Debating Broker Compensation - Aligning Incentives for all Parties
This clip highlights a very powerful discussion I had with my guests on Episode 118 of @SelfFunded with Spencer.
This episode featured Cliff Favors and Winston Elliott of @LocktonCompanies
In this segment, we debated the optimal way to structure broker compensation, which historically has come in the form of commission.
The issue with tying broker comp to commission is that if the cost of their client's insurance goes up, that broker gets a raise.
However, if you decouple broker comp from premiums, and get paid in the form of a PEPM fee or a flat annual consulting fee, then it removes the disincentive to control the employer's cost.
Taking that one step further, both Cliff and Winston suggest you could also tie additional compensation to over performance, meaning they might get a bonus of they deliver savings above and beyond what was projected.
A consultant could also return a percentage of their comp if the plan underperformed.
At the end of the day, it is not my place to state how a broker SHOULD get paid.
That is between them and their client.
I am just trying to shine the light on the options, and recommend what I believe is optimal for all partiers.
Full Episode Here - https://youtu.be/B7Pyy7_vCMU?si=cZkDSzx2C4NYiJu7
