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Negotiating Your Investments: Use Proven Negotiation Methods to Enrich Your Financial Life

ISBN: 978-1-118-58307-4
288 pages
April 2014
Negotiating Your Investments: Use Proven Negotiation Methods to Enrich Your Financial Life (1118583078) cover image


Get smart about personal finance with the art and science of negotiation

Negotiating Your Investments is an in-depth guide to applying the principles of negotiation to your personal finances. With expert insight into the before, during, and after of a successful negotiation, you'll learn how to prepare for and conduct important financial discussions with an eye toward getting the best possible outcome. The book contains practical, actionable guidance toward pursuing what you really want, and tools that can greatly improve your chances of getting it. Clear, concrete advice describes how to influence the other side, avoid being taken advantage of, and direct the conversation to your advantage.

As a rule, investors fail to negotiate over financial matters, to their great detriment. Improving returns, or reducing fees, by a mere 1 percent per year can make a remarkable difference in your bottom line. For example, a million dollar investment that returns 7.5 percent rather than 6.5 percent, over 30 years, will put an extra $2.1 million dollars in your pocket. On the other hand, that much money could easily go straight into someone else's purse. With that much money at stake, good negotiating practices become extremely valuable. Negotiating Your Investments provides the skills and tools you need to hold your own at the negotiating table while offering advice you can put to work immediately. Topics include:

  • The elements of negotiation – identifying goals, interests, commitments, alternatives, and power
  • Preparation, information exchange, bargaining, and closing and commitment – the four phases of negotiation
  • Asymmetric information, conflicts of interest, professionalism, and whom to trust
  • Investment vehicles and the economic science that lies behind wise investing
  • Hard economic truths involving past results, rational market pricing, diversification, interest rates, and the effect of costs on investment returns

While the focus is on personal finance, the book also includes techniques, analysis, and examples drawn from award winning negotiation courses. It explores the basic theoretical models of bargaining in depth. With Negotiating Your Investments, you'll gain the skills and confidence you need to be smarter, and get better outcomes, in both your financial affairs and the many other negotiations you conduct every day.

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Table of Contents

Prologue xv

Acknowledgments xxi

Introduction xxiii

Part I: What the Best Negotiators Do 1

Chapter 1 What Is a Good Outcome? 3

Identify Truly Good Outcomes and Don’t Get Distracted 6

What Makes for a Good Outcome? 7

Chapter Summary 10

Notes 10

Chapter 2 Interests, Options, and Goals 11

What Do You Really, Really Want? 12

Shared Interests 13

Dig Deep to Explore Underlying Interests 15

Don’t Settle for Win-Win 16

Options 17

Structure the Deal to Meet Their Needs, Too 18

Work with Them to Create More Value 20

Chapter Summary 22

Notes 23

Chapter 3 Fairness 25

What Is “Fair”? 25

Move beyond Market Value to Measure Fairness 27

Chapter Summary 27

Notes 28

Chapter 4 Communication to Build the Kind of Relationship You Want 29

Set Relationship Goals 30

Choose Communication Tools Carefully 30

Work to Create the Atmosphere You Want 32

Focus on What You Want to Tell Them—and How 33

Use Active Listening Techniques 34

Good Negotiating Process 35

Be Aware of the Power Dynamics—and Consider Changing Them 35

Plan a Process That Will Lead to Good Outcomes 37

Chapter Summary 38

Notes 39

Chapter 5 Thinking about Commitments 41

How Tight Are the Bindings? 41

When Should We Be Bound? 43

Degrees of Commitment 44

Commitment Is Not Just about the Ending—Consider It throughout the Process 46

Many Little Agreement Steps 46

Chapter Summary 47

Note 47

Chapter 6 Best Alternative: Where Your Power Comes From 49

Step 1—An Inventory of Your Possible Alternatives 50

Step 2—Identify Your BATNA 51

Step 3—Strengthen Your BATNA 51

Step 4—Estimate What the Other Side’s BATNA Might Be 53

Step 5—Consider Whether You Can Weaken the Other Side’s BATNA 53

Work to Shape Their Perceptions 55

Be Careful Not to Rely Too Much on BATNA, Especially Where Relationships Are Important 56

