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

توضیحات

PRAISE FOR NEGOTIATING YOUR INVESTMENTS

“Two subjects I enjoy but had never thought about as a pair come together in this book, which gives away the secrets of a successful negotiator, and then applies those secrets to investing.”
—Maria E. Rodriguez, Partner, Venable LLP; former editor-in-chief, Litigation

“This book is a timely and daring endeavor; it combines practical knowledge in negotiations and in investing, while often exposing the misdeeds of a very powerful industry. Many readers will simply wish that they had read all this earlier. Above all, however, this is an effort of a committed educator to extend his teaching hours and student base across time and space. An educator some of us still call affectionately: ‘il professore.’”
—Dr. Seraphim Voliotis, Barrister (np), Mediator; Assistant Professor of Strategy, ALBA Graduate Business School at the American College of Greece

“The financial advice is in this book is sound and merits a close read, but it is Steve Blum’s insights about negotiating that make this book a game-changer. I highly recommend it.”
—Dan Solin, Author of the Smartest series of books

Negotiating Your Investments is two books in one—the first lets the reader slip into the back row of Steve Blum’s popular Wharton class for a well-organized and illustrated overview of negotiation. The second offers individual investors the client’s chair in Blum’s thriving practice, with pointed advice about how to invest with a negotiator’s mindset. A must-read about how to think like a skilled negotiator when you select a financial advisor or buy investment products.”
—Jennifer Beer, Negotiation & Dispute Resolution instructor, Wharton School, University of Pennsylvania; Principal, JB Intercultural Consulting; Author of The Mediator’s Handbook

“Professor Blum undertakes a doubly difficult task: explaining the elements of wise investing and explaining strategies for working with the sometimes strange characters who are financial professionals. The book is a complete success. Even though his topics will not in themselves excite all readers, Blum writes so engagingly that anybody concerned about his or her financial future will enjoy learning from this book. So many works offering financial advice merely put old wine in new jugs. By focusing on negotiation aspects of investment, Blum introduces something new and deeply important.”
—Alan Strudler, Professor, Legal Studies and Business Ethics, Wharton School, University of Pennsylvania


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.

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