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Loot Crate, once America's fastest-growing company, says that it's laying off 150 workers as it moves away from operating its own warehouses

Wed, 05/29/2019 - 3:17pm

Loot Crate, a consumer startup that's described itself as "Comic Con in a box," is laying off 150 employees, according to a public filing with California state authorities released this week

The company, which sells monthly subscription boxes for "geek" culture, listed the reason for the layoffs as due to the "closure permanent" of a location in Vernon, California. As of Wednesday, 192 LinkedIn users listed Loot Crate as their employer, so these layoffs would seem to affect a majority of its staff.

However, in a statement to Business Insider, Loot Crate says that the company is alive and kicking — but that it's closing its in-house warehouse operations and moving to a third-party logistics provider, and that the layoffs were "predominantly our on-call shipping and receiving staff."

Here's Loot Crate's statement:

"This isn't closure for Loot Crate's business, and instead is the company transitioning out of our current warehouse operations to a third party logistics company. The employees affected were predominantly our on-call shipping and receiving staff, who were notified earlier this year when the transition process began. Today is simply the final day of our warehouse operations, and we have begun full-time packing, shipping, and receiving for our products through the third party logistics company."

Part of the themed subscription box boom that produced jewelry-focused RocksBox, makeup-themed Birchbox, and clothing-centric StitchFix, Loot Crate was founded to cater to fans of geek culture, with boxes including swag from movies and TV shows like "Game of Thrones," "Star Trek," and "Star Wars." 

In 2016, Loot Crate raised $18.5 million from Upfront Ventures, Time Inc., Sterling.VC, M13, Downey Ventures, and Breakwater Investment Management, according to Crunchbase.

At its height, Loot Crate was considered one of the fastest growing subscription-based startups, with 650,000 subscribers paying $20 per month for apparel and collectibles, according to a Los Angeles Times report. In 2016, Inc. named it the fastest-growing company in America

Read More: Her first month on the job, she had to oversee a 30% layoff. Now, Tile's VP of People thinks she's cracked the secret of building company culture even in the hard times.

This appears to be the second major round of layoffs at Loot Crate since it was founded in 2012. In an interview with the Los Angeles Times in 2017, Loot Crate founder and CEO Chris Davis said that he made a fatal error in growing the business too much, too quickly, following a round of layoffs earlier that year the cut 60 employees.

"We bit off a lot and everyone felt that," Davis told the Los Angeles Times in 2017. "Trying to get all these different perspectives, skill sets and levels of experience to work together was probably harder than I expected it to be."

SEE ALSO: Recruiting software startup SmartRecruiters just raised $50 million at a valuation above $300 million. See the deck that sold Insight Ventures on leading the startup’s Series D.

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Uber says it will soon ban passengers with low ratings (UBER)

Wed, 05/29/2019 - 3:04pm

  • Uber will soon ban passengers with low ratings, the company announced late Tuesday.
  • The company did not say what minimum riders would need to meet or what infractions might ding them the most.
  • Drivers have long been expected to comply with minimum star ratings to keep working.
  • Visit Business Insider's homepage for more stories.

Have a low Uber passenger rating? The company could soon ban you from the app, it announced late Tuesday.

Drivers have long been expected to meet minimum ratings to continue working on the platform, Kate Parker, Uber's head of safety brand and initiatives, said in a blog post. Now, passengers will be expected to uphold their side as well.

"Riders may lose access to Uber if they develop a significantly below-average rating," Parker said in the post. "Riders will receive tips on how to improve their ratings, such as encouraging polite behavior, avoiding leaving trash in the vehicle, and avoiding requests for drivers to exceed the speed limit. Riders will have several opportunities to improve their rating prior to losing access to the Uber apps."

Read more: There's a new, easier way to find your rating on Uber inside the app

Parker said Uber would launch an education campaign before the new standards took effect so that riders and drivers alike had a chance to understand what's acceptable — and what's not — on an Uber ride.

"From in-app messages and email to signs in Greenlight Hubs, we'll get the word out to customers and partners," Parker said. "By educating customers and partners about the Community Guidelines, asking them to confirm they understand, and holding everyone accountable, we can help Uber be welcoming and safe for all."

Read more: Uber and Lyft drivers reveal the most annoying things that passengers do during rides

Uber didn't offer much detail on the specific behavior it's trying to mitigate with the new policies and educational programs, but in conversations with Business Insider, more than 30 Uber drivers previously explained what their biggest pet peeves were and things they wished riders would avoid doing during rides.

The Independent Drivers Guild, which represents app-based drivers in New York, praised the move by Uber as a way to protect drivers, especially in the wake of a violent attack caught on video this week.

"Holding riders accountable for their behavior on the Uber platform is an important safety measure to protect drivers as well as fellow riders who may book shared rides," the group said in a statement. "While most riders are respectful, banning riders who threaten driver safety, spew racist rants, and disrespect or damage our vehicles is the right thing to do. For too long there has been one-sided accountability and this is a positive step toward correcting that." 

The new announcement comes on the heels of a new offering for Uber's premium service, Uber Black, in which passengers can request a quiet ride if they're willing to pay for the convenience.

Uber is expected to disclose its first quarterly earnings as a public company on Thursday after markets close.

