Monetary rewards for client referrals raise debate

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The debate may have past on whether to reward clients sending business a broker’s way, but the question of when to send often hefty gift cards -- and whether to disclose them – is very much alive.

“I send out gift cards to clients who’ve referred another deal to me after the deal has been signed or I’m very confident that it will close,” said Susanna Penning, a high volume agent with Oriana Financial and based in Ottawa. “They’re usually for $50 and they’re usually geared toward the client. For example I sent a $150 gift card for Home Depot to a referring client who is now renovating.

Regardless of the face value on those gift cards, Penning always discloses it to the referred client, although doesn’t include it in the contract’s disclosure terms.

Many brokers aren’t in fact going that far even as they ramp up the use of referral rewards for clients recommending them to family, friends and associates. Their lapses in transparency have raised some concerns among industry veterans worried about possible compliance breaches.

That debate is largely a moot one if the broker switches the point of reward, a CMP Top 50 broker working B.C.’s Lower Mainland told

“I do generally hand out gift cards to clients who refer business to me, but I do it at the point of referral not at closing or when the deal is signed,” Dustan Woodhouse, with Dominion Lending Centres Canadian Mortgage Experts, told “So I’m not paying referrals for completed transactions, but for just for the referral.

“We have to reward the behaviour and that’s the point of referral.”

Penning presents her gift cards later in the process, at signing, although all referring clients get a prompt thank-you email.

“I send the gift cards then, simply because of the cost factor considering my whole business is referral,” said Penning, who realized a funded volume of $33 million last year. “In sending the card for deals that will close, I’m able to make it $50 instead of a $10 Starbucks card and that substantially increases the incentive to refer.

Woodhouse isn’t so sure, arguing small rewards sent immediately after the referral do a better job of engendering goodwill.

“You’re giving that person an instant thank you,” he said, “and the flip side is that is if you’re only sending them a material thank for files that complete, you may be setting yourself up for dwindling referrals.”

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