I am a former solicitor who has spent the past two years developing an IT system to help firms manage referrals and monitor the results of their advertising campaigns.


The debate on whether referral fees add to clients' costs seems to be missing a basic point. A referral fee is simply a marketing expense - and in my experience, a very effective one at that.



To illustrate the point, I have analysed some figures from a client firm. Over the past 12 months, the firm spent £2,950 on advertising with Thomson Local - which generated only £5,842.50 in fees. Over the same period, the firm paid £6,200 in referral fees to a referrer who generated £49,490 in fees.



Each £1 spent on referral fees generated about £8 in fees, compared with £1 spent on advertising, which generated about £2 in fees. Why is nobody asking who pays for the ineffective advertising, as this is just as likely to drive up costs?



Those who argue that referral fees just add to the clients' costs are out-of-touch with the commercial reality of a severely competitive market-place. Banning referral fees will drive more work out of the profession, increase yet further the pressure on smaller firms, and force more firms to consider closing.



The answer is to improve compliance - lack of disclosure, inadequate disclosure, and failing to obtain an undertaking from the introducer can all be dealt with easily using IT systems already available.



Andrew Risbey, ProRefer, Hope, Derbyshire