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Employees at top biotech companies can get paid more than $800,000 a year. Here's where workers make the most.

Wed, 05/29/2019 - 2:59pm

It pays to work for a biotechnology company. 

The US recently began to require that public companies disclose the median compensation of their employees. For some biotechs, compensation  is as high as $800,000 for the typical employee.

The US also requires companies to calculate out a ratio illustrating the difference between the median pay for workers and CEOs. Companies have long been required to disclose how much they pay board members and top executives.

Read more: Here's how much the typical healthcare employee makes, from CVS to buzzy biotechs

The publication BioPharma Dive pulled together a list of 180 biotech companies to analyze their compensation packages for CEOs and employees. The list included biotechs with a market cap above $500 million.

Overall, reporters Andrew Dunn and Ned Pagliarulo found that across the industry, median pay for biotech workers was $177,650. 

Here are the 10 companies where the typical biotech employee made the most money, according to their analysis.

  • Sarepta, $329,229. Sarepta makes gene therapies for conditions like an inherited form of blindness. As of its last filing, it employed 499 employees, noting that 252 of those employees hold advanced degrees. 
  • Intra-Cellular Therapeutics, $337,867. Intra-Cellular is developing treatments for conditions like schizophrenia and bipolar disorder. As of February, the company employed 73 employees.
  • Agios Pharmaceuticals, $345,181. Agios is a cancer drugmaker that has two approved treatments for acute myeloid leukemia. At the end of 2018, the company employed 482 employees. Agios noted in a filing that that included 156 employees with MDs or PhDs.
  • Clovis Oncology, $349,809.  Clovis Oncology makes an ovarian cancer drug called Rubraca that's part of a class of cancer drugs called PARP inhibitors, which block a particular enzyme that's used by our cells to repair DNA so that tumors can't survive. In certain kinds of cancer that repair system is broken, allowing cancer cells to thrive, so blocking it is critical. As of February, the company employed 468 employees.
  • Blueprint Medicine, $398,087. The cancer drugmaker had 217 employees as of February 2019. 
  • Heron Therapeutics, $418,130. Heron has developed treatments for cancer patients designed to cut back on treatment-induced nausea and vomiting. In May, the Food and Drug Administration rejected its application for a non-opioid pain drug, citing manufacturing issues. As of its last filing, the company employed 68 employees as of February 2019.
  • Sage Therapeutics, $589,166. Sage is developing treatments for central nervous system disorders, including major depressive disorder and Parkinson's disease. In March, Sage got a key approval for its drug Zulresso, which is used to treat post-partum depression.  The company had 637 employees as of February 2019. 
  • Esperion, $601,814. Esperion is developing new treatments for high cholesterol. The company had 76 employees as of the end of 2018. 
  • The Medicines Company, $659,048. The biotech is focused on treating heart conditions. As of the end of 2018, the company had 67 employees. 
  • Madrigal Pharmaceuticals, $804,000. Madrigal is developing treatments for NASH, short for nonalcoholic steatohepatitis, a type of liver disease in which liver fat builds up in people. In 2018, the company got positive data related to its trial. The company has the highest median pay of any biotech, in large part because it employs just 15 employees.

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Boeing slides after report says the 737 Max will be out of commission until at least August (BA)

Wed, 05/29/2019 - 2:52pm

  • Boeing shares fell 2% after reports said the 737 Max will be grounded until at least August.
  • The timeline for the aircraft's return to services was highlighted Tuesday by the head of the airline industry's trade group.
  • Watch Boeing trade live.

Boeing's 737 Max aircraft will be out of commission until at least August, according the head of an industry trade group. The story was first reported by Heekyong Yang of Reuters. Boeing shares slid down more than 2% on the news.

"We do not expect something before 10 to 12 weeks in re-entry into service," said Alexandre De Juniac, CEO of the Montreal-based International Air Transport Association (IATA). The IATA represents 290 airlines or 82% of total air traffic.

"We are preparing a meeting between regulators, the aircraft manufacturer and the operators to make an assessment of the situation. But it is not in our hands. It's in the hands of regulators," De Juniac added.

Boeing has had a difficult 2019, dealing with the fallout of two 737 Max crashes within six months. In March, the aircraft was grounded globally, despite initial resistance from the planemaker.

In addition, the company reported a hit to profits and was fiercely criticized for its handling of the crisis. Regulators have also come under pressure for Boeing's outsized role in pushing through rapid regulatory approval for the aircraft.

Boeing has slowed production of the 737 Max amidst a sharp decline in orders. In March, new orders ground to a halt, down sharply from 112 orders in the first quarter of 2018. The company also suspended its financial forecasts on its last earnings call due to uncertainty from the 737 Max fallout. 

And on Wednesday, Boeing CEO Dennis Muilenburg said the company is planning the 737 Max's comeback, noting the company has already taken actions, such as a software upgrade, to ensure the safety of the aircraft. The comments were made at the Bernstein Strategic Decisions Conference.

"We know ... that the public's confidence has been hurt by these accidents and that we have work to do to earn and re-earn the trust of the flying public and we will do that," Muilenburg told investors at the conference, according to CNBC.

Boeing is up 8% this year.

