Local Professor Urges Investors to
Negotiate With Their Financial Advisors
Most people who shop for a car or house, don’t usually take the first price offered. They ask questions. They negotiate with the dealer or seller for the best price.
Steven G. Blum, a professor at Wharton School of Business who has a law degree and a master’s in law of taxation, believes that hiring an investment advisor should be no different. In fact, he says, “high level negotiation skills can (and should) be applied to all of one’s financial life.”
Blum has taught negotiation for more than 20 years at Wharton and has put those skills into practice dealing with corporations, individuals and nonprofits, as the founder of Steven G. Blum and Associates, LLC (a financial management company) in the Strath Haven Condominium in Swarthmore (stevengblum.com).
Now he has written a book, Negotiating Your Investments: Use Proven Negotiation Methods to Enrich Your Financial Life, to teach people how to become better negotiators with their financial advisors.
But, you say, professional investors know more than you do. In the book, Blum shows what qualities to look for in choosing your financial advisor and 13 questions to ask up front to determine how well the advisor knows her stuff. Then he shows how to level the asymmetry of knowledge between you and your advisor.
In easy to understand, jargon-free prose, Blum shows you how to negotiate techniques he learned at Harvard’s Program in Negotiation, which he says have worked amazingly well for him in every facet of his life. The book is divided into three parts; each part is divided into chapters, which all end with bulleted summaries. In Part I, “What the Best Negotiators Do,” Blum delineates the principles he teaches in his classes.
In Part II, the title “Applying Negotiating Principles to Investing” is self-explanatory. Here Blum shows how to deal with possible conflicts of interest between you and your investment advisor, how to use an objective standard of fairness, what are the different options for structuring a deal, and what are the four phases of an investment negotiation.
Part III, titled “The Economic Truths You Need to Know to Be an Effective Investor-Negotiator,” includes chapters such as “Nobody Can Consistently Beat the Market,” “There Is Really Only One Interest Rate,” and “The Concept of Present Value;” and a chapter subhead “Figure Out How Much You Are Paying to Those Who Lay Hands on Your Investments.”
Keep Away form These Risky Investments
Blum is forthright with his advice: In a chapter about investments to avoid, he lists a bunch that “are never a good idea:” variable annuities, hedge funds, derivatives, callable bonds, and convertible securities, and explains why each is risky.
Besides urging readers to enter into a series of negotiations with their financial advisors, Blum wants readers to seriously consider what “professionalism” means in the financial services industry. The definition of a true professional, he says, is a person who follows solely the interests of the client, even when they diverge from his or her own interests.
In his concluding remarks, Blum says, “The information in this book could be the most valuable contribution to your financial life that you have ever made.”
On Nov. 7, Blum will present a program on his book at Lower Merion High School, (301 E Montgomery Ave., in Ardmore) on Tuesday, Nov.11, from 6:45 p.m -8:45 p.m. (It is safe to say it won’t be boring; Blum has won outstanding teaching awards six times at Wharton.)
A former longtime resident of Swarthmore, he now lives in Pine Ridge with his wife Suzie and son and daughter. Negotiating Your Investments is available on Amazon, and you can keep up with Blum’s articles on his blog http: Negotiatingtruth.com.