The Consultative Broker™ Briefing
Volume VII, Number 9
A Free Publication of C.R. Ekern & Company
888.670.1177
www.crekern.com
Copyright, C. R. Ekern & Company, 2007

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A Closing Window of Opportunity

Over the course of the past several years we have exhorted, cajoled, pleaded, and even begged our broker clients to take a long look at their compensation structure.  Even before the Spitzer Investigations we talked about the need to go from a commission to fee-based selling.  Not for reasons of transparency, but because it makes the best business sense!

Here is the reason why we have extolled the virtue of Fee Based Selling for some time . . . It is the only win-win compensation formula.  When the marketplace dramatically increased we urged our broker clients to implement more fee based compensation.  It was our opinion that the best time to do this was when the prices of insurance were rising dramatically.   By switching to fee based compensation it allowed a broker to assure a client that they were not “profiteering” from a client’s misery.

Of course there is one more important reason to switch to fees during a time of drastically increasing prices.  Locking in a fee at a slightly lower income protects you against a time of drastically decreasing prices!  It is the old “Live by the Sword, Die by the Sword” viewpoint.

So, in keeping with our Consultative Brokerage philosophy of bringing clients value, here are some things you need to consider:

Timing is everything - The best time to talk with a client about switching to a fee is when it is in their advantage economically to do so.  If you wait until it becomes about your income . . .it’s too late!

Your resources have value – By approaching your clients on a fee basis, it forces you to deploy resources and value their impact.  Those of you that have these resources are well on the way to differentiation.

Many of your competitors can’t sell fees – In the event your competitors are not Consultative Brokers, they don’t know what value they bring clients - other than selling them insurance.  Therefore, they are afraid to talk with clients about fees.

Never use fees as a point of competition – Some brokers have fallen into the trap of using fees as a way of selling a cheaper product.  They will show the client how much commission a broker is taking and then point out how they can provide the insurance for a cheaper fee.  DON’T DO THIS!!!!  The brokers that use this method have just made their compensation a commodity.  They are well on their way to being out of business.

You must offer outcomes – Working on a fee allows you to better manage client expectations.  At the beginning of the year you and the client, as partners, determine what goals are important.  Together you agree on what will be considered a successful business relationship.

Implement gain-sharing – As part of your fee structure, add a provision for gain-sharing.  In the event you help a client by exceeding expectations in cost reductions (other than premiums), the client then agrees to share part of the gain with you.  This must be part of the fee agreement and spelled out completely.

So, now the window of opportunity is closing rapidly.  Those of you that took our advice are well on your way to establishing a solid business model that will sustain you throughout the coming years.  The rest of you have a closing window to implement this approach on your top accounts.  After that time, the falling prices may erode your income past the point of no return.  Don’t wait until it is too late to implement a compensation system that is win-win.

Best regards to all Consultative Brokers,

Rob Ekern
President
C.R. Ekern & Company

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Consultative Brokerage® Techniques are utilized by agents and brokers across North America in the development and retention of upper middle market revenues.  The Consultative Broker Briefing is delivered electronically free of charge to selected agents, brokers, and other insurance professionals across North America.  To subscribe to The Consultative Broker Briefing, please click here.

Copyright 2007 C.R. Ekern & Company