Let's talk business.
Commission is how the insurance business has been operating in Germany for decades. The reason for this is, it offers you convenience - you only pay if you're happy and want to buy something. If not, then you're free to walk. The biggest downside of the commission is it’s lack of transparency.
It’s difficult to understand how much you actually paid in the end. Of course it's designed like that on purpose.
I'll give you a rough overview:
There are two categories of insurance. Products that are easy to explain but that are comparatively low cost. The work is not only recommending the best insurance products, but the service of giving expert advice when you get to use the insurance in case of a claim. The compensation is designed to reflect this. For category 1 products I get around 10 to 20% of the yearly premium. For a €40 private liability policy, that is €4 - €8 per year. Not much, I know. The best part is that, generally speaking, this doesn’t mean your price goes up.
Regardless of where you buy these products, you would be paying the same price. If you buy it from the insurance company directly, the company pockets that money without providing additional services. If you buy via an online broker like Check 24, they get the commission. I believe I am your best choice and you will get the best service.
Category 1: Liability insurance, legal insurance, home contents insurance, sick pay insurance. It’s a bit different for category two products.
Category 2: Pension insurance, private health insurance, income protection insurance.
It sometimes takes weeks to get a consultation to explain the options and to select the best product for you and your circumstances. Thus, these products pay more at the point of sale. For pension insurance, the commission is usually around 2.5% of the premium paid. For pension products the money is taken out the investment over the first 5 years.
Advantages of using a commission
You get the service first and pay later. If you don't like my service or the product, relax. You're under no pressure to buy anything.
Commission will make you feel more comfortable. Parts of the buying process take a bit of time and are neither super fun nor enlightening but they are either necessary or legally required.If you pay by the hour, it can feel like you're not getting your money's worth.
Disadvantages of commission
Transparency: In theory, I can only tell you exactly how much I will earn after we have selected a product.
Conflict of interest: In theory I do have a conflict of interest when getting a commission because some companies offer a little more commission than others. Also, the commission is a percentage of how much you spend. So, you could argue that I do have motivation to get you to spend more. And I agree. However, I also have a strong code of ethics and my first obligation is that my customers get exactly what they need.
The fixed fee is useful for standardized services. The class of "Investing for your future with ETFs" falls under this category. The effort is similar and thus the price can be fixed. This helps you to know how much it is in advance and makes it easier to judge if the the gained knowledge is worth it to you. For example, I offer a course that teaches you how you can invest your money to build wealth for €250 + tax.
Advantages: You can judge upfront what you get and if it's worth the price.
Disadvantages: Only useful for standardized services like courses.
Specific questions. You are not interested in buying a specific product but you do have specific questions and want an expert opinion on what to do, e.g., how good is your company pension and does it make sense to keep paying into it?
Price: The hourly rate is €120 + tax.
For specific topics, you can expect to ask all your questions and just use the time to the max. You'll gain a ton of useful information in a short space of time. Because you're paying for answers and not for a product, we can focus on the knowledge exchange and and not get slowed down by admin stuff.
Advantages: The price of the service is transparent; there's no incentive to push a specific insurance or even to sell anything at all. You only pay for the time you are using.
Disadvantages: Not great for admin-heavy topics because you might feel on the clock and uneasy when things move slowly.
