Adviser are still not pricing their services correctly and many are giving too much away, Kevin Trokey, partner and coach at brokerage advisory firm Q4intelligence, said Monday to National Association of Health Underwriters members at NAHU’s annual convention in Orlando, Fla. And part of the problem is that adviser often hesitate to have discussions about raising fees with client for fear of losing an account.
Instead of charging higher price for more and better service, Trokey says many brokers simply try to increase revenue by selling more products to as many clients as possible – a move that can spread advisory firms to thin.
In an effort to avoid compensation negotiations, Trokey said many brokers’ first idea for handling the loss associated with offering expensive services for free is to attempt to sell more products to as many clients as possible.
“We did a survey recently of a couple dozen agencies and asked them to help us calculate how much does it cost to go out and get books [of business],” Trokey said. “We broke out the calculator and asked them to run a scenario of a fully insured medical, dental, life and disability and what came back was an average cost $1,000.”
Based on that scenario, Trokey said, the brokerages were then under water an average of $250 on every account in the bottom half of their books — before even considering paying commissions, dealing with service issues or giving away any other valuable services.
“You might think that your agency is the exception, but if you go crunch the numbers, it probably is not,” Trokey said. One solution for brokerages with small clients that are not delivering substantial revenue to the firm is to let those businesses go, if only to make room for at least one large client, he said.
Free market fix
Fixing a firm’s business plan should not have to fall on government legislation or associations such as NAHU either, he added. Having a third party tell another third party what an insurer’s services are worth is not their responsibility.
“The free market will determine what compensation is,” Trokey said. “We all recognize that clients need help, need advice, need guidance, need whatever to make them happy, and I hear you loud and clear when agents say, ‘I have to be paid more to provide the services and the resources my clients now need.’”
Brokers give value to their clients by helping with insurance needs and by offering value-add services such as boosting employee advocacy and assistance navigating an ever-changing healthcare system, as well as helping clients stretch their healthcare dollars, he said.
“It is fair to recognize the real ROI potential of these investments like charges and fees for the additional ways you can bring value to your client,” Trokey said. “Commissions are not payment for the value you deliver to your client, but value that you deliver to the carriers."
Carriers are the companies that are in the product business, while brokers are in the advice and results business, he added.
Employers “will never see the value of your solution until they understand they have a problem that needs to be fixed,” Trokey said. “Every non-insurance solution solves a problem, every problem solved delivers value and clients will pay for that value. But, it starts with clients seeing that they have problems that need to be fixed.”
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