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'It will be a crash for sure': Ethiopian Airlines pilot reportedly warned senior officials that pilots needed more training on Boeing 737 Max

Wed, 05/29/2019 - 2:13am

  • A pilot urged Ethiopian Airlines managers for more training on the Boeing 737 Max aircraft in an effort to prevent a crash similar to that of the doomed Lion Air Flight 610 flight that killed all 189 passengers, according to emails and documents seen by Bloomberg News.
  • The pilot reportedly warned managers in December that more training was required following the Lion Air crash in October. He also called for greater communication with 737 crew members, Bloomberg reported.
  • Three months after the pilot delivered the warning, Ethiopian Airlines Flight ET302 crashed and killed all 157 passengers.
  • "It will be a crash for sure," the pilot said in an email in December, Bloomberg reported.
  • It is unclear if the Ethiopian Airlines crash would have been prevented if the airline heeded the pilot's warnings.
  • Visit Business Insider's homepage for more stories.

A pilot urged Ethiopian Airlines senior managers for more training on the Boeing 737 Max aircraft, following the doomed Lion Air Flight 610 crash that killed all 189 passengers two months earlier, according to emails and documents seen by Bloomberg News.

Bernd Kai von Hoesslin, the Ethiopian Airlines pilot and 737 instructor, reportedly warned managers in December that more training was required following the Lion Air crash in October. He also suggested greater communication between crew members. Three months after von Hoesslin delivered the warning, Ethiopian Airlines Flight ET302 crashed and killed all 157 passengers.

Von Hoesslin was concerned with how pilots would handle an issue with the 737 Max's flight-control feature in conjunction with cockpit warnings, according to the emails seen my Bloomberg.

"It will be a crash for sure," von Hoesslin said in an email in December, Bloomberg reported.

Read more: Boeing reportedly let some of its mechanics inspect their own work, and it's causing problems for the manufacturer at the worst possible time

Von Hoesslin also expressed his concerns on aircraft maintenance and pilot fatigue in 418-pages of communications. Von Hoesslin reportedly left the airline in April and included his previous advice with his resignation letter. He declined to comment for the Bloomberg story.

"Some of these concerns were safety-related and well within the duty of the airline to adequately address," von Hoesslin said in his resignation letter, according to Bloomberg.

An Ethiopian Airlines spokesman told Bloomberg they could not comment on the story.

Initial news reports suggest that a faulty reading from a sensor could have played a role in both crashes. The reports indicate that the faulty sensor may have triggered the plane's automated system, which would point the nose downward after takeoff to prevent the plane from stalling.

Von Hoesslin mentioned the aircraft's sensor from the automated safety system — a feature currently being scrutinized by investigators. However, it is unclear if the Ethiopian Airlines crash would have been prevented if the airline heeded his warning, Bloomberg noted.

Boeing has been under intense scrutiny following the crashes. Multiple news reports have revealed problems in the production process, including for the 787 Dreamliner aircraft.

Errors on the production line included debris in airspeed sensors, rags and bolts in planes, and loose cabin seats, The Post and Courier reported earlier in May. Tires with cuts in them, untested gears, and malfunctioning hydraulics systems were also spotted by workers, some of whom were allowed to self-inspect their work.

SEE ALSO: Boeing reportedly let some of its mechanics inspect their own work, and it's causing problems for the manufacturer at the worst possible time

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The US, Australia, and the UK are among the 25 most resilient countries in the world

Wed, 05/29/2019 - 1:07am

  • Norway took the top spot, while the US, UK, and Australia have ranked within the top 25 most resilient countries in the world, according to a new study. 
  • The 2019 Global Resilience Index, published this month by American risk management consultancy firm FM Global, ranks 130 countries around the globe based on the resilience of their business environments.
  • According to the report, Australia, the US, and the UK ranked highly based on their economic vibrancy, political stability, and corporate governance. 
  • Visit Business Insider's homepage for more stories.

Norway was named the most resilient country in the world, according to the 2019 Global Resilience Index. The United States of America, the United Kingdom, and Australia all ranked in the top 25.

The Global Resilience Index, published this month by American risk management consultancy FM Global, ranks 130 countries around the globe based on the resilience of their business environments.

The rankings look at 12 economic, risk quality, and supply-chain related measures — like a country's risk of natural disasters and cyber attacks — in order to help business leaders make more informed decisions when looking to expand or strengthen their operations.

Norway received a score of 100 out of a maximum score of 100 and was followed by Denmark, which scored a 97.2 and Switzerland, which scored a 97.

According to the report, Australia, the US, and the UK ranked highly based on their economic vibrancy, political stability, and corporate governance.

The US was divided into three regions — central, eastern, and western portions — which were each scored separately based on their perceived risks.

The United States' central region took spot nine on the index, with a score of 92.4. It scored highest on risk quality because of its low-risk of natural disasters like hurricanes. It also boasts a large population of people living in urban areas, and has high-quality of infrastructure in place to entice potential investors. 

The eastern section of the US was ranked at 11, and scored a 91 out of 100 based on the fact that much of its population lives in urban areas and the region also has a strong supply chain in place. The western portion, on the other hand, was ranked in spot 22 with a score of 85.3, based on its high exposure to natural disasters like wildfires and moderate control over corporate corruption. 