Chapter Summary 57

Notes 58

Chapter 7 The Preparation Phase 59

Where Do We Hope to End Up? 59

Consider the Substantive Issues 60

Then Consider the Relationship Issues 60

You Want Good Substance and Good Relationships—But Don’t Trade

One for the Other 61

Set High, Achievable Goals 62

Who Are These People Who Will Soon Be Sitting Across from Us? 62

Chapter Summary 63

Notes 64

Chapter 8 The Exchanging Information Phase 65

Ask Lots of Questions 66

Strengthen Your Bonds with the Other Parties 67

Gather Up All the Facts That They Are Willing to Share 68

Managing the Danger That They May Lie to Us 69

Chapter Summary 70

Note 70

Chapter 9 The Bargaining Phase 71

Work to Increase the Pie—and to Claim a Fair Slice 72

Use Conditional Language to Explore Trades That May Create Value 73

Propose Terms Favorable to You—But Defensible as Fair 75

Make Small Concessions Slowly and Deliberately—and Insist on Fairness 75

Be Resolute about Claiming Your Fair Share 76

Chapter Summary 77

Notes 77

Chapter 10 The Closing and Commitment Phase 79

You Want Promises They Are Sure to Keep 80

Create Scarcity to Enhance Their Enthusiasm for the Deal 80

Prepare to Be Patient 82

Chapter Summary 82

Notes 83

Chapter 11 The Problem with Agents 85

Sometimes Employing an Agent Is Wise 85

Often Employing an Agent Is Foolish 86

Are the Agent’s Interests the Same as Yours? 87

Chapter Summary 89

Note 89

Part II: Applying Negotiating Principles to Investing 91

Chapter 12 Why Is Investing Really Just Another Type of Negotiation? 95

Investing Is Similar to Other Big-Ticket Negotiations 95

Do Not Be Fooled into Thinking It Is Something Other Than a Negotiation 97

Different Types of Investing Negotiations 98

Chapter Summary 101

Chapter 13 What Is a Good Outcome Regarding Your Investments? 103

The One Investment Goal That Almost Everyone Shares 104

Your Investment Good Outcome Is Uniquely Your Own 104

Should You Narrow Your Investment Goals? 108

Chapter Summary 109

Notes 110

Chapter 14 The Problem of Conflicts of Interest 111

Incentives Matter 112

Some Conflicts Other Than Money 113

Chapter Summary 114

Note 115

Chapter 15 The Problem of Asymmetric Information 117

They Know Much More Than You Do about the Tricks of the Trade 117

Knowing More Creates Tremendous Opportunity to Take Advantage of Others 118

Chapter Summary 120

Notes 120

Chapter 16 Whom Can You Trust? And Why? 121

Be Extremely Careful about Whom You Trust—and How Much 121

You Can Work Well with People without Trusting Them 123

You Can Trust Those Whose Best Interests Make Them Trustworthy 123

Chapter Summary 125

Chapter 17 Professionalism: Who Is a True Professional and Why? 127

The Traditional Professions’ Struggle with Society’s Need for Trustworthy Help 127

