“There have been firms sued over the years for a mere referral, where a mere referral has gone pear-shaped and the client has sought damages,” said Mr Butler.

Disclaimers issued by a firm need to make it clear that the business does not hold a licence and that the client is being referred on to someone who does hold a licence to give a particular type of advice, Mr Butler said

“If you’re receiving any fee or commission [from the referral] you must also disclose that to your client because it may influence their decision about you being conflicted in relation to that referral,” he said.

Ideally, firms should provide two or three names for a referral, he added.

“It’s generally best to say to the client, ‘you seek these out and do your own due diligence to consider which relationship, which cost structure and which firm suits your needs best’,” he advised.

He also recommends firms implement a ‘referral panel’ to ensure clients go to a firm-approved referrer.

“[You] want to have the communication process clearly documented, particularly for your staff, so that any referral is within the firm’s guidelines,” Mr Butler said.