Read more: The 31 safest countries in the world

The UK was given a score of 91 out of 100, and was tenth on the list based on the quality of its infrastructure as well as the high visibility of its supply chain. 

Australia came in spot 17 on the list, earning a score of 88.2. Australia scored low on economic productivity from its gross domestic product (GDP) based on purchasing power parity divided by the total population, but it scored high on its rate of urbanization and control over corporate corruption. 

Lynette Schultheis, Operations Manager at FM Global, explained that Australia's ranking comes from its outsourcing of its supply chain overseas. 

"While many Australian-based businesses have moved their supply chains into Asia to make them more competitive, few have mapped the vulnerabilities that their supply chains are now exposed to, Schultheis said in a press release. "This means too few businesses understand the potential political, financial, legal and reputational risks they may have unintentionally exposed themselves to and now must face and overcome."

Haiti remains the lowest ranked country in the index, based on its high rate of poverty and slow recovery from 2007's Hurricane Matthew, a category 5 storm which brought catastrophic damage to the Caribbean nation. Venezuela also ranked poorly based on its high levels of corruption and its economic dependency on oil.

The top 25:
  1. Norway
  2. Denmark
  3. Switzerland
  4. Germany
  5. Finland
  6. Sweden
  7. Luxembourg
  8. Austria
  9. Central portion of the United States
  10. The United Kingdom
  11. Eastern portion of the United States
  12. New Zealand
  13. Canada
  14. France
  15. Netherlands
  16. Ireland
  17. Australia
  18. Hong Kong
  19. Belgium
  20. Czech Republic
  21. Singapore
  22. Western part of the US
  23. Spain
  24. Poland
  25. Iceland

SEE ALSO: The safest countries in the world for women

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How tech giants are using their reach and digital prowess to take on traditional banks (GOOG, GOOGL, AAPL, FB, MSFT, AMZN)

Tue, 05/28/2019 - 11:01pm

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

As headlines like "Amazon Is Secretly Becoming a Bank" and "Google Wants to Be a Bank Now" increasingly crop up in the news, tech giants are coming into the spotlight as the next potential payments disruptors.

And with these firms' broad reach and hefty resources, the possibility that they'll descend on financial services is a hard narrative to shy away from. To mitigate potential losses under this scenario, traditional players will have to grasp not only the level of the threat, but also which segments of the financial industry are most at risk of disruption.

Google, Apple, Facebook, Amazon, and Microsoft, collectively known as GAFAM, are already active investors in the payments industry, and they're slowly encroaching on legacy providers' core offerings. Each of these five companies has introduced features and offerings that have the potential to disrupt specific parts of the banking system. And we expect a plethora of additional offerings to hit the market as these companies look to build out their ecosystems.

However, it remains unlikely that any of these firms will become full-blown banks or entirely upend incumbents, due to regulatory barriers and the entrenched positions of big banks. Moreover, consumers still trust traditional firms first and foremost with their financial data. That means these companies are far more likely to rattle the cages of incumbents than they are to cause their total demise. That said, these companies have a proven capacity to revolutionize industries, making their entry into payments critical to watch for legacy players, especially as their moves demonstrate an intent to be a disruptive force in the industry.

In this report, Business Insider Intelligence analyzes the current impact GAFAM is having on the financial services industry, and the strengths and weaknesses of each firm's position in payments. We also discuss the barriers these companies face as they push deeper into financial services, as well as which aspects of a bank’s core business provide the biggest opportunities for the new players. Lastly, we assess these companies' future potential in payments and the broader financial services industry, and examine ways incumbents can manage the threat.

Here are some of the key takeaways: 

  • GAFAM has been actively encroaching on the payments space. This includes offering mobile wallets for in-store and online payments, peer-to-peer money transfer services, and even loans for small- and medium-sized businesses. 
  • These firms' broad reach and hefty resources have put them in a strong position to take on legacy players. GAFAM has products that have been adopted by millions of users, and in some cases, billions. They also have access to a tremendous amount of capital — Apple, Microsoft, and Google had over $400 billion combined in cash at the end of 2016.
  • However, these firms have to overcome major barriers to compete against legacy players, which includes regulation and trust. For example, 60% of respondents to a Business Insider Intelligence survey stated that they trust their bank most to provide them financial services.
  •  As a result of these barriers, it's more likely that GAFAM will make a dent in very specific segments of the financial services industry rather than completely disrupt it. 

In full, the report:

  • Explains what GAFAM's done to place themselves in a position to be the next potential payments disruptors.
  • Breaks down the strengths and weaknesses of each company as it relates to their ability to build out an extensive financial ecosystem. 
  • Looks at the potential barriers that could limit GAFAM's ability to capture a significant share of the payments industry from traditional players. 
  • Identifies what strategies legacy players will have to deploy to mitigate the threat by these tech giants.
Get The Tech Companies in Payments Report


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$2.5 billion video game company Roblox and China's Tencent defied the growing tech 'cold war' and announced a big gaming partnership

Tue, 05/28/2019 - 8:33pm

  • Roblox, the $2.5 billion video game platform, is forming a joint venture with Chinese tech titan Tencent
  • The eventual goal: Bringing Roblox, which currently has over 90 million active players, to the massive Chinese market.
  • Tencent is no stranger to working with foreign video game companies, and bought a 40% stake in "Fortnite" creator Epic Games in 2012. 
  • This comes amid the rising worries of a tech Cold War between the United States and China, sparked by the ongoing trade war and the recent blacklisting of Huawei
  • Visit for more stories.

