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Michael Kitces' #FASuccess Podcast: JD Bruce on Segmenting Clients with Separate Planning Fees

Abacus Wealth Partners' J.D. Bruce describes how the firm uses Angie Herbers’ Diamond Team Model to offer different services for a variety of clients.



Welcome back to the 248th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is J.D. Bruce. J.D. is chief of innovation for Abacus Wealth Partners, an RIA headquartered in Santa Monica, Calif., that manages over $4 billion in assets for 1,900 clients.

What's unique about J.D., though, is how he’s been able to help scale Abacus to the size it is today by implementing Angie Herbers’ Diamond Teams model, in order to offer a variety of different service models for different types of clients.

In this episode, we talk in depth about how J.D. and Abacus segment their clients into three styles based on their complexity and net worth, including Builders, Protectors and Changemakers, how Abacus charges a separate financial planning fee in addition to an AUM fee for most of its clients in order to emphasize the planning work that it does and have the flexibility to charge different amounts for different clients depending on where those clients land along the complexity curve, and how J.D. found that implementing Angie Herbers’ Diamond Teams structure was the key to unlocking the puzzle of making sure that clients are comfortable working with different advisors over time while staying connected to the firm.

We also talk about how Abacus has built a focus on working with those who are most interested in shaping their financial lives to reflect their most deeply held values, why J.D. feels that financial planning firms should be focused on their advisors’ capacity, which isn’t defined solely by the amount of time they spend doing their work but by the emotional impact of the work they do as well, and why Abacus moved away from a “revenue under management” compensation model and toward a model that bases an advisor’s compensation on the competencies they’ve gained and what they’re capable of in the future, rather than just what they’ve accomplished in the past.

And be certain to listen to the end, where J.D. shares why he feels that finding new talent that is a “good cultural fit” isn’t nearly as desirable as hiring people who can become "culture adds" and help change Abacus’ perspective and see things in a different way, why J.D. feels that AUM fees will inevitably compress industrywide to 50 basis points, but that the price of advice overall will increase as financial planning itself becomes more valuable (and something we can increasingly charge separately for), and how, even though J.D. admits to having an innate dislike of conflict, he realizes that some internal conflict and disagreement are often necessary ingredients for advisory firms looking to grow and change.

So whether you’re interested in learning how J.D. and Abacus have implemented Diamond Teams in their practice, how they use different service models and fee structures for their three client segments, or how they structure their compensation, then we hope you enjoy this episode of the Financial Advisor Success podcast, with J.D. Bruce.

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