Fee-based benefits firm versus broker: What to consider before making the switch
In this article, we’ll address some questions and concerns employers must answer before switching to a fee-based benefits firm.
Employers rely on benefits advisors to help them maximize the return on their benefits investments. However, some people, including myself, believe that the traditional revenue model used by brokers undermines their ability to achieve this for employers. Seeing the influence benefits advisors have over procurement and purchasing decisions, some employers are considering turning to a fee-based benefits firm. While the promise of enhanced returns on benefits investments is alluring, there are several factors employers need to consider before making the leap.
In this article, we’ll address some questions and concerns employers must answer before switching to a fee-based benefits firm.
Q) How is the client experience different for employers who work with benefits brokers versus fee-based firms?
Since no two brokerage or fee-based firms are the same, the client experience depends on the firm’s process, scope of service, and the pedigree of their team. Be sure to evaluate the scope of services offered and the compensation structure being proposed. If the compensation structure does not align with your organization’s goals, find alternative proposals.
Q) Are benefits teams at companies equipped to handle this type of change in process (working with fee-based firms versus brokers), or are there often changes in job roles and descriptions at companies that switch to fee-based firms?
Companies often switch from traditional brokers to fee-based firms because they want better returns on their benefits investments. However, fee-based firms usually don’t offer free quotes for insurance products, so switching to them can feel like a leap of faith, even though it won’t affect your current coverage. While fee-based firms generally offer a more comprehensive range of product options, there’s no guarantee that these options will immediately provide more value to your organization. Therefore, finance and HR teams must understand a firm’s procurement process, scope of service, and fee structure to make informed decisions and ensure mutual success.
Q) Are benefits teams at companies equipped to handle this type of change in process (working with fee-based firms versus brokers), or are there often changes in job roles and descriptions at companies that switch to fee-based firms?
Whether switching to a fee-based firm or another brokerage firm, getting clarity on roles and responsibilities between parties is essential for a successful working relationship.
Q) What can companies expect to win over stakeholders and gain approval to switch to a fee-based firm over a broker?
Since many employers do not have full visibility on how their benefits broker gets paid, understanding the financial ramifications of switching from a benefits broker to a fee-based firm takes some attention. If your broker hasn’t disclosed all forms of compensation as required under the Consolidated Appropriations Act of 2021, request it from them.
The bottom line
While switching to a fee-based benefits firm can offer advantages, it’s important to weigh the pros and cons carefully. By understanding the differences between brokers and fee-based firms, anticipating potential challenges, and effectively communicating with stakeholders, companies can make an informed decision that aligns with their long-term goals.