Tensions between the United States and China are running high, as industry experts warn that the Trump administration's ongoing trade war, and its recent blacklisting of tech giant Huawei, could led to a full-blown tech Cold War between the two countries

It's against that backdrop that Roblox, the video game platform most recently valued at $2.5 billion, announced on Tuesday that it will form a new, jointly-owned company with Chinese tech giant Tencent. 

This new company, which does not appear to have a name just yet, will be based in Shenzhen, and have "an initial focus on education to teach coding fundamentals, game design, digital citizenship, and entrepreneurial skills," according to the press release. 

The eventual goal, the companies said in the announcement, is to bring Roblox to China, where it does not currently operate. 

Roblox now has 90 million active users, many of which are kids and pre-teens, putting it on a par with mega-hits like Microsoft's "Minecraft" phenomenon. Getting access to China's roughly 800 million internet users would definitely give Roblox the opportunity to take things to the next level.

Read more: A video game turned this self-taught 23-year-old programmer into a budding mogul who can support his mom and brother

It's important for Roblox to have a powerful ally like Tencent in doing so, too — China has very strict rules around allowing foreign companies like Roblox to do business in the country; having Tencent as a local partner could smooth the way. 

In the interim, the two companies say that this joint venture will focus on using Roblox to teach coding. To that end, the two are sponsoring a scholarship program for 15 Chinese students to attend a week-long camp taught at Stanford University this summer, where they will learn about game design and 3D world creation. 

For its part, Tencent is no stranger to working with foreign game companies: Back in 2012, Tencent bought a  40% stake in Epic Games, the creator of the smash-hit "Fortnite." Tencent also licensed the Chinese rights to "PUBG Mobile," a very popular battle royale game for smartphones, from South Korean developer Bluehole. It's even been reported that Tencent will help Nintendo bring its Switch console to China.

Still, the partnership between Roblox and Tencent is striking given the political uncertainties and heated rhetoric that currently rule the day.

It's also worth noting that China has also recently put new restrictions on the video game industry, and Tencent isn't immune: The company recently discontinued its support for "PUBG Mobile" in the country, after it failed to get approval from regulators to monetize the game. Instead, Tencent launched "Heping Jingying," a very similar title, with more patriotic overtones. 

SEE ALSO: The Tech Cold War: Everything that's happened in the new China-US tech conflict involving Google, Huawei, Apple, and Trump

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13 luxury real-estate agents reveal what it's really like working with millionaire and billionaire clients

Tue, 05/28/2019 - 7:23pm

Business Insider asked real-estate agents around the US about what it's really like working in the industry, what they wish they could tell their clients, and what it's like working with millionaire and billionaire clients in the luxury market.

Many agents said working with affluent clients is easier than ordinary clients because they tend to know exactly what they want, they have the means to get it, and they don't want to waste any time.

One agent said wealthy buyers want a good bargain as much as anybody else — and since they have more options, they'll walk away if the price isn't exactly right.

Here's what it's really like working with ultra-wealthy clients in the real-estate industry.

SEE ALSO: 13 easy things you can do to increase the value of your home, according to real-estate agents

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Several agents said millionaire and billionaire clients aren't too different from ordinary clients.

"I've only had a handful of truly wealthy clients, but I can say that my experience with them was honestly the same as any other client," Jason Tsalkas, an agent at Compass who sells homes primarily in Brooklyn for between $650,000 and $2 million, told Business Insider. "As a hired real estate advisor, you should be working for the relationship, not solely the transaction. Additionally, we live in NYC on a 'New York Minute' — time is everything. No matter who the client is, respond and react in REAL TIME."

And as with any client, honesty is the best policy when it comes to super-wealthy clients, Tsalkas said.

"I remember having to tell a certain famous client a property wasn't for them, despite how much he thought why, until I laid out the reasons," he said. "No one deal is worth losing the confidence and respect of a client; being transparent will gain you that respect for a lifetime."

Colin Turek, a Compass agent who sells in the $800,000 to $2 million range in New York City, says millionaire and billionaire clients "care about the same stuff — just on a bigger and more luxurious scale."

"Most of them are down-to-earth and want to be treated just like everyone else — in a private car, of course," said Boris Fabrikant of Compass, who sells homes with an average price of $1.5 million in Manhattan.




Many said it's actually easier to work with clients who have "infinite funds" ...

"I commonly work with millionaires," Barbara Leogrande of Douglas Elliman, who sells homes at an average of $550,000 in Suffolk County in Long Island, told Business Insider. "I find it to be easy, as a millionaire didn't accumulate wealth by accident. They have a head for business and understand the dynamics of a transaction."

It's typically a smooth process from start to finish, she said.

