Money is never an easy subject, and in terms of broker compensation, it is a completely taboo topic in our industry. As I speak to broker groups, I regularly ask, "How many of you have anyone in any part of your life who works for you, but you have no idea of how much you pay them; you effectively give them a blank check?" Of course, no hands go up. Then I ask, "How many of you have clients for whom you work, who have no idea of how much they pay you?" And, of course, almost every honest hand in the room goes up.
This leads me to one obvious conclusion. As an industry, at least in our gut, we feel we're overpaid. My suspicion of this belief was confirmed recently when a producer told me the following.
"I keep having this nightmare that I'm running down the street buck naked dragging a huge bag of money and being chased by my clients."
You think maybe he's concerned that he's being paid more than he's worth?!
What's the financial reward for mediocrity?
There is no doubt that there are many in our industry who truly are overpaid. If you've read my articles in the past, or heard me speak, you have likely heard me say that the financial reward for mediocrity in our industry has been way too high. And, that's true. But I'm not writing to those who deliver mediocre value; I'm writing to those of you who (like my "naked" friend above) deliver great value but are still having nightmares about discussing it with your clients.
How much you are being paid is a conversation you must start having with your clients. However, that conversation has two sides to it. It can't just be about how much you are getting paid; it has to also be about the impact you deliver that makes that compensation a great value for your client.
Create a new standard
Summarize that value in a stewardship report, which is simply documentation of the hard work and value you have delivered to the client over the previous X months (provide the report at least annually). It doesn't have to be elaborate. In fact, a list of bullet points used to prompt the conversation is plenty.
When you sit down and create this report, your confidence in having the compensation conversation will go up as you see how much value you have truly delivered. We are an industry with strong brokers who help protect and build the businesses of their clients. Too often, we fail to give ourselves credit for the value we do deliver.
Understanding your value
Finally, don't underestimate or undervalue the actions that seem trivial to you. It's like the old story of the salesman who, while on the way to close a huge deal, had his car break down in front of a service station. He coasted into the service bay, explained his urgent situation, and asked the mechanic if he could take a look. After a quick assessment, the mechanic announced, "I can see the problem and can fix it. However, it's gonna cost you $500."
Thinking of the huge deal that was now on the line, the salesman responded, "Absolutely, please take care of the problem!" The mechanic grabbed a screwdriver, opened the hood, and made a quarter turn adjustment to a screw. The car started right up. The salesman, although delighted to get to his meeting on time, said, "Are you really going to charge me $500 for a quarter turn to a screw?" To which the mechanic responded, "Of course not. It's only $10 for turning the screw. The other $490 is for knowing which screw to turn and how far it needed to be turned."
Don't underestimate the value of your knowledge and the impact you have with that knowledge. Don't be afraid to charge $500 for making a quarter turn to a screw. For your clients, it may make all the difference in their world.
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