The contingencies controversy can give agents a competitive advantage.
If I had a thousand dollars for every pound of paper written on the contingency debacle, I could retire young (or younger!). Here’s what we all need to understand: The contingency flap did not involve the typical agency agreement and contingency contract. These alleged payments concerned specific overrides on specific placements. In some cases, brokers were even accused of steering business to certain companies because of higher commissions, or obtaining inflated quotes to justify placing business with the selected carriers.
The controversy certainly gave our industry a black eye — but it wasn’t a deathblow to successful Consultative Brokers. In fact, the firestorm offered significant opportunities for those of you who understood how to work with Consultative Brokerage and communicate your Value Proposition through Total Cost of Risk (TCOR).
Here’s why:
- Buyers have become increasingly wary. More astute buyers are asking, “What’s your total income on my account?”
- Brokers have become more “transparent,” encouraging clients to understand fully the brokerage compensation system.
- Total Cost of Risk has become more critical. Brokers who understand how to communicate TCOR effectively are able to offset the sticker shock that some clients might feel after the broker’s income is revealed.
As the contingency litigation winds down, the winners have been firms and brokers that know how to charge for their services and communicate their true value. It doesn’t really matter what the compensation system looks like. Consultative Brokers are standing tall, without shrinking from a client discussion about their income. They’re prospering, writing new accounts, and retaining their largest accounts, with no reduction in revenues. They’re asking, “What’s all the hullabaloo?”