"When you work with clients who have infinite funds, it becomes almost easier in a sense because a couple hundred thousand dollars don't typically make a difference," Eric Goldie of Compass, who handles sales in New York City for $1 million to $5 million on average, said. "Working with clients who are buying their first starter home is more of a challenge because every dollar matters. I once had a client who wanted to put a hot-tub on the roof of his penthouse which would require shutting down a major road in Manhattan. I told him it would cost roughly $100,000 and he didn't even flinch. " 

Jose Laya, who sells homes in Miami for between $800,000 and $2 million, said most wealthy clients make quick decisions, don't waste time, and tell you exactly what they think.

"Most deals can be quite easy as they pay cash," he said.



... as long as you work around their schedules.

"This of course comes at a price, as they expect you to be on-call at all times," Laya said. "And always remember... everything will happen on their time. And that is the tough part... working EVERYTHING around their schedules." 

Communication tends to be easier with wealthy clients.

Brian K. Lewis of Compass, who sells $2 million to $10 million homes in New York City, says he loves the "ease of communication" that comes with working with the highest-end buyers and sellers.

"They tend to be good communicators and are often self-made individuals," Lewis told Business Insider. 

He added that many of these clients grew up middle class and have universal values and fears.

"I don't get distracted by fancy titles, or their fame, or the trappings that come with their fortunes," Lewis said. "I relate to them as individuals. Trust is built. Communication is good. I get them what they want. I've used this formula to effect a sale for $42 million— but I also use this same approach for my $420,000 clients."


Agents get to see some of the most luxurious homes in the world working with these clients.

"Working with millionaire and billionaire clients is one of the most exciting parts of the job as you get to see some of the most luxurious homes on the market," Jared Barnett, a Compass agent who sells homes between $2 million and $5 million in New York City, told Business Insider.

"People have the perception it's more challenging to sell ultra-luxury homes to a buyer, but in fact these clients have often bought and sold properties many times throughout their life," Barnett said. "For this reason, they know what they like and are able to make quick decisions, which can expedite the process."

Some of them have "handlers" who deal with their real-estate transactions.

Michael Bello of REAL New York, who does $5,000-per-month on average rentals in the city, said the most affluent clients often have "handlers" — such as accountants or lawyers — who take care of the transactions for them.

"I rented to the daughter of a wealthy celebrity last summer, and they had their accountant handle everything," Bello said. "They wanted to remain anonymous. They couldn't have been nicer people, though!" 

Wealthy clients know exactly what they want.

"They are very clear on what they want, do not like to waste their time and want us to respect their time and they respect our time," said Smitha Ramchandani, a broker-associate at SR Real Estate Group at Prominent Properties Sotheby's International Realty, who sells homes in New Jersey and California, in the $400,000 to $3 million range.

Working with millionaire clients requires a perspective shift.

Scot Dalbery of REAL New York, who deals with rental properties in New York City that are $4,000 a month on average, said that working with millionaire clients is all about adjusting perspective.

"Unlike other typical buyers, there is more urgency for their needs to be met," Dalbery said. "They're often the nicest and most understanding clients. However, you have to know what you're getting into and understand that they have a different perspective on many things than the typical buyer does, and make sure you allow them to voice those opinions in a way that doesn't feel judged." 

Agents should understand their time is less valuable than that of their ultra-wealthy clients.

Martin Eiden, an agent who sells homes in Manhattan and Brooklyn for between $700,000 and $7 million, says working with millionaire and billionaire clients is "pretty much the same" as with other clients.

"Be courteous, professional and prompt," Eiden said. "If they call you on your cell, you need to pick up. Time is extremely important to them. Don't waste it, and understand your time is less valuable than theirs. For billionaires, you will often work with their personal attorneys and rarely (if at all meet them)."

Millionaires want to get a great deal as much as anybody else.

Julie Brannan of Compass, who deals with homes at an average $2 million in New York City, said there's a misconception that people of means don't want a bargain. 

"In some ways, since their options are so open, they are more driven to get the right apartment at the right price or they will walk away," Brannan said.

"I once negotiated up to $26 million on an apartment that was listed for $31 million and the seller wouldn't come down from a counter of $29 million," she said. "My buyer could afford it but felt it was overpriced (and I agreed). We walked away and bought something else — and three years later that apartment is still on the market, now for $26.9 million."

Doctors are burning out twice as fast as other workers. The problem is costing the US $4.6 billion each year.

Tue, 05/28/2019 - 7:22pm

Overworked and unhappy doctors are costing the US billions. 

Physician burnout is costing the US $4.6 billion each year, according to a study published on Tuesday in the Annals of Internal Medicine. Burnout is generally defined as long-term stress linked to your work.

The costs of burnout are related to doctors leaving health systems and working reduced hours, according to the study. There are about 1 million doctors in the US. The authors of the study said their findings suggest there's good reason to develop programs that reduce burnout in doctors. 

More than half of the doctors in the US experience burnout, a rate that's twice as high as the average American worker, researchers previously found. That can have a lot to do with the number of patients doctors see and the amount of documentation that needs to be completed for each visit. 

"It's just created such an extraordinarily structured, regulated environment in which many, many tasks that used to be done by other members of the healthcare team fall to physicians," Dr. Ed Ellison, the co-CEO of the Permanente Physician medical group said in a presentation on doctor burnout at CNBC's Healthy Returns conference in May.  Ellison wrote an accompanying editorial in the Annals of Internal Medicine.

