The Secret to Increasing Client Engagement

The Secret to Increasing Client Engagement

Increased referrals is a product of, probably more than anything else, increased client engagement. And a new book suggests that the secret to increasing client engagement may be to increase your own engagement.

This is the suggestion of Julie Littlechild in her recently released book Absolute Engagement. With her personal journey as inspiration, Littlechild confirmed with quantitative research that the top 15% of advisors have a relationship with their business that creates not only more success but more personal satisfaction, lower stress, and a better life. It turns out that the best way to have a really engaged client base is for you to be more fully engaged first. If you feel stalled or stressed in your business or are a Gen X planner feeling disenfranchised at your baby boomer owned firm, this book is especially for you.

It starts out with a personal vision and reflection on what you hope to accomplish in your business. In interviewing Julie, it begins by asking questions like “Honestly, what do I love to do? If I could just do one thing, for example, with all my time, what would that be?”

There are echoes of what I have heard from other successful and personally satisfied advisors like Evelyn Zohlen, and fits with principles explored by people like Simon Sinek, whom she refers to in the book. Sinek has popularized the idea that people don’t do business with you because of what you do but because of why you do it. Passion for what you do can be very persuasive in attracting clients. Being engaged in something you feel passionate about also inspires and motivates.

Developing that vision helps you focus on the three elements Littlechild identified that contribute to engagement in your business: the right clients, the right work, and the right role. She talks about the value of being audacious and setting goals to orient your practice around an offer tailored to target clients doing the work that is most meaningful to them and to you. It’s not that you would necessarily change everything about your business, but putting everything on the table may open up your mind to things you had not considered. It helps you overcome what Julie called in my interview with her a “crisis of imagination.”

You might think that anyone who has the courage to start a business, including financial advisors, would have a certain level of boldness and ability to think big. But interestingly the opposite is often true after businesses have been established a while.

As documented, for example, in The Breakthrough Company, as a business becomes successful it’s owner tends to become more conservative and less willing to take risks. In the advisory world the translation is advisors getting stuck in a box of their own making. Having a certain approach, a certain process, and the body of clients built up that is producing a good, consistent living brings a natural tendency not to want to mess with it.

Audacity is called for. Dr. Peter Diamandis, the serial entrepreneur and innovator is known for asking questions of business owners like “how would you accomplish your 10 year goals in six months?” He does not necessarily expect the entrepreneur to accomplish such a goal but considering what it would take forces you into the necessity of considering a whole new system or approach.

One of the useful topics Littlechild explores is discovering the right role to play in your business. A lot of the stress of running an advisory firm comes simply from doing a lot of things you don’t like to do. Some advisors are gregarious and great at business development. Others are great technicians. Many are lousy delegators.

One of the questions on her survey was true or false: “My business could operate effectively if I had to be away for an extended period of time.” Creating equity in a business requires that you be able to answer in the affirmative – and that is true for all industries, not just financial services. Many small business owners cannot answer yes to this question and that is the source of a lot of the stress they feel. One of the big differences between the absolutely engaged advisors and everyone else is their answer to this question.

Engagement is not just an issue of how you work with your clients. It is a reflection of how you work with your team. Many successful founders of advisory firms gradually delegated all of the technical planning responsibilities to staff to free them up to work on client relationships. It may be that the most rewarding role for you is to craft financial plans and to hire an executive to manage the business. It was an issue Julie had to confront herself. “I’ve always worked with financial advisors. I have no plan on changing that. I like working with financial advisors. But what needed to change for me was more focusing on the right work: speaking and writing -- and playing the right role… I wanted to create the role in a business where I could work from other parts of the world, where I could work from home if I so chose to do so.” That recognition has a big impact on the design of her business.

Creating a unique client experience heavily influences your ability to attract the right clients. Equally important and often overlooked is creating the right team experience. Absolutely engaged advisors are far more likely to create and manage the culture of their firm deliberately. And creating the right environment can have a dramatic effect on your personal satisfaction and motivation.

Finally, Littlechild discovered the importance of taking care of yourself and creating time for recharging and renewal. The most engaged advisors take more time off and take better care of themselves. One of the outcomes is increased creativity, enabling them to find new and better ways to improve their service to clients and their businesses. It becomes a virtuous circle.

Most of the books I read about the business side of financial services focus on the business itself – systems and strategies for making the enterprise more efficient, effective, or marketable. Littlechild’s contribution is the focus on the personal journey of the leader of an advisory firm. If you are leader of your own firm or aspire to be one, this book has a lot of valuable guidance. 

Stephen Wershing
Advisor Marketing
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Stephen Wershing, CFP® is President of The Client Driven Practice, a firm that assists financial advisors gather client feedback and develop referral marketing plans. Bob Ver ... Click for full bio

Alternative Beta Strategies: Alpha/Beta Separation Comes to Hedge Funds

Alternative Beta Strategies: Alpha/Beta Separation Comes to Hedge Funds

Written by: Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies, J.P. Morgan Asset Management

A quiet revolution is taking place in the alternatives world. The idea of alpha/beta separation has finally made its way from traditional to alternative investing. This development brings with it a more transparent, liquid and cost-effective approach to accessing the “alternative beta” component of hedge fund return and a new means for benchmarking hedge fund managers.

