How do you set your fees? How do you know if you're charging too much or too little?
I've always tried to price my services on the high side of average. I base this strategy on various snippets of wisdom that I've heard from consultants and speakers:
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* If nobody ever complains, you're charging too little.
* If no client or prospect ever leaves due to price, you're charging too little.
* There are three ways to compete: based on price, based on quality and based on service. You can't possibly do all three; you can only pick two.
* Price is the least effective way to compete because there will always be someone else willing to work for less.
I feel justified in charging somewhat above the norm because our firm provides a lot of expertise and services for the cost. Our team has designations including PFS, CFP and CPA as well as various certifications. Our quarterly fee includes tax-efficient investment management, financial planning, tax planning, and unlimited consulting. I believe that this combination justifies free on the high side.
I still feel bad when confronted by clients who are leaving because they can get investment management more cheaply. Sure, maybe that's just an excuse. Yet, they sometimes give me the opportunity to lower my fees to retain their business. I always refuse - citing the value of my services and the need to keep fee schedule consistent between clients. While it is true that it is more expensive to replace a client than keep one, it is also true that it is better to lose a client who is unhappy with fees.
In the end, it's inevitable to experience some degree of attrition. That's the tough part of the job. However, the key to success and peace of mind is to focus on providing excellent client service. That way, your clients will continue to appreciate you - and pay your slightly higher than normal fees.