More small and medium-sized employers are turning to professional employer organizations (PEO) in order to overcome HR challenges such as rising healthcare costs, ever-changing employment law compliance regulations, and emerging employee benefits trends.
PEOs are designed to help both a business and its employees
; providing access to improved health insurance plans (often at lower costs), modern HR technology, and new employee benefit offerings that otherwise would be unavailable or cost prohibitive by going direct to carriers.
But if business owners continue to switch to PEO services for benefits and HR, what does this mean for today’s brokers and financial advisors?
Not All Professional Employer Organizations Sell the Same
In an earlier post, we explored the top myths surrounding PEOs
and reviewed the 3 most common PEO selling models:
- Direct: A PEO engages and sells their solutions straight to small and medium-sized business owners.
- Broker-Only: The PEO works exclusively through a broker or financial advisor to offer their services to a client.
- Dual-Model: Some PEOs sell both directly to businesses and through brokers, essentially combining the two methods.
By working with a broker-only PEO, brokers stand to gain valuable business benefits through this partnership. Typical, brokers see an increase in 3 key areas:
1) Winning New Business
Working with a broker-only PEO enables brokers and financial advisors to offer new, in-demand products and services that are usually only available to Fortune-500 employers. And for clients, PEO services can reduce HR costs – the average ROI based on cost-savings for PEO clients is 27.2%
2) Competing More Effectively
Not only do brokers and financial professionals lose clients to their peers, clients are also leaving for direct-selling PEOs that offer bundled products at competitive prices. But partnering with a broker-only PEO enables brokers to offer the healthcare, benefits, compliance, and HR services they need to remain competitive.
3) Earning Recurring Revenue
When brokers close a deal with their broker-only PEO partner, they earn a recurring revenue stream through the residual-based compensation structure offered by the PEO. This commission is paid out for the entire time a broker’s client remains with the PEO. Often, a broker’s compensation is determined by a percentage of the client’s medical premium.
What Does a Broker-Only PEO Partnership Look Like?
The relationship that is formed between a broker and their PEO is meant to become a true partnership
. Throughout this process, brokers have access to their PEO’s subject matter experts in risk management, payroll, compliance, finance, employee benefits, and HR. Working with these professionals helps brokers ensure higher success rates with prospects and higher retention rates with current clients.
1) Identify an Opportunity
Together, the broker and PEO would review and qualify a potential client
. If there is a fit, the broker schedules a discovery meeting.
2) Qualify the Client
During the discovery meeting, the broker and PEO learn more about the prospect’s needs and discuss the business benefits of working with a PEO.
3) Develop a Proposal
The PEO representative crafts a proposal containing personalized HR solutions tailored to the client’s wants and needs. The PEO would review and prepare the final proposal with the broker prior to submission.
4) Deliver the Proposal
Next, the broker and PEO present the proposal to the client, answer any questions or concerns the prospect may have, and confirm a start date for the client.
5) Complete Contracting
Lastly, the broker and PEO would agree upon final pricing and timing with the client, complete all necessary paperwork, and schedule a kick-off meeting with the broker, client, and team-members from the PEO.
Brokers and financial professionals are facing more competition for new business and existing clients than ever before, especially from direct-selling PEOs. However, partnering with the right broker-only PEO can help brokers and financial advisors realize continued success.
If you’re looking for additional information on broker-only PEOs, download our eBook Broker-Only PEO: A Partnership That Can Grow and Protect Your Book