Traditional small to mid sized brokers are in danger of losing their future revenues. This is a fact that many, but still not all brokers have recognised. Already the largest brokers have created consulting divisions that are making very significant profits and these brokers see their competitors as being the big four management consultancies, not other insurance brokers.

Why is all this happening?

• Insurance has become a commodity, with no real difference being seen by the public between the offerings of any of the insurers - so they chose a product based solely on the cheapest price.
• There is very little perceived professional skill involved in offering standard insurance products off the shelf. It is a low status "profession" when compared with accountants, lawyers, auditors and other fee- earning professionals.
• Insurers, over the past few years have created a situation where brokers are now dependent on them for service, now the insurers can squeeze the broker with impunity.
• Insurance cover is still restricted to risks and classes of business that were topical 50 years ago, when we had a thriving manufacturing based economy, and the e revolution was still science fiction. These products, the stock in trade of brokers, no longer reflect the real exposures of modern businesses.
• Insurer consolidations have reduced the choice.
• More is being offered online, customers in the higher income brackets all have internet access and are able to shop around for the best prices just as easily as many broker, and they do not have to pay commissions in the process.

However it is not at all bad news. Clients are showing signs of wanting much more than just an intermediary who sells a commodity. The client does not want either a smart Alec consultant, or the kid who left university last week and now is him billing £2,500 or more per day, to ask banal questions.

What he wants is someone who will gently ask sensible questions, that are relevant to his business and to hold his hand and to guide him through the range of horrors that await him. He wants someone to help him stay in business. He wants someone who will help him prioritise how to spend the limited funds available for staying in business - should it be on new machinery, better fire protection or a business continuity plan. Or should it be on better recruitment policies?

We call this role Risk Mentoring, because it is not telling the client what to do, but helping him to understand and articulate what risks his business faces and to help him to plan what to do about tackling the problems that have been unearthed. By doing this simple act, the broker raises his status in the eyes of his client from a salesman to a trusted adviser.

How can this be done?

The broker already has access to the clients inner most secrets, customers, stock levels, financials and his vulnerabilities. All he has to go is one little step further than selling "off the shelf" insurance packages and involve himself in the risks that can really damage the client. By doing this he will make a friend for life and be able to earn fees from every part of the clients business throughout the year.

There is little risk of accepting more liabilities because the answers are given by the client himself, not by the mentor consultant.

The prize is much bigger now, the broker has a chance to become a part of the client's management team, sit on his risk committee, influence his corporate governance compliance plans and to advise on the selection of other consultants who will be employed to resolve some of the issues that have been unearthed and he can take a share of their earnings quite legitimately as a "finders fee". By following this strategy a single, vulnerable income stream from a once a year exercise selling insurance products becomes a multiple income stream from a range of services the need for which arises many times during a typical year.

The reason why this is not already standard practice is that most brokers don't know where to start or how to start.

So don't start from scratch. Use a template. Take a leaf out of other professions' books, that traditionally have worked on a fee basis, such as Auditors.

Learning the skills to do this is not as hard as it seems, in many ways it is simply doing what you do now but in ways that are more in tune with the way most customers do business. Consultancies do exist that can help you make the change and they can show you how to use the simple techniques that auditor and other consultants use.

Unless brokers develop ways of doing business that are in tune with their clients, they face a bleak future of shrinking commissions and a shrinking number of insurers with whom to place their policies. Perversely this unpleasant truth may force brokers into ways of earning fees that make their businesses more profitable and secure than ever before.

Barry Hammond and Chris Stalvies are joint managing directors of Cognitix Limited, a boutique risk management consultancy that specialises in providing support and simple, effective tools to other professionals who are active in risk management.

They can be contacted by telephone on +44 (01442) 216127, or by email at Tellmemore@cognitix.co.uk. Their website address is www.cognitix.co.uk.