Comments on: Incentive

By: Sunday Money Roundup - Nothing To Share Edition. | My Two Dollars

Sunday Money Roundup - Nothing To Share Edition. | My Two Dollars — Sun, 01 Feb 2009 14:01:50 +0000

[...] Pillars talks about incentive. Incentive for what? [...]

By: jesse

jesse — Fri, 30 Jan 2009 19:22:33 +0000

Jerry, I hear you but even 40 years ago there were dishonest vagrants floating around looking for work. The handshake comes from a network and has always been earned, not given, on large deals like a major renovation. Handshakes for strangers is the start of a business relationship that lasts years or decades and doesn’t start by signing away the house. Like friendship it starts small and is built. Perhaps the flux and fluidity of community can no longer support this.

Perhaps it speaks to the need for us to re-connect with people, not the phone book or the internet.

By: Jerry

Jerry — Fri, 30 Jan 2009 15:33:24 +0000

Time was, people could be taken at their word… but that time has past. The example of the contractor who will accept money up front – and then not do any work – may be commonly seen, but it’s disgusting. There is no longer any insurance that you will get what you pay for unless you structure your deal correctly, which leads to a sad commentary on modern society.
Jerry

By: jesse

jesse — Fri, 30 Jan 2009 05:47:13 +0000

Another consideration, speaking of incentives, is the commission structure so popular for financial advisors. Many make their money on insurance and mutual fund kickbacks. If the fees are not explicit and fixed, you are relying on disclosure and a pretty good sign there’s a “scamish” quality to the business relationship. This is because you may be sold an inferior product because they are being paid out or if you don’t buy their insurance schemes they likely will see you as a low margin account and not pay much attention to you. Remember: insurance is extremely lucrative so it’s hard to say if half these guys really have your best interests at heart if they’re pushing this crap on you.

The one I like is the famous x% annual commission. The argument goes that if your money grows, they get rewarded blah blah blah. That’s not how it has to work. You should expect the same level of advice whether you have $50K or $500K. They are prepared for this, though. Above some limit they can “talk to their guys” and “get you inside deals” that only the high rollers get. B.S. They know all the lines and are looking for the juicy commission schedule. The other trick is they “charge out” at $50/hr or something ridiculous to make the commission look sweeter from your perspective.

Go for flat fee all the way if you want to use these services. The deal is: if their advice is good, you’ll keep paying them. If their advice is bad, you won’t be returning their calls. If the advisor keeps pushing for commission structure, call them on it and thank them for their time.

By: jesse

jesse — Fri, 30 Jan 2009 05:28:38 +0000

Here’s another anecdote about a hotel room. I had a hotel room booked in advance for $99/night on Saturday. We went to the front desk on Saturday afternoon to book the room for the next night but the manager said the rate jumped to the weekday rate of $300/night. Pissed off of course we said that was too much and wanted the same rate as Saturday. No dice, no movement on price. We decided for that price we would pack up and go to another hotel for Sunday night and were about ready to do so the next morning. The city had lots of vacancies.

We went down on Sunday morning to check out and all of a sudden the room was available again at $99 for that night. What changed? Who knows but my guess is they weren’t going to be even close to full occupancy and needed to fill the room. The night before they were still hoping for some last minute corporate booking. The key was us willing to accept an alternative, namely moving to another hotel. My wife said that given how wonky the hotel rates were, they should throw in a free breakfast as punishment for trying to screw us over, but whatever. The hotel was a biggish chain so it could be their rates were pre-programmed into the computer but I wonder if they were just being dicks about it.

In any case, we have to now discount any future stays with this hotel chain because we can’t trust them. No way are we staying there again unless the deal is beyond their competitors’ rates. There’s a lesson here in negotiations. If you don’t trust the other person you either need a screaming deal or the deal never gets done, just as we discount stocks or bonds based upon credit ratings and wouldn’t touch many with a twenty foot barge pole.

By: Steve in Montreal

Steve in Montreal — Thu, 29 Jan 2009 22:22:30 +0000

Great post and most timely I might add. There is a chance I may be laid off soon and I’ll be negotiating my severance for sure using this.

By: plonkee

plonkee — Thu, 29 Jan 2009 19:44:51 +0000

Yes, I’ve always wondered why people think that there needs will cause me to give stuff away. I mean, sure, if I already care about them, but when they’re a complete stranger? I prefer to be fair, but that includes being fair to me.

By: nobleea

nobleea — Thu, 29 Jan 2009 16:03:42 +0000

good post mr cheap. well written with interesting anecdotes.
i’ve got some books on hold at the library on game theory. looking forward to reading through them.