The Traditional Professions Don’t Always Succeed—but They Must Always Try 128

Reclaiming Professionalism 129

Chapter Summary 130

Chapter 18 Use the Power of Your Alternatives 131

Alternatives When Making Direct Investments in Actively Traded Securities 132

Alternatives When Investing Through Intermediaries 133

With So Many to Choose from, You Can Demand What You Want with Confidence 136

Chapter Summary 137

Notes 137

Chapter 19 Knowing Your Interests and Theirs 139

Understanding Your Own Interests 139

Thinking about Their Interests 142

Interests That Can Lead You Astray 146

Chapter Summary 148

Chapter 20 Many Different Possible Options for How to Structure the Deal 149

Trade Their Interests for Yours 149

Work Together to Create Packages of Interests 150

Find the Best Investment Deal among Many 151

A Few Cautions 153

Chapter Summary 154

Chapter 21 Insist on Using Objective Standards of Fairness 155

Gather Your Measures of Fairness 155

Beware of What They Call Fair 156

Keep Your Eyes on Profitability and Transparency 157

Demand a Fair Division of All the Value That the Deal Creates 158

Do the Math on Fees and Costs 158

Pay Only for Services That Provide You with Value 159

Chapter Summary 160

Notes 160

Chapter 22 Plan the Type and Tone of Communication You Want 161

Communication to Enhance Your Understanding 161

Communication to Make Things Clear to Them 162

Create the Tone and Atmosphere You Want 162

Chapter Summary 163

Note 163

Chapter 23 Think about Relationship Goals 165

A Good Working Relationship Need Not Be Personal 165

Pay Attention to Power Dynamics 166

Special Concerns about Financial Advisors 167

Chapter Summary 167

Notes 167

Chapter 24 When to Commit—and to What 169

Avoid Getting Locked In 169

Pay Attention to the “When” of Commitments 171

Chapter Summary 172

Chapter 25 The Four Phases of an Investment Negotiation 173

The Preparation Phase of Investing 173

Gather New Data Continuously 175

The Exchanging Information Phase of Investing 177

Plan to Put Them at Ease 178

The Bargaining Phase of Investing 180

Propose Ways for Them to Meet Their Most Important Interests 181

Let Them Know the Things on Which You Cannot Compromise 182

Be Aware of Their Salesmanship Skills 182

The Closing and Commitment Phase of Investing 183

Build In Your Ability to Check on Them and to Get Out 183

Get Everything in Writing 184

Chapter Summary 187

Notes 187

Part III: The Economic Truths You Need to Know to Be an Effective Investor-Negotiator 189

Chapter 26 Nobody Can Consistently Beat the Market 191

The Markets Are, for the Most Part, Rational 191

Don’t Confuse Random Chance with Skill 192

Stock Research Offers Little Value 195

Chapter Summary 198

Notes 198

Chapter 27 Past Performance Does Not Guarantee Future Results 201

No One Can Predict the Future 201

Chapter Summary 202

Chapter 28 The Concept of Present Value 203

What Is Tax Deferral Worth? 204

Present Value and Life Insurance 204

Present Value and Money-Back Guarantees 205

Present Value and Comparing Investments 205

Chapter Summary 206

Chapter 29 There Is Really Only One Interest Rate 207

Higher Rates Reflect Higher Levels of Risk 207

Risky Investments Involve a Danger of Losing Much of Your Principal 209

Chapter Summary 210

Chapter 30 There Is No Such Thing as a Free Lunch—Except Diversification 211

Why You Want to Diversify 212

Chapter Summary 212

Chapter 31 Diversify Across Every Asset Class 213

Be Honest with Yourself about Your Risk Tolerance 214

How to Achieve Diversification of an Investment Portfolio 215

Diversifying Asset Classes beyond Stocks 216

Use Time to Further Diversify 219

The Efficient Markets Hypothesis 220

Some Practical Advice on Choosing Specific Categories of Index Funds 221

Chapter Summary 222

Notes 222

Chapter 32 We Know What Has Happened in the Past 223

The Historical Average Return on Stock Investments Is a Very Good Result 223

Seeking Higher Than Market Returns Is Called Gambling 224

Chapter Summary 225

Notes 225

Chapter 33 Costs Are Important—They Reduce Your Returns 227

Higher Costs Result in Lower Returns 227

Many Investments Carry Expenses That Are Just Too High to Be a Good Deal 228

Figure Out How Much You Are Paying to Those Who Lay Hands

on Your Investments 229

How You Can Minimize Costs 229

Chapter Summary 231

Notes 232

Chapter 34 Investments to Avoid 233

Variable Annuities 233

Hedge Funds 233

Derivatives 234

Callable Bonds 235

Convertible Securities 236

High Costs, Complexity, and Creative Geniuses 237

Chapter Summary 238

Notes 238

Chapter 35 How Much Is at Stake? 241

The Impact of the Fees You Pay for Advice 243

The Need for Action 245

Chapter Summary 246

Note 246

Afterword: What is a Good Outcome in your Financial Life? 247

Selected Bibliography 249

About the Author 253

Index 255

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Author Information

STEVEN G. BLUM is an expert negotiator who works with corporations, individuals, and nonprofits to refine their negotiating techniques. He is a principal in the firm of Steven G. Blum and Associates, LLC, and has conducted seminars in the Executive Education Programs at the University of Pennsylvania and Harvard Law School. He has been teaching in the Department of Legal Studies and Business Ethics at the Wharton School of the University of Pennsylvania for over twenty years.

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Press Release

April 21, 2014
Why Investing IS a Negotiation—and 11 Tips for Coming Out on Top

Few of us love buying a car. Well, we love picking out the car, but negotiating for it—not so much. Yet all the dreaded research, haggling, and back and forth with salespeople are needed to get you to a price you can live with on a car you want. Imagine if, instead, you let a “car advisor” who works for the manufacturer make all the decisions for you. You’d be greeted at the car lot by a guy in a pin-striped suit who tells you he’s your car advisor. His job is to analyze your needs and make guesses about the future to select the best car for you.

