Tips For Improving Your Negotiating Skills
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One of the things that I love about investing is that we can find tips from other industries and use them to improve our business.
In finance, you can learn so much from management experts who have been through various industries and learned what works and what doesn’t.
A perfect example is this post on how to improve your negotiation skills in finance.
In this post, authors Bryce Goggin and Sujay Sahoo discuss the importance of communication and how to improve your negotiation skills in finance.
Here are some tips for improving your negotiating skills in the finance industry:
1. Take responsibility for your own investment decisions
Goggin and Sahoo encourage their readers to take responsibility for their investment decisions. If you don’t know the right questions to ask, simply don’t invest.
When I see this post, I think back to a client that I had that was extremely hesitant to use an adviser when he had an issue with his own investments.
He didn’t have enough information or knowledge to make an informed decision.
Here’s what I said:
“Why did you decide to invest in the stock in the first place? Did you understand the risks involved?”
He replied with a question:
“What does that have to do with the investment I’m about to make?”
His answer was, “It’s your money. You should make your own investment decisions.”
I cut him off and asked him why he wasn’t doing his own research. He replied that he didn’t have enough time.
I told him I had zero time. I was a working mom trying to do what I could to support my family. That was the last conversation I had with him.
If you have investors with a question about their investments, just ask them:
“What are your long-term investment goals?”
For example, if a client invests in gold, and they’re looking to buy an apartment in the future, how will they protect their investment?
How are they going to generate an income? What is the risk?
For example, in an apartment, you’ll need maintenance funds.
The landlord can raise the rent every time you need money. Or the building can burn down and leave you homeless.
When you have these questions, the client will feel comfortable because they’ll be giving you information about their future business.
They’ll feel as though you’re treating their money with care.
2. Ask great questions to gain more information
I’m constantly learning new things in finance.
As an example, recently I read an article from Philip K. Howard on how to make a market-beating decision.
The first step is to think like a trader and determine what kind of trading strategy you are going to employ. Here are some of the strategies he suggests:
- Short-term trading
- Stop-loss trading
- Waiting for more information
- Buying near a major inflection point
- Long-term investing
The second step is to perform the analysis. How do you know you’re doing the right thing?
Howard said it like this:
“I was wrong before, and I am wrong again.”
Howard had gone through a bad time with his investments, and he came to realize he didn’t know everything.
That led him to seek help. His mentor pointed out that he had been selling when he should have been buying. That helped him to learn from his mistakes.
I love the quote Howard used: “I was wrong before, and I am wrong again.”
He goes on to say that every decision we make is temporary, but the mistakes we make are permanent. The important thing is to keep learning and improving.
A couple of years ago, I went through a financial crisis. My income was cut in half, and I had to make some life-altering decisions.
The first thing I did was ask a ton of questions. For example, I asked the CFP Board, the Financial Planning Association, and other experts for help.
They were there for me to answer questions and guide me through the process.
When I realized I had made some serious mistakes, I asked for advice. I was told that the options I had, in hindsight, were the worst ones for me.
I needed to sell my business. I needed to take a loan against my home.
I needed to take the money I was making and invest in a CD ladder. That’s what I did.
After that financial crisis, I decided to learn everything I could about the financial world.
3. Speak the language of investment so clients can understand it
When you help your clients make financial decisions, you should make them simple and understandable.
When it comes to investing, people have the common misconception that there is one “right” answer to every question.
The truth is, there is no right answer to everything.
I once heard an investor ask, “Why do I need a 6-year CD?”
His lawyer said, “You need one because it makes your interest rate lower.”
The investor asked, “Why do I need a 6-year CD when I can get a 2-year CD and get a higher interest rate?”
“Because it’s a guaranteed return,” the lawyer said.
Of course, he thought he could take a risk with his money. He thought he could decide to invest in a lot of different things, all at the same time.
He believed that he could use the time value of money as an argument. He couldn’t.
Just because you can get a higher return on one investment than another doesn’t mean that one investment is better than the other.
You can use the time value of money all you want, but the only sure thing in the world is the amount of time you have to get your money back.
Investment decisions are complicated. They require the ability to think in terms of risk vs. reward. Sometimes, it’s difficult to figure out the risk-reward ratio of your investment.
So what does this investor do?
He buys a 6-year CD.
Boom! He’s just doubled his money. He’s making 18% interest.
The 6-year CD has a payout amount. It isn’t a fixed rate of return, but it does have a set payout.
Even if the rate of return is higher, the payout amount is not the same.
For example, if you wanted to invest in a stock and you thought it could double, you might have to wait for the stock to double before you’d get the same return on your investment.
This is why you shouldn’t always look for a guaranteed return. Even if it is a guaranteed return, it may be a low-risk investment.
But when a high-risk investment is on the table, it’s time to look at the whole picture.