3 signs brokers are paying the hidden cost of ‘free’ (and what to do instead)

Originally published in BenefitsPro November 11, 2021

Who doesn’t like free stuff? We seek free samples at the grocery store, love buy-one-get-one-free sales, and covet free delivery. We’re inherently drawn to free — but there’s always a cost, though it may be hidden.

I’ve seen this play out over the years in the insurance industry, but never more so than today.

This begs the question: Why do we constantly hear about “free” when it comes to employee benefits, specifically when brokers and consultants provide these services:

  • Free COBRA administration
  • Free HSA / FSA administration
  • Free employee assistance programs
  • Free telemedicine
  • Free wellness programs
  • Free benefits technology
  • And my all-time favorite: free quotes

Despite these common practices, there’s no value in free, and eventually, the entity receiving the service for free doesn’t respect it.

Before you disagree or think that you’re immune, ask yourself if you:

  • Regularly give away services to secure a deal?
  • Consistently absorb the cost of said services?
  • Never turn away a client?

If any of these rings true, it’s give ely that you and your business are paying a hidden cost and may not even realize it.

Let’s take a look at each of these three red flags to break down why they’re a bad idea. Then we’ll offer some helpful alternatives to consider.

1. You give services away for free to win the business

I see it happen every day: You worry about what the competition is doing or how you can win the business. As a result, you quickly undervalue what you bring to the table as a consultant of choice.

But if you don’t win the business because you didn’t offer something for free, trust me when I say that you’re better off.

Unlike carriers who offer “free” benefits technology (that somehow finds its way into a client’s enormous premium) or payroll vendors claiming to be a one-stop-shop, you have the expertise and deep knowledge base to deliver quality benefits solutions they can’t. And that expertise is worth paying for.

2. You consistently absorb the cost of what you’re giving away for free

It starts innocently enough. In an effort to be helpful and provide value, you deliver your services free of charge to clients and then absorb the cost into your business. But over time, this leads to you working twice as hard for half the price. And the impact of those short-term hits multiplies against your bottom line long-term.

A better solution is to position your pricing. I’m asked by consultants from both top-ten firms and smaller, state-based shops about how to set pricing for benefits technology platforms all the time. If you’re a broker or consultant, there are two options.

One is providing the technology as long as you are the broker of record. This is a common practice and isn’t a bad deal, if disclosed upfront. The client knows that it’s part of your offering. Plus, going into it, they’re fully aware that if they change their broker, chances are they lose the technology. Most brokers I know who do this will bake the cost of the system into their consulting fee.

However, many of the folks we work with position technology in a different manner. Employee benefits and benefits technology are not the same, nor should they be treated the same. A strategic broker provides value to a client for what they deliver on the benefits side and also helps recommend options for technology solutions the company can utilize. The costs are different, and there is transparency in this since the two are not tied together. The partners we work with get incredibly competitive rates, so they pass these savings along to the client; the client then engages with us directly, and they don’t feel handcuffed to anything.

3. You never turn away a client

I’ll admit that when I started my business, I took any client I could get. And that worked … until it didn’t.

Some of those early clients quickly became problem children who didn’t value me, my time, or my expertise, causing me to lose precious hours (and revenue) and gain nothing but headaches. Slowly, I learned to vet my clients, ultimately selecting only those with whom I had mutual respect and shared values.

Here’s the thing: When you accept clients whose only consideration is price, they tend to demand the most for the least. And without any skin in the game, that behavior is understandable. But for you, it’s a race to the bottom.

Instead, be choosy about your clients. Resist the urge to say yes, and learn to say no, especially to those unwilling or unable to see and invest in your value. If a client isn’t willing to pay for it, are they really the client you want?

Remember, something “free” rarely is. So, brokers and consultants, think twice before giving away your services, absorbing their cost, or taking on anyone as a client. By avoiding these red flags and demonstrating your value, you’ll avoid the hidden cost of free.

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