There might be an arduous process of questionnaires, meetings, and investigations into your automotive history. Finally, after much analysis and input from many experts, you would be handed the keys to a Toyota Camry. There would be no room for haggling; you must pay whatever price they say. And not only do you have to cover the cost of the car, your “car advisor” informs you you’ll be paying for all that analysis, too. This guy is not working in your best interests—he’s trying to sell you a car! Sounds ridiculous, right?

Sure it does, says Steven G. Blum—but it should also sound familiar. That’s because it’s similar to how most people invest. And what we should ask ourselves is why we accept this process…when, really, investing is no different from any other big transaction.

“Though too few people realize it, the care and management of your financial life is best seen as a series of negotiations,” says Blum, who teaches at the Wharton School of Business at the University of Pennsylvania and is the author of the new book, Negotiating Your Investments: Use Proven Negotiation Methods to Enrich Your Financial Life (Wiley, 2014, ISBN: 978-1-118-58307-4, $40.00, www.negotiatingtruth.com). “As an investor you’re seeking a deal in which you will exchange payment for some instrument that you hope will appreciate in value—a stock, a bond, or some sort of commodity. Both sides, you and the sellers, are looking for as much value from the deal as possible.”

Negotiating Your Investments is an in-depth guide to applying proven principles of negotiation to your personal finances. With expert insight into the before, during, and after of a successful negotiation, you’ll learn how to prepare for and conduct important financial discussions with an eye toward getting the best possible outcome.

“Americans waste billions of dollars paying too much to the financial industry,” says Blum. “For many families and individuals, that waste totals well into the millions. Failing to understand these transactions as negotiations sets you up as prey for those who do. Too many people follow investment recommendations with the trust and passivity of lambs being led from the barn.”

Read on for a few tips to help you negotiate your way to better, more profitable investments.

Know what you don’t want, what you do want, and what’s even better. One of the most important things a negotiator can do is figure out what she is trying to gain or achieve. As simple as it sounds, many people don’t truly know their own motivations. Once you remedy this problem, you can be purposeful in keeping the process moving toward your goals and avoiding measures that might throw you off course.

“People invest for many different reasons, and their goals reflect this,” says Blum. “Most of the motivations driving investor behavior can be divided into the following categories: to be safe, to be clever, to be wise, to feel connected to a peer group, as well as to make money. These different kinds of goals can be useful in examining your own desired outcomes. Consider which of these groupings may play a part in your own goals, hopes, and targets.”

Be aware that you’re on an uneven playing field. Knowledge is power, and in the financial industry that is especially true. Most advisors have command of a great many tricks of the trade that are far beyond the knowledge of even very smart regular people. The result is an uneven playing field between the financial industry and the client. Because they know a great deal that you don’t, you are badly disadvantaged and very vulnerable to being manipulated. Among the consequences of this knowledge imbalance are overcharging, underserving, moving bad merchandise, guiding business to friends (or reciprocators), hiding fees, selling things that have no value, misleading, stealing, taking credit unfairly, and claiming random chance as skill.

“So, how do you avoid suffering as a result of this information asymmetry?” asks Blum. “One answer is to learn more, although in all fairness you’ll never be able to level the information playing field with those who work in that field every day. Also, be very careful about whom you hire as your advisor. Look for people whose best interests require that they remain trustworthy.

“Really, there is no single answer,” he adds. “The best advice is not a prescription but a set of cautions and admonitions. Stay vigilant. Don’t trust imprudently. Be keenly aware of the problem of asymmetric information and constantly on guard to avoid being its victim.”

Watch out for conflicts of interest. In the financial services industry, these are varied and complicated. Not only are there money-related conflicts like commissions and fees, sales quotas, and pay-to-play schemes, there are others, like time itself. Financial advisors are under constant pressure to bring in new clients and more revenue. Every hour spent serving you is time away from those other tasks. His haste to move on to snagging new clients and the pressure he’s under to increase revenue could very well affect how he handles your money.

 “Such conflicts of interest aren’t easily mitigated,” says Blum. “Fee-only advisors, who are compensated based on agreed-upon rates, may avoid some of the conflict problems that commissions generate. This is a step in the right direction, but it doesn’t eliminate the problem.  Consider, for example, what happens when the client asks a fee-only advisor about the wisdom of paying off a mortgage early. He may be loath to recommend a payoff when the funds used to reduce that debt will mean less money available to invest, and in turn, less revenue for him.

“The problem of conflicts of interest is neither easily solved nor likely to go away,” he adds. “Careful attention to it, though, can give rise to dramatically better results.”

