It is a fair offer, and you should take it seriously, because it usually arrives at the moment a broker realizes an account is at risk. Most employers who begin looking at a fee-only advisor will hear some version of it within a week. So here is how to tell whether the offer changes anything.

A fee changes how the broker is paid. On its own it does not change who the broker answers to. Those are two different questions, and the offer is designed to make them sound like one.

Question one: did the other money stop?

Legacy brokers, meaning the brokers paid on commission and carrier bonuses, receive their income in layers. There is the commission built into your premium, which is the layer most people know about. Then there are the bonuses, overrides, and contingent payments carriers and vendors pay to the brokerage based on the size and persistency of its book. “Going to a fee” often means the first layer is converted to an invoice while the other layers stay exactly where they were. The firm’s income now has a line you can see and several you still cannot.

That is why the first thing to look at is a revised written compensation disclosure, dated after the offer. It should show the new fee, and it should say, in plain terms, what compensation the firm will continue to receive from carriers and vendors on your account. If the answer is none, and the document says so, the offer is real on this point. If the document is silent, the answer is not none.

The distinction matters because the incentive does not come from the commission alone. It comes from every dollar that flows from a carrier or vendor to your advisor. As long as any of it does, the advisor is paid more when some products win than when others do, and the fee has changed the label without changing the arithmetic.

Question two: what is the fee for?

A commission is payment for placing a product. A fee should be payment for a defined body of work. If the broker cannot tell you what the fee buys, in writing, then the fee is a commission with a different name and the work is whatever it was last year.

Ask for the scope. It should state what will be done, by whom, by when, how often, and for how much: the market evaluation each year, the vendor procurement, the plan performance reviews, the employee communication, the compliance calendar, the escalation path when a claim goes wrong. At Health Compass every engagement runs on a scope like that, and the fee is a flat annual amount, invoiced to the company, that stays the same whether your costs rise or fall and no matter which products your committee chooses.

Question three: what does the agreement say?

This is the one most employers never check. Read your broker agreement and look for a sentence that obligates the firm to act in your best interest. Most brokerage agreements do not contain one, because the brokerage model was built to distribute products and the agreement reflects that. A fee does not add the sentence. Only a new agreement does.

At Health Compass the agreement itself binds us to act in your best interest and to meet fiduciary standards of loyalty and prudence, with every decision resting with your committee. That duty is independent of how much we are paid. It is the reason the fee can be flat.

The honest summary

If your broker’s offer comes with a revised disclosure showing no carrier or vendor compensation, a written scope, and an agreement that puts your interest first, then your broker has become a fee-only advisor, and you should say thank you and stay. That outcome would be good for you and good for the industry.

If the offer comes with a fee and nothing else, then what changed is the invoice.

You would never hire a CPA who was paid by the IRS, and you would not be reassured if the CPA offered to bill you as well.

Health Compass Consulting is a fee-only benefits consulting firm in Orlando, Florida. We are paid only by the employers we serve. We accept no compensation from insurance carriers or vendors in any form, and our fee is the same whether your costs rise or fall and no matter which products you choose.