What Mobius' fee-driven decision teaches about client value

Earlier this month, Mobius Investment Trust decided to part ways with PricewaterhouseCoopers LLP (PwC), its long-standing auditor, in favour of Johnston Carmichael LLP. The reason for this change was straightforward yet profound: a lower fee.

This decision brings to light several critical issues in the realm of professional services, particularly in auditing. It raises questions about pricing strategies, the communication of value, and the delicate balance of maintaining client relationships in a cost-conscious world.

At its core, the Mobius case highlights the ongoing struggle between cost and value in professional services. PwC’s candid statement revealed the crux of the matter: “the Company wishes to appoint another firm of auditors at a lower fee than we would charge for our audit for the year ended 30 November 2024.”

This situation forces us to confront some uncomfortable questions: How do firms strike the right balance between competitive pricing and ensuring they can deliver high-quality services? In an increasingly competitive market, how can established firms justify higher fees when newer or smaller firms offer similar services at lower prices?

Sacrificing value?

The answer lies not just in the numbers, but in how firms communicate their worth. It’s no longer enough to rely on reputation alone. Firms need to actively demonstrate their expertise, regularly sharing industry insights, thought leadership pieces, and case studies that showcase their deep knowledge and experience. They need to clearly articulate what sets them apart from competitors, whether it’s specialized expertise, advanced technologies, or a track record of handling complex cases.

Moreover, firms should strive to quantify their impact wherever possible. Providing concrete examples of how their work has positively impacted clients’ businesses, such as through risk mitigation or cost savings, can be a powerful tool in justifying fees. It’s also crucial to emphasize the value of long-term partnerships and the cumulative benefits of institutional knowledge built over time.

But what happens when, despite best efforts, a client decides to switch?

Don’t be afraid to fire clients

The Mobius-PwC case provides a masterclass in handling such situations with grace and strategy. PwC’s response – providing a clear, concise statement without negativity – sets a good example of maintaining professionalism in challenging circumstances.

Such situations, while difficult, can also be opportunities for growth and learning. Firms can use these moments to gather valuable feedback, understanding what factors led to the client’s decision. This information can be invaluable for improving services and preventing future losses. It’s also important to maintain a positive relationship with the departing client. After all, business circumstances change, and today’s departing client could be tomorrow’s returning one.

The Mobius-PwC case is not just about one client switch; it reflects broader industry trends. There’s increasing pressure on audit fees, particularly for mid-sized companies, raising questions about how the industry can address this while maintaining audit quality. It also highlights the tension between auditor rotation, which can enhance independence, and the deep client understanding built over years of partnership.

Technology plays a crucial role in this equation. As technological advancements continue, clients may expect more efficiency and, consequently, lower fees. This presents both a challenge and an opportunity for firms to leverage technology to meet these expectations while maintaining profitability.

Finding the balance is hard

The auditing profession, like many service industries, faces the ongoing challenge of balancing cost, value, and client relationships. The Mobius Investment Trust’s decision to switch auditors serves as a reminder of the importance of clear value communication, strategic pricing, and graceful client management.

As the industry evolves, firms that can effectively navigate these challenges will be best positioned for long-term success. By viewing client switches not as setbacks but as opportunities for growth and improvement, firms can refine their approaches and strengthen their market positions

. In the end, the goal is to create mutually beneficial relationships where both the service provider and the client see clear value in the partnership.