Beware of “beat the market” promises. The rational market theory states that markets price assets based on all information known at the time. In essence, the theory states that stock prices accurately reflect all the information that is known about a company at any given moment. This means that future price changes can be the result of only surprises or unexpected events. Since, by definition, surprises and unexpected events cannot be predicted, nobody can successfully know in advance about the future performance of a given stock.

“Taken to its logical extreme, a monkey throwing darts at the stock market page of the newspaper should be able to perform as well as anyone else,” explains Blum. “My Economics 101 professor introduced me to the theory by allowing my classmates and me to choose five stocks any way we wished, including asking anyone we knew, while he threw darts at the Wall Street Journal.He beat most of us.

“The bottom line is that an individual investor will have great difficulty doing better than the overall market by selecting individual stocks or bonds,” he clarifies. “Will some pickers be able to beat the market from time to time? Yes, but their success is primarily just a reflection of random chance. Anyone who tells you they can do it all the time is dishonest or deluded.”

Don’t get distracted by side issues. We are competitive by nature, often driven by the desire to win. But this desire can get you into big trouble when negotiating investments. It can cause you to get distracted by small battles and side issues, taking your focus away from achieving your best outcomes. 

“The vision of a good outcome I bring to my own investing is straightforward,” says Blum. “I seek to make the maximum amount of money while avoiding excessive or undue risk. Furthermore, I demand transparency of fees—hidden costs strike me as dishonest trickery. Like most people, I do not wish to pay even a cent for anything that economic science can show is actually worthless. I will not pay anyone to gamble for me. I never want to feel that I am being cheated, lied to, or played for a fool.

“Achieving best outcomes requires avoiding actions that may look inviting but actually lead in other directions. An investor-negotiator should constantly ask herself whether a given move really leads to her ultimate goals,” he adds. “If it doesn’t, just say no.”

Don’t pay for anything that isn’t fair or doesn’t provide value to you, period. Of course,nobody should be expected to work for nothing, and skilled assistance is worth paying for. On the other hand, excessive fees, even those that seem “reasonable,” can be extremely costly over time. That’s why Blum recommends following two rules when it comes to settling on fair compensation for financial advice. One, “Fair terms or no deal.” And two, never accept “we’ve always done it this way” as a reason to agree to pay an advisor a certain amount.

As you negotiate over fees and costs, you will surely encounter the argument that 2 percent of your capital is just a tiny amount to pay for good help. Be careful here, for it is a mistake to examine fees in relation to the amount of your capital. Rather, compare fees to your expected return on the capital. Let’s take a look at the 2 percent deal. One dollar, earning a return of 8 percent over 30 years, will grow to $10.93. Reduced by costs of 2 percent, though, an after-fee return of 6 percent will be achieved. And a dollar growing at 6 percent for 30 years will become $6.02. In this example, a “mere” 2 percent fee reduces the return by almost 45 percent. When we put it that way, does it seem fair?

“And if legitimate investment services with excessive costs are bad, services that add no value to you are a terrible deal at any price,” adds Blum. “As mentioned, most stock-picking strategies perform no better than throwing darts at the Wall Street Journal. This means a great deal of the investment advice and services being offered are worth nothing to you. Financial companies seek payment for the playing out of random chance. Even if such firms spend millions of dollars on salaries, computer programs, and high-priced New York rents, their services are overpriced at a nickel.”

Harness the power of BATNA. In negotiation, power comes from alternatives. One of the first things a skilled negotiator explores is what course she will take if the deal being worked on completely falls apart. If I can’t make this arrangement with this person work out at all, what will I do instead? Answering this question leads you to your Best Alternative To a Negotiated Agreement (BATNA) and lays the foundation for increasing negotiating strength. And greater strength presents the potential for increased control, influence, and authority.

“To find your BATNA, carefully inventory all of the alternatives available to you,” recommends Blum. “Once the very best alternative is identified, it gets labeled as your BATNA. This gives you a powerful floor to support your negotiation effort. You will never accept a deal unless it is better than your BATNA. It forms a minimum acceptable level for you. It is said that a strong BATNA provides the negotiator with both a sword and a shield. In other words, it allows her to be more aggressive (offense) while also protecting her from making bad deals (defense).”

Consider how you might create mutual gain. Remember the grade school lunchroom: your grilled cheese for my turkey sandwich, your cookie for my chips, and both of us happier? Essentially you and your lunch buddy were deciding which options offered the most opportunity for creating mutual gain. You asked yourselves, What can I trade to you that you value more dearly, and what can I receive from you that holds greater worth to me?

