Saturday, November 6, 2010

Shifting From a The Traditional "Commission Based" H&L Brokerage Model To A "Fee Based" Consulting Model?

We at BenefitPlace (.biz)  &  BP Trade Show (.com) have long been discussing the feasibility of a shift from traditional "Commission Based" compensation to a "Fee Based" system. Our interest in this shift pre-dated Health Insurance Reform, Ratios, etc.  As carriers have reduced the systemic commissions and renewals, we have noted increased interest and discussions on this topic among Insurers and Brokers within Social Media Networks such as Linkedin and Plaxo.. 

Having been involved in the Financial Services Markets in the '70s, I witnessed the same type of shift.  Discount Brokerage and Online Services took their pieces of the pie - leaving Traditional Stock Brokers with a group of clients who were sincerely looking, and willing to pay, for advice. Traditional Stock Brokers who shifted to the "Fee Based" model, and became Consultants, have been doing extremely well and enjoying the positioning of "Trusted Advisors"! 

The same may hold true for the Insurance & Benefits Marketplace!  Individuals, Employers & Employees who are generally to busy to research, select, and implement integrated Insurance / Benefit Plans may gravitated to, and be willing to pay for, Broker Advisors who are willing to invest the time to work with them to meet their specific needs. 

I think the biggest question may be - How to structure the pricing?  Using the Financial Services Model which looks at a "Fee" plus Percentage of "Assets Under Management" might have some application. Our research team is looking at the concept of a Fee plus Percentage of Insurance or Premium Under Management for Brokers and Consultants in the Insurance & Benefits Industries. 

As the impact of reform and shrinking commissions unfolds, it will be interesting to see how the Broker/Agent Community reacts!

If you would like to contribute your ideas to our research, please share your thoughts or email:!


BenefitPlace hopes you will use this forum to respond to posted comments and share your ideas, questions and expertise related to the overall Employee Benefits and Individual insurance marketplace. Thanks for joining us!