When I say Bernie Madoff, what do you say? Without more than a second, you might generate sinister synonyms such as “thief,” “crook,” “con-man,” or “man with no ethics.” The list could go on and on.
And as we all know, the sad fact is that the damage Madoff inflicted was not just monetary. He also crushed the public’s opinion of the advisery community. Those of us in his wake have been given the task of raising the industry’s ethical bar. However, the good news is that out of the wreckage, more efficient and transparent processes can be established.
Looking at our client relationships, we must take on the ethical challenges they present.
Despite the dismal economy, the employee benefits field flourishes. In fact, it is drastically more crowded today than it was thirty years ago. Not only do advisers provide services, but also non-traditional entities, such as payroll and accounting firms with corporate licenses and P&C agents. In this environment, the broker-versus-consultant discussion is rarely considered.
Nonetheless, benefits brokers must contend with the ethical dilemma of whether to act as brokers or consultants on the behalf of their clients. And so, the question I ask you is, when is it appropriate to go from a broker relationship with a client, to that of a consultant?
Clients must be treated as we ourselves would like to be treated in the same position. At some point, a certain conversation must take place. Here is how it might sound:
“As your broker, you are paying me (fill in the blank) for servicing your (fill in the blank). If I was to work as your consultant, you would pay me (fill in the blank). I estimate the average hours I have worked for you is (fill in the blank). It appears I could save you an estimated (fill in the blank) per month by switching our relationship from one of broker to one of consultant. Ethically, Mr./Ms. (fill in the blank), I want fair compensation for my expertise, but it seems you have grown to a point where we need to address how I am serving you.”
The key issue: Size matters
Okay guys, no crude jokes here . . .
Here’s the dilemma in numerical terms: If a client’s covered employees increase from 75 to 600, at what point do you say to them, “You’re paying me too much—you should fire me as your broker, and hire me as your consultant”?
It is vitally important that ethics be reintroduced into the minds of the public when it comes to employee benefits advisers. New consumer confidence means more business and a healthy foundation for our industry from which growth may continue.
Are there any burning ethical issues that you believe our industry needs to address? Please let me know in the comments.
Arnoff is author of The Three R’s of Employee Benefits: Recruiting, Retention, and Rewards
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