Can a lawyer accept regular client referrals from a financial-services company without sharing fees with it?

Plain-English summary

A financial-services company sold products such as portfolio management, insurance, securities, annuities, and mortgages. When a nonlawyer representative learned that a client needed estate-planning documents (a will, trust, or durable power of attorney), the representative told the client those services must come from an attorney and offered to have an attorney the company had worked with contact the client. If the client agreed, a referral went to that lawyer, who then took the client's information, recommended and prepared the needed documents, and was paid a fee directly by the client with no fee-sharing. The lawyer had no ownership interest in the company, and billed the company at the regular rate for any legal work done for it. The inquiry, prompted by a Bar News article on nonlawyers who mass-market trusts, asked whether the lawyer could ethically accept these frequent referrals.

The committee said RPC 1.4(b) requires a lawyer to explain a matter enough to let the client make informed decisions, and that here the lawyer gathered the client's information and made an informed recommendation, with no facts suggesting the representation was materially limited by responsibilities to the referral source; so there was no RPC 1.4(b) violation. It said the lawyer must independently determine whether RPC 1.7(b) is implicated, that is, whether the representation may be materially limited by the lawyer's responsibilities to the company or by the lawyer's own interest in continued referrals, and if so, the lawyer must reasonably believe the representation will not be adversely affected and obtain the client's written consent after full disclosure. The committee said the absence of fee-sharing or any quid pro quo distinguished this arrangement from the perils described in the Bar News article, California Formal Opinion 1997-148, and WSBA Informal Opinion 2068, because the referral source and the lawyer remain independent with no tradeoffs. Its response was that the arrangement as presented involves no ethical impropriety under RPC 1.4(b) or 1.7(b).

Currency note

This opinion was issued in 2004, before the Washington State Bar Association's adoption of the 2006 revisions to the Rules of Professional Conduct. RPC 1.4 and 1.7 kept their numbers in 2006, but RPC 1.7 was restructured as a concurrent-conflict rule. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

In practice

Under the Washington rules as they stood at the time of the opinion, the committee approved the referral arrangement on the stated facts: no fee-sharing, no quid pro quo, and independent legal judgment. It held there was no RPC 1.4(b) problem because the lawyer obtained the client's information and made an informed recommendation. It made the RPC 1.7(b) question a matter for the lawyer's independent assessment in each case: if the representation may be materially limited by the lawyer's responsibilities to the company or by the lawyer's interest in future referrals, the lawyer must reasonably conclude the representation will not be adversely affected and obtain the client's written consent after full disclosure. The committee tied the favorable result to the absence of fee-sharing or tradeoffs.

Common questions

Q: Can a lawyer take regular referrals from a financial-services company?

A: The committee said yes on these facts, where there is no fee-sharing or quid pro quo and the lawyer's judgment stays independent; the arrangement did not violate RPC 1.4(b) or 1.7(b).

Q: What turns an acceptable referral relationship into a conflict?

A: The committee said the lawyer must assess RPC 1.7(b): if the representation may be materially limited by responsibilities to the company or by the lawyer's interest in continued referrals, the lawyer needs a reasonable belief it will not be adversely affected and the client's written consent after full disclosure.

Q: What distinguished this from the trust-mill arrangements the committee warned about?

A: The committee said the absence of fee-sharing or any quid pro quo set it apart from the perils described in the Bar News article, California Formal Opinion 1997-148, and WSBA Informal Opinion 2068.

Background and rules framework

The opinion interprets RPC 1.4(b) (Model Rule 1.4, communication; explaining a matter so the client can make informed decisions) and RPC 1.7(b) (Model Rule 1.7, conflicts of interest; material limitation by the lawyer's responsibilities to a third person or the lawyer's own interests). The committee read the two together to allow referrals from a financial-services company where the lawyer's independence and the absence of fee-sharing keep the representation free of material limitation.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.4 / Washington RPC 1.4(b) (communication; explaining a matter for informed client decisions)
• Model Rule 1.7 / Washington RPC 1.7(b) (conflicts; material limitation by responsibilities to a third person or the lawyer's own interests)

Other opinions cited:

• California State Bar Formal Opinion 1997-148: nonlawyer trust-marketing arrangements (cited as a contrast)
• WSBA Informal Opinion 2068: sharing legal fees with a nonlawyer (cited as a contrast)

See also

• WA Ethics Op. 2068: Fee Sharing With a Nonlawyer
• WA Ethics Op. 2050: Mandatory-Referral Networking Clubs
• WA Ethics Op. 2038: Paying a Nonprofit for Referrals

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1312

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Advisory Opinion: 2061
Year Issued: 2004
RPC(s): RPC 1.4(b), 1.7(b)
Subject: Referrals by a financial services company

QUESTIONS PRESENTED: May an attorney ethically accept frequent referrals of clients for estate planning advice from a financial services company which is an occasional client where there is no sharing of fees or quid pro quo and the attorney’s judgment remains independent?

FACTS: A financial services company sells a variety of financial products and services such as portfolio management, life insurance, health insurance, property and casualty insurance, securities, annuities, and mortgages. A nonlawyer representative of the company counsels with the client during which the representative may learn that the client needs a will, trust, durable power of attorney, etc. The representative tells the client that those kinds of services need to be provided by an attorney and that they should contact their own attorney or they could have an attorney the company has worked with contact them. If the client expresses a desire to speak with the attorney with whom the company has worked, a referral is made to that lawyer. The attorney has the client complete a questionnaire, reviews it, and makes recommendations as to what estate planning documents are needed and then prepares them, for which the attorney is paid a fee directly from the client and does not share the fee with anyone. The attorney has no ownership interest in the referring company, and when s/he renders the company legal services, it is billed at the regular rate.

DISCUSSION: The inquiry was triggered by an article appearing in the Bar News dated March, 2004 entitled, “An Unholy Alliance: Nonlawyers Who Mass-Market Trusts, and the Lawyers Who Assist Them.”

RPC 1.4(b) states “A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.”

Here, information is obtained from the client, allowing the attorney to make an informed and rational recommendation as to what estate planning documents should be prepared and signed. The inquirer offers no facts, and none can be inferred, whereby the attorney’s representation of the client is materially limited by responsibilities to the person or firm making the referral, and thus there is no violation of RPC 1.4(b).

The attorney must independently determine whether RPC 1.7(b) is implicated - whether his representation may be materially limited by his responsibilities to the financial services company, or by his own interests in receiving further referrals and business from the company. If the representation may be limited, then the attorney must determine whether he reasonably believes that the representation will not be adversely affected, and the client must consent in writing after full disclosure.

The absence of a fee-sharing or quid pro quo for referrals distinguishes this inquiry from those ethical perils described in the Bar News article and California State Bar Association Formal Opinion No. 1997-148 and WSBA Informal Opinion No. 2068. Here the referral source and the attorney remain independent and there are no tradeoffs.

RESPONSE: Yes. The question as presented involves no ethical improprieties per RPC 1.4(b) or RPC 1.7(b).