Controversy caused by investigations into the conduct of large brokers has had at least one very positive outcome, according to the leader of a major brokerage firm.
“There has been one thing that has come out of it that the industry probably never would have done on its own that I think is very positive–and that is transparency,” said J. Patrick Gallagher Jr., chairman, president and chief executive officer of Arthur J. Gallagher & Company in Itasca, Ill.
He pointed out that while four or five brokers have committed to transparency, there are still “thousands of agents and brokers in America that have not necessarily signed on to that. But I believe the market will eventually be transparent because the four largest [brokers] are driving that–and I think the customers really like it.”
In fact, he said, added transparency has enhanced client relationships. “We've always been well into the 90s in terms of our retention [percentage]–but our retention has actually improved,” he said.
While this can be partly attributed to the softening market, he said, “I also contribute some of it to this dialogue we're having now, which is, 'Here's what you pay us.'”
That dialogue gives the client an opportunity to “agree or disagree on your level of compensation,” Mr. Gallagher added. “I think that's a very professional business discussion that every other financial professional in the world has to go through, and yet the broker/agency world didn't have that before the investigations.”
He continued that transparency sets up a “completely different conversation” with the client that is “extremely healthy.” It also gives the broker an opportunity to “truly explain our value proposition–and we add a lot of value.”
Because transparency is so important to the market, he observed that risk managers “really ought to commit to only doing business with brokers who will commit to being 100 percent transparent.”
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