Why do brokerage firms pay referral fees?
Brokerage firms pay referral fees because obtaining a referral and paying a fee is almost always more cost effective than other means of obtaining clients. Brokerages that are offered a chance at a referral are faced with the choice of taking the referral and paying a fee, or spending the time and money necessary to attract a completely new client. Due to the high monetary costs of marketing to new clients, the time it takes to create a marketing campaign and the risk that the campaign will fail, brokerages are happy to take referrals when the opportunities present themselves.