The good news for investors is that the separation of hedge fund return into its components—rules-based alternative beta and active manager alpha—has the potential to shift investing as we know it. These advancements could democratize hedge funds and, at long last, make what are essentially hedge fund strategies available to all investors—even those who aren’t willing to hand over the hefty fees often associated with hedge fund investing.

A benchmark for alternatives

With respect to traditional equity investing, we have long accepted the idea that there is a market return, or beta—but this hasn’t always been the case. Investors used to assume that to make money in the stock markets, one needed to buy the right stocks and avoid the wrong ones. The idea of a market return independent of skilled stock selection seemed ridiculous to most market participants. Yet today, we would never invest in an active manager’s strategy without benchmarking it against its respective beta.

Interestingly, hedge fund managers have been held to a different standard. Investors have been much more willing to accept the notion that hedge fund strategy returns are pure alpha, and that their investment returns are based entirely on the skill of the fund manager. That notion explains why investors have been willing to accept a “two and twenty” fee structure just to access what has been perceived as one of the most sophisticated and powerful investment vehicles available.

In thinking about the concept of beta, consider its precise definition—the return achievable by taking on a systematic exposure to an economically compensated risk. In traditional long only equity investing, the traditional market beta has been further refined as a number of other risks have been identified that are commonly referred to as “strategic beta.” These include factors such as value, momentum, quality and size. But no one ever said that these risk factors must be long-only.

Over the past decade, as more hedge fund data became available, academics began to disaggregate hedge fund return into two components: compensation for a systematic exposure to a long/short type of risk (alternative beta), and an unexplained “manager alpha.” What they found is that a significant portion of hedge fund return can be attributed to alternative beta. That fact has turned the tables on how we look at hedge fund return. With the introduction of the alternative beta concept, hedge fund managers will have to state their results, not just in terms of total return, but also as excess return over an alternative beta benchmark.

Merger arbitrage—an alternative beta example

The merger arbitrage hedge fund style can be used to illustrate the alternative beta concept. In the case of merger arbitrage, the beta strategy would be the systematic process of going long every target company, while shorting its acquirer. There is an inherent return to this strategy because the target stock price typically does not immediately rise to the offer price upon the deal’s announcement. This creates an opportunity to purchase the stock at a discount prior to the deal’s completion. The premium that remains is compensation to the investor for bearing the risk that the deal may fail.

Active merger arbitrage managers can add value by choosing to invest in some deals while avoiding others. Therefore, their benchmark should be the “enter every deal” strategy, not cash. In fact, the beta strategy explains the majority of the return to the average merger arbitrage hedge fund. And it doesn’t stop there. Other hedge fund styles that can be explained using alternative beta include equity long/short, global macro, and event driven. Note that the beta strategy invests in the same securities, using the same long/short techniques as the hedge fund strategy. The difference is that the beta strategy is a rules-based version that can become the benchmark for the hedge fund strategy. After all, if a hedge fund strategy cannot beat its respective rules-based benchmark (net of fees), an investor may be wiser to stick to the beta strategy.

Implications for investors

What does all this mean for the end investor? Hedge funds have traditionally been the domain of sophisticated investors willing to pay high fees and sacrifice liquidity. Alpha/beta separation in the hedge fund world means that investors can finally choose whether to buy the active version of the hedge fund strategy or opt for the passive (beta) version. Hedge fund strategies can be effective portfolio diversifiers. Now, through alternative beta, virtually all investors can access what are essentially hedge fund strategies in a low cost, liquid, and fully transparent form. For investors who haven’t had prior access to hedge funds, this could be welcome news. Not only can investors look at an active hedge fund manager’s strategy and determine how it has done compared to the systematic beta equivalent, they can also invest in ETFs that encapsulate these systematic strategies.

When looking at one’s traditional balanced portfolio today, there are plenty of questions around whether the fixed income portion will achieve the same level of diversification it has provided in the past. After all, with yields still low, there is little income return. Additionally, the capital gains that came from interest rate declines are likely to reverse. With fixed income unlikely to adequately fulfill its traditional role in portfolios, there is a need to find an alternative source of diversification. This is where alternative strategies may help. For investors seeking to access diversifying strategies in liquid and low-cost vehicles, alternative beta strategies in ETF form are one option.

Looking for an alternative to enhance diversification in your portfolio?

For investors looking to further diversify their overall portfolio, JPMorgan Diversified Alternatives ETF (JPHF) seeks to increase diversification and reduce overall portfolio volatility through direct, diversified exposure to hedge fund strategies using a bottom-up, rules-based approach.

Learn more about JPHF and J.P. Morgan’s suite of ETFs here


Call 1-844-4JPM-ETF or visit to obtain a prospectus. Carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full prospectuses contain this and other information about the ETF. Read them carefully before investing.
J.P. Morgan Asset Management
Empowering Better Decisions
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See how ETFs differ from other investment vehicles, learn how to evaluate them, and discover how ETFs can be used effectively to achieve a diversity of investment strategies. ... Click for full bio