Where Should Advisors Fit Into Your Business?

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Gale Strategies

August 5, 2023 • 5 min read

From talent managers to operating partners and marketers to fundraisers, leaders at private capital firms are becoming increasingly frustrated. The fundraising cycle is slowing, budgets are shrinking, and everyone’s looking at how to get to sustained profits… yesterday.

So, do you need an advisor to help you through challenges like this? It’s another expense, not an immediate contribution to the top line. If you do, what exactly do you want in an advisor?

Let’s look at employee benefits for example. We’ve done a fair amount of work in the insurance, benefits, carry and compensation space. So, we’ll take a deep dive here to illustrate some points.


Corporate employee benefits and health insurance costs are steadily rising with an apparent scant increase in value (thought let’s save that for a separate debate). Yet, balancing savings with team wellness makes for tough choices. Not only is the health insurance market confusing, fragmented, and risky, this proverbial maze is constantly changing and always full of surprises.

The common solution of switching to another prepackaged deal has its drawbacks. Transition costs can often outpace regular price hikes. Prepackaged solutions can’t always match an employer’s unique needs, either. And given the current labor market — an exceedingly tight and competitive space that places employment benefits and other perks under the microscope of potential and existing employees — retention and recruitment challenges are constant.

To better navigate this maze, private capital firms may find it advantageous to seek help from a benefits advisor who can serve as an extension of their deal, operations, and procurement teams. In fact, advisors who stand apart from the broker and are familiar with the dynamic between general partner teams and portfolio companies is especially valuable in the private capital world.

This point goes beyond benefits and talent. Independence, when it comes to advising on something that can make a decisive difference in your business can be more important than getting that thing in a package wrapped up with the service you’re trying to analyze. The same goes for having independent investor relations counsel in addition to an investment bank, not relying entirely on the investment banking team for counsel.

Let’s explore this further in the benefits context, starting with the challenges posed by the current benefits and insurance landscape.

Status quo no more

The employee health insurance market is not designed to be easy to navigate. Adding yet another layer to this fundamental challenge, the benefits maze is also constantly shifting and evolving. As soon as you have a strategy for navigating your way forward, the landscape changes.

While cost containment remains a steady concern among private equity firms, retention and recruitment issues have begun to influence health insurance and other benefits, too. These offerings are a vital part of professional employment packages.

Conducting a comprehensive review and developing a competitive benefits strategy that matches the unique needs of current and potential employees can be difficult, however, when prepackaged or “status quo” solutions are the only options on the table. Also, given the current pandemic environment and its widespread effects on the economy and labor market, it’s clear that we’re living in volatile times.

So, customization appears to be the name of the game. And that goes for much or the operations landscape, right down to marketing and the IT stack. But customization also incurs costs.

Customizing, a magic bullet

Developing a strategy that provides bespoke, yet cost-efficient plans may be the best way to contain spending while keeping team members happy.

Easier said than done.

True benefits strategy takes shape when you ask the right questions, build a framework that helps explain why things are the way they are, and then test your assumptions until a realistic — and sometimes uncomfortable — picture of a company or portfolio’s situation emerges. That’s when you can measure a company against industry benchmarks and start implementing realistic solutions, including those that include cross-portfolio oversight and collaboration.

Part of this process entails unbundling the various components of health insurance options to find the most efficient approach to piece together a bespoke plan.  Of course, this process can be extremely challenging. Navigating all possible options and their complexities requires a level of expertise that may not be available within the firm. Hence, the need to outsource benefits strategy.

Seek guidance from outsiders

Think of an independent an outside advisor as an experienced traveler navigating a changing river who knows how to test what’s happening under the water. In addition to knowing where the maps will steer you right, an advisor knows when and where the maps are out of date. Ultimately, an independent advisor can guide you through the trickiest and most rapidly changing parts of your perilous journey.

For example, would it be more advantageous to adopt a self-funded approach with stop-loss protections or would it be wiser to establish a licensed company offering a captive insurance plan? Might the adoption of a reference-based plan provide better pricing than another that’s carrier-determined? Could alternative funding vehicles help ease expenses on the high-cost claimant end? Most importantly, is the necessary data there to make the clearest assessment before a final decision?

Wanted: a great advisor

What, then, makes a good strategic advisor? Here are some things to look out for:

  1. Does your advisor ask about your goals? For example, in our benefits example are you seeking to cut excessive costs, retain employees or undergo a complete overhaul?
  1. Do they ask about your current plan’s transparency? Let’s consider prescriptions in benefits. Do you really know how much everything costs? Have you considered a transparent pharmacy benefit manager?
  1. Do they ask about your third-party administrator or outside resources? Have you reviewed your administrative services only (ASO) agreement?
  1. Have they suggested new plans? For example, have they suggested direct contracting, reference-based pricing, limited, center of excellence or captive insurance models? Do these plans reflect the needs of employees? Employees value plans customized to suit their personal needs.

Adding value

The healthcare insurance and benefits landscape may be a shifting maze whose only fixed features are rising costs and flat or declining values. That’s true of many business systems and functions currently, including marketing and public relations.

That will likely remain the case if prepackaged solutions remain front and center in the development of enterprise-level strategies. There are plenty of other options available.

Seeking the help of an experienced strategic advisor may be the best way to develop a process to expand your bottom line while adding significantly more value for your current and potential customers, investors, and employees.

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