Lets talk about fee based consulting

Mar 03, 2023

Is the person you are paying to help arrange and organize your employee benefit plan or retirement plan earning their money? It’s a question that a broker will often wonder, typically around renewal time. That internal conversation often depends on the commission amount, and what happened that year. As client relationships grow over time, some years plans require more attention than others. Some years you can confidently say you earned your money, other years you show up with doughnuts. 

Most businesses don’t care so much about embedded advisor fees. This is because they don’t understand how they work, they might not know the total amount, and there is almost never an alternative. In my career I’ve found consistently the easiest new clients to acquire are the ones who decided they could save money by not having an advisor at all and just dealing directly with the insurer.  There is one time that “you get what you pay for” is always true – when you choose to pay nothing. 

Do you understand a portion of your premiums are siphoned away from the program to pay for your advisors services? 

Do you understand the effect that redirection of funds has on the mechanics of plan costs? Do you know how much you are paying in fees?

Embedded fees in group benefits matter because insurance companies design benefit plans to increase in cost over time. If your advisor fees are built into that model, your fees are also designed to increase. It’s a great business model for everyone except the customer. If you’ve operated a plan that has ever had a double digit price increase at renewal, that probably means there have been years where you have given your advisor a double digit raise. Costs go up more than they go down, so that means the juicy raise you conferred on your representative last year is likely permanent.

How about group retirement? Whether you offer a pension or an RRSP plan, most commonly, group savings plans pay for advisors by building in some additional margin into the investment management fee plan members pay. In practice whatever percentage this is, raises the bar on what the market needs to return for your savers to hit their goals. It’s like a parachute on a race car. Fees put a drag on the growth of your savers nest eggs over a long enough time, every amount added matters.

What is the fair amount to pay for your benefits advice? We feel a better question is, how can you know you are getting good value if you don’t understand what you are paying?

We believe that trust is the core component and the first step in any client relationship, and this is why compensation is the first point to address. We offer a few different fee models, and want you to make the choice. 

This way you will understand expectations from the start, and you can be your own judge as to whether or not you are receiving fair value. 

If you are curious to learn how this might work for your plan, reach out for a consultation. I guarantee it will be a different conversation than you’ve had before. 

Click here for a link to my calendar


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