We are more than a third of the way through 2013 and most benefits advisers still have not committed to a plan to adapt and change in light of the tumultuous changes occurring in the marketplace. Last month we discussed how many of the market survivors will have mastered market segmentation. They will carve out employer groups with common characteristics - like size - and organize their resources to provide expert counsel, advice and cost-effective service to their clients. And most importantly, this group is accelerating their organic growth and improving their client retention.

So what else will the survivors do differently? Universally, they have realized that their competitive advantage and value proposition cannot be as the access point to products. That day is long gone. They know their value to their clients emanates from their expertise and counsel. They are highly consultative and strategic in their approach to client engagement. They understand their client's core values and critical business issues. They create benefit strategic plans for their clients, conduct stewardship meetings with their clients like their property and casualty counterparts, and know that their clients need a formalized process for managing change.

 

A new path

These forward-thinking advisers are also evolving their own business models. Many are now charging consulting fees either as a monthly retainer or a per employee, per month fee. Some have now developed expertise in self-funded plans and are advocating such arrangements, even in the smaller case market. Others have decided to offer voluntary benefits to the majority of their clients as a new method of monetizing their client relationships. They've realized that they need to make up for commission revenues that have seemingly evaporated in the last 18 months. And with the increasing likelihood of gaps in coverage, they know that employees have a critical need for voluntary coverages. A number of advisers are now offering executive benefits as well. And a select group is now offering HR consulting services and payroll as they position themselves as human capital consultants.

This allows them to offer a very wide array of outsourced services to their clients, and thereby make themselves relevant to their clients in new ways. Some have even realized that in the small case market many clients will no longer offer group health coverage, so they have created business units to provide individual health insurance through employer-sponsored programs.

You might be asking yourself, why should I ever consider becoming a human capital consultant? Why would that be necessary? The survivors already realize that competition and dis-intermediation will result from other emerging competitors: payroll firms; retirement planning specialists; property and casualty brokers; even voluntary benefits firms (which historically are very sales oriented) realizing that they can take over the account from the unsuspecting group health broker.

Can you afford to allow this to happen before you make plans to change? Many industry observers estimate that advisers have 12-24 months to adapt or run the risk of seeing revenues decline 30%-40% due to commission reductions and client defections. It's not too late, but you need to commit to change now. Tell me about changes you implement and I will share it with other readers.

Kwicien is managing partner at Baltimore-based consulting and advisory services firm Daymark Advisors. Reach him at jkwicien@daymarkadvisors.com.

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