“Looking for mutual gain in investing is valuable because it’s a great way to forge lasting relationships,” notes Blum. “For example, you might propose a deal that helps them keep you as a client and get referrals for new clients in exchange for your desire for low fees, full disclosure, and all the attention you need regardless of how long it takes. Tying the fulfillment of their interests to making sure your own get met well is the key to success.

“Be careful to structure agreements so that you get what you need before, or at least simultaneously with, fulfilling the other party’s interests,” he adds. “In short, craft the deal so that the rewards they seek come only after you have received all that was agreed upon. With those concerns in mind, try to work with them to put together the best possible deal for all—a deal that will leave everyone much better off than they started.”

Choose your words (and how you dole them out) wisely. How can you let your advisor know of your requirements, interests, and inviolate standards in the clearest way possible? You need to tell them explicitly that any agreement must be better than your best alternative, meet your interests well, and be demonstrably fair. It will also have to be stated clearly in writing with all its terms verifiable. It cannot in any way “lock you in” but, rather, must give you the right to step away whenever you wish. How can you best communicate all this and more to your partners in a manner that keeps the door open for fair and honest dealing?

“Be warm and friendly in person yet firm and unyielding in writing,” advises Blum. “You will want to follow up all conversations with letters that summarize and confirm what was discussed. Those letters should make clear the firmness with which you are insisting on your needs. Be explicit in your written communications about your expectations, requirements, deal-breakers, and understandings. Choose language carefully, leaving no room for interpretation or discretion by those whose interests may differ from your own.”

Ask lots of questions. A much-cited study found that skilled negotiators spend almost 40 percent of their time acquiring information (asking questions) and clarifying information (restating and reframing what they’ve heard to verify that they’ve understood correctly). Average negotiators spend about 18 percent of their time on the same behaviors. In other words, average negotiators ask half as many questions as skilled negotiators.

“The key is to ask previously prepared questions and, just as important, listen well enough to pose precise follow-up questions,” notes Blum. “Probing and clarifying the other party’s position requires that you listen carefully and formulate good questions on the spot. Strong listening skills, along with good preparation habits and the ability to express thoughts clearly, consistently show up in the research as among the top traits of the most effective negotiators.

“It’s critical to listen and absorb with discernment,” he adds. “The information you receive will not all be accurate. There is usually an incentive for the other parties to misrepresent certain needs or interests. You can preempt bluffing with hard factual questions; it is psychologically much harder to falsify numbers than it is to mislead about the severity of a situation or the importance of an issue. Plus, there is usually a way to check up on factual information.”

Don’t get locked in. Avoid situations or deals that tie you into investments for long periods. Indeed, the shorter the better. For example, you would prefer a contract that permits you to quit without reason with five days’ notice to a contract requiring three months’ notice. A firm billing for services six months in advance locks the client in to a greater degree than does their competitor charging only after the work is completed. An agreement that can be terminated without penalty, whenever the client wishes, is superior to one that imposes an exit fee. That, in turn, is less onerous than one requiring significant notice as well as imposing a price to get out.

“Be especially careful about exit fees,” warns Blum. “They’re really penalties for trying to get your money back. For example, ‘back-loaded’ mutual funds sometimes charge 6 percent to get your money back in the first year, 5 percent in the second year, and so on. The right to your own money without penalty will not be granted until six years after the fund was purchased. Most variable annuity products have a similar ‘early exit’ penalty.

“As an investor-negotiator, you must examine carefully how any proposed commitments will actually work,” he continues. “It is your job to determine what will be advantageous and what might lead to disaster. If the terms of a deal under discussion are to your disadvantage, you should bargain hard to change them. Where change is not possible, or the other side declines to be flexible, you should walk away. Refuse to be bound in ways that work against you or make a good outcome unlikely.”

“To revisit the car buying analogy, just as you wouldn’t accept a ‘car advisor’s’ suggestion and pricing outright, it would be unwise to go to a car dealership before you’ve sufficiently armed yourself with the information you need to negotiate a fair price for the car you want to buy,” says Blum. “I’m urging people to take those same steps before they make investment decisions. Arm yourself with the knowledge and skills you need to make truly fruitful financial decisions. Use negotiation to protect yourself from being taken advantage of by an industry that is counting on your lack of knowledge and preparation. Let’s make sure they are underestimating you.”

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