Have your advisor clearly explain how he’s making money for you. You need to understand what is being done for you. Furthermore, you need it explained in plain language that you can easily understand. Do you know how your advisor makes investing decisions? How does he decide what investments to recommend? “It’s important to understand how your advisor invests,” says Blum. “You need to know the how and why behind what he’s doing with your money. A high-quality financial advisor should be more than willing to have this discussion with you.”
Have them tell you how they make their money. Ask for a clear and complete explanation of costs and fees. Make it clear that you want to be informed honestly, clearly, and completely as to how your advisor makes money off of your money. “This is a conversation you should have before you start working with an advisor, but it’s also good to stay informed about any changes,” says Blum.
Pay attention to power dynamics. Consider the extremely important matter of personal power dynamics. In most human interactions, one person is given or takes more of the authority and control over the interaction. Sometimes this is a natural consequence of people’s roles, such as a parent’s superiority to a child. There are many situations, though, where the question of power gets resolved by one party simply being aggressive and seizing control.
“Where accepted power dynamics lead to best outcomes, it’s okay to observe and follow them,” explains Blum. “On the other hand, the world is also full of power dynamics put in place to serve less admirable goals or simply to advance one person’s or organization’s agenda. In such circumstances, passive acceptance is a mistake. Good negotiators are well advised to ask whether the power structures and processes in current use are the best ones to advance their goal of reaching a best possible outcome. Don’t be rude or inappropriate, of course, but also don’t be afraid to question anything that seems unfair or disadvantageous. Always own your power and politely decline any part of the negotiation process that makes you feel uncomfortable, disadvantaged, or manipulated.”
“You don’t have to be a world-class economist to have productive, mutually beneficial conversations with your financial advisor,” says Blum. “Simply knowing what to ask, how to communicate verbally and in writing, how to listen, and how to insist on fairness can make a world of difference in the relationship you have with your financial advisor. When you can communicate more effectively, you get better outcomes. And, of course, the good feelings that flow from such better outcomes can facilitate even better communication in the future.”
Steven G. Blum has been teaching in the Department of Legal Studies and Business Ethics at the Wharton School of Business of the University of Pennsylvania since 1994 and was a visiting professor at the ALBA Graduate Business School in Athens, Greece, for more than a decade.
To read more of Blum’s writings or to get further information, visit www.negotiatingtruth.com.