Burnout is a big deal across professions. The World Health Organization on Saturday added burnout to its list of medical conditions, characterizing it as "a syndrome conceptualized as resulting from chronic workplace stress that has not been successfully managed." 

Alleviating burnout

To avoid burnout, some doctors have turned to alternative business models.

That includes new models like direct primary care, which charges a monthly fee and doesn't take insurance. Through direct primary care, doctors manage the healthcare of fewer patients than they might in a traditional model. That frees them up to spend more time with patients and ideally help them get healthier.

It's a model that has been adopted by independent doctors who would otherwise have left medicine, with insurers and even the government starting to take notes on the new approach. 

Others have chosen to set their own hours by working for sites that virtually link up patients with doctors

Even so, it'll take more to cut through the note-taking and other tedious tasks that preoccupy doctors, from primary-care visits to acute surgery. It has prompted some to look into ways to alleviate how much work they do on their computers for note-taking purposes by using new technology like artificial-intelligence voice assistants.  

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Jeff Bezos is one of the few top US billionaires who haven't signed the Giving Pledge. Here's how much the Amazon CEO has given to charity.

Tue, 05/28/2019 - 6:38pm

Amazon CEO Jeff Bezos may be the richest person, but he isn't well-known for his billion-dollar donations and philanthropic efforts like Bill Gates and Mark Zuckerberg.

Additional light was recently shed on Bezos' charitable donations after news that his ex-wife, MacKenzie Bezos, had signed the Giving Pledge, in which participants promise to give away more than half of their wealth during their lifetimes or in their wills. 

Among the five richest people in America, Jeff Bezos, who has a net worth of $114 billion, is the only one who hasn't signed on to the philanthropic commitment. 

It's not clear why Bezos has avoided joining the Giving Pledge, an initiative started by Bill Gates and Warren Buffett almost a decade ago. His charitable history has "remained largely a mystery," The New York Times wrote in 2017 after Bezos posted a "request for ideas" for philanthropy on Twitter.

A nonprofit bearing Bezos' last name, the Bezos Family Foundation, has given millions of dollars to the Fred Hutchinson Cancer Research Center in Seattle. However, the fund is run entirely by the Amazon CEO's parents and hasn't received contributions from Bezos himself, according to Inside Philanthropy.

Additionally, Bezos had never appeared on the annual list of America's 50 largest donors until 2018, when he took the top spot with the launch of a $2 billion fund for education programs for the homeless. Still, that donation represented only about 1.3% of his net worth at the time, according to Quartz.

Here are all the major donations Bezos is known to have given to charity since becoming a billionaire in 1997:

SEE ALSO: MacKenzie Bezos just pledged to give away half her fortune during her lifetime, something Jeff Bezos, the richest person in the world, has avoided doing

August 2011: $10 million to the Museum of History and Industry in Seattle.

Bezos' $10 million grant was used to establish the museum's Bezos Center for Innovation, which highlights companies that have gotten their starts in Seattle — including Microsoft, Costco, Boeing, and UPS.

The innovation center was officially unveiled in October 2013. The Museum of History and Industry is just a few blocks from Amazon's headquarter near downtown Seattle.

December 2011: $15 million to Princeton Neuroscience Institute.

The $15 million donation went toward creating a center studying neurological disorders at Princeton Neuroscience Institute. The Bezos Center for Neural Circuit Dynamics opened in late 2013 on Princeton's campus in New Jersey.

Bezos and MacKenzie Bezos are both graduates of Princeton University. Jeff Bezos studied electrical engineering and computer science, while MacKenzie Bezos majored in English.

July 2012: $2.5 million to Washington United for Marriage, a same-sex-marriage advocacy group.

Jeff and MacKenzie Bezos, who were still married at the time, donated $2.5 million to a group called Washington United for Marriage. The group was raising funds for a campaign for Referendum 74, a state referendum that would legalize same-sex marriage in Washington if approved.

The donation from the Jeff and MacKenzie Bezos doubled the organization's campaign fundraising, according to CNN Money. The referendum appeared on the ballot in November 2012 and was approved.


January 2013: $500,000 to Worldreader, a nonprofit that provides access to e-books and e-readers.

Bezos pledged half a million dollars to Worldreader, a nonprofit that supplies children in underdeveloped countries with access to digital books and e-readers. Bezos' donation went toward boosting the organization's programs in African countries, including Kenya, Ghana, Uganda, and Rwanda.

May 2016: $1 million pledge to match donations to Mary's Place, a homeless nonprofit in Seattle.

Bezos pledged to match up to $1 million in donations given to Mary Place during Seattle's annual GiveBig day of philanthropy in 2016. Mary's Place, a nonprofit that provides housing to Seattle's homeless population, exceeded its $1 million goal that year, bringing the organization's fundraising total to more than $2 million.

Although this is the only donation Mary's Place has received from Bezos personally, Amazon has turned part of its office space in Seattle into a homeless shelter (pictured above).

May 2017: $1 million to the Reporters Committee for Freedom of the Press.

The $1 million gift was the largest personal contribution ever to the nonprofit, which advocates and provides resources for journalists and First Amendment rights. The Reporters Committee for Freedom of the Press' executive director called the donation "an institution-changing gift" for the nonprofit.

