Statement (ii) is false: disclosure tells clients about a conflict but does not remove it. Petra would need to stop taking the payment and refer on merit, for example by giving clients a choice of unrelated firms.
Disclosing a referral payment does not remove the conflict it creates.
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