To keep his monthly costs affordable and to protect his business, Cofield charges an onboarding fee which clients must pay -- either in full or in installments -- within 30 days of signing up. It’s $1,000 for his starter service package, $2,000 for his growth service package and $3,000 for his wealth builder package.
When he explains the dual purpose of his onboarding fee to clients, “they get it,” said Cofield, who does extensive work for clients during their first few months with his firm. “Clients are better clients when they have skin in the game,” he said. They associate price with value and are less likely to “blow off your recommendation,” he said -- a lesson he learned when he joined the XY Planning Network to receive guidance on starting a firm.
Cofield also educates clients that “expenses are guaranteed, returns are not,” he said.
One client who had $100,000 invested in a brokerage-sponsored target-date fund didn’t realize it had a 1.9 percent annual operating fee (including a 1 percent management fee). Cofield showed the client his account could potentially be worth $1,005,000 after 30 years but its fees would top $440,000. He then explained a passively managed fund with the same potential returns but an annual operating fee of 0.15 percent could provide about $962,000 in retirement instead of $565,000.
Cofield said his free consultations have a conversion rate of 60 percent to 70 percent. If hourly clients wish to establish a long-term relationship, he’ll apply their project costs to his onboarding fee. Millennials earning below $70,000 annually usually don’t need an advisor on a continuing basis, said Cofield, who doesn’t want anyone to pay for services they don’t need.
“That would defeat the purpose,” he said.