Jeff Bezos owns The Washington Post, a historic newspaper he bought for $250 million in August 2013.

January 2018: $33 million to, a nonprofit that funds college scholarships for immigrants.

Bezos donated enough to fund the college education of 1,000 "Dreamers," immigrants who were brought to the US as children. The $33 million donation came during a time when President Donald Trump attempted to end the Deferred Action for Childhood Arrivals program — known as DACA — under which these children were protected from deportation and allowed to work legally in the US.

Bezos said the donation was a nod to his father, Miguel Bezos (pictured above), who fled to the US from Cuba when he was 15. He later went on to attend college and work as an engineer at Exxon.

September 2018: $10 million to With Honor, a PAC for electing military veterans.

Bezos' first major political donation was a $10 million donation to With Honor, a bipartisan PAC that backs military veterans running for election to Congress.

September 2018: $2 billion Bezos Day One Fund launched to support education programs for homeless families.

The Bezos Day One Fund is named after the Amazon CEO's longstanding "Day 1" way of thinking. Bezos said he planned to use the charity to support homeless families and launch education programs in underserved communities.

The first round of donations, announced in November, went toward organizations fighting family homelessness. The fund's website hints at more donations to come, including some that will be used to launch "a network of high-quality, full-scholarship Montessori-inspired preschools in underserved communities."

How to use PayPal to send money securely, with no fees or minimums

Tue, 05/28/2019 - 4:42pm

  • PayPal is a secure, free way to send or receive money quickly.
  • To send money on PayPal, both people need (free) PayPal accounts.
  • Once you have an account, it's just a matter of using the "Send & Request" feature on the site or app.
  • Visit Business Insider's homepage for more stories.

You might know PayPal as a secure way to pay for purchases online, but it's also a secure way to exchange money.

"Exchanging money" sounds very serious, but it's a useful service for day-to-day transactions like paying your part of a group dinner at a restaurant, giving your teenager some cash to see a movie, or even paying the babysitter (provided they agree!). PayPal is encrypted for security, and provides constant transaction monitoring to watch out for fraud.

To send money through PayPal, both parties — that is, you and the person you're sending money to, or requesting money from — will need to have PayPal accounts, which are free and easy to set up through the PayPal website.

In order to send or receive money through the PayPal system, you'll need to follow a few simple steps.

How to send money on PayPal

1. Visit to set up an account.

2. Click 'Sign Up' in the upper-right-hand corner to be directed to the account creation page. From there, you'll need to pick from a personal or business account.

3. Create your account, including picking out a password and linking your PayPal account to your checking account or credit cards. Once you create your account, you'll be sent to the homepage.

4. Click "Send & Request" from the top menu bar to send money to someone (or request it).

5. Type in the name, email address or phone number of the person you wish to send money to. Keep in mind that in order for a PayPal transaction to occur, the person you want to send cash to needs to have a PayPal account, as well.

6. Type the amount you wish to send in the first box, and pick from sending to a friend (which is free to use your bank or current PayPal balance to send to family or friends in the U.S.) or click "Change" to pay for an item or service (in which case the seller would pay a fee).

You can also add a note in the "add note" section, if you'd like. Click continue after filling in all of your information. 

7. Your next step will be the "How do you want to pay?" screen. You can pick from a linked checking account (which is free), or a credit card, which will come with a fee. You can also add new accounts on this page as needed. When you've picked your payment method, click next. 

8. A confirmation page will appear with your fee, who you're sending payment to and how you're sending it. Click "send payment now" to have PayPal send the money to your contact's PayPal account.

9. You will receive an email from the account with the information regarding your transaction. Keep this email in case you need it for any future reference.

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Tesla just got slammed with a new lawsuit from a supplier that alleges the automaker hasn't paid a $1.7 million bill (TSLA)

Tue, 05/28/2019 - 4:39pm

  • A French metal supplier says Tesla hasn't paid for $1.7 million in parts.
  • Lebronze Alloys filed a lawsuit over the alleged overdue payments in court on Tuesday. 
  • It's not the first time suppliers have said Tesla has balked on agreements. 
  • Tesla did not respond to a request for comment from Business Insider. 
  • Visit Business Insider's homepage for more stories.

Tesla owes roughly $1.77 million in overdue payments, a French metal supplier alleged in a new lawsuit filed on Tuesday.

According to court documents, Lebronze Alloys has supplied a metal part for Tesla's electric motors since 2016. However, efforts to collect the 1,559,420.06 euros (approximately $1,768,460.32) that the company owes have been unsuccessful, the company alleges in the lawsuit.

"LBA made numerous efforts to get Tesla to pay the amounts Tesla owed to LBA. LBA convened meetings, sent e-mails and letters, and initiated numerous telephone calls in an effort to get Tesla to pay what it owed, to answer any questions Tesla may have had, and to resolve any issues," the lawsuit, which was filed in California's Northern District, reads. "In addition, LBA demanded reasonable assurances of performance by Tesla."

In 2016, Tesla agreed to buy parts from Lebronze Alloys for up to 1.5 million vehicles, according to contracts filed as exhibits in Tuesday's suit. That agreement was amended in February 2019, with the forecast trimmed to just 250,000, