As a licensed attorney, insurance producer, and real estate broker, I am uniquely positioned to see something that does not add up. I have been living it and following it in the data.
Take this as a confession from the inside.
The price of professional services keeps climbing, even as the cost to deliver them falls. And the experience is not necessarily improving to match.
Legal worked rates rose roughly 7% last year, more than double inflation. The drafting, review, and research that once filled the hours now take a fraction of the time. Yet 90% of legal spend is still billed hourly, so neither the speed nor the savings is likely to reach the client.
Insurance is one of the cleanest examples. Commission is a percentage of premium, so what the broker earns floats with the market, not the work. Hard market or soft, the scope never changes. The pay does.
And here’s a data point I find particularly intriguing: as the cost to deliver falls, some firms are just cutting their own team’s renewal splits. The savings never reach the client and never reach the people doing the work. They stop in the middle.
Commercial real estate tells the same story. Leasing still runs 4 to 6% of the lease. Investment sales, 3 to 6% of the price. Property management, 3 to 5% of collected rent. The work behind all of it now runs on software that did not exist a couple years ago. The rates never moved.
I’m not a CMO or a CTO. But I did stay at a Holiday Inn Express last night, and from what I can tell, marketing and software pricing haven’t gotten the memo either.
Prices up. Delivery cost down. Both true at once.
Between what you pay and what the work costs sits a gap. It is widening fast. The question is who keeps it.
Here is what that gap is worth. Take $125,000 of recurring costs out. At 8X EBITDA, that is a million dollars of enterprise value.
Our best return this year did not come from a deal. It came from our own SG&A and other expenses.
We think the widening gap should clearly benefit the client. And we are building to make sure it does. Not another firm doing the same work for a little less.
Something different, from the ground up: one connected team instead of siloed advisors who never talk, so the savings and the service both reach the client.
More on that soon. For now, watch your own spend. The gap is easier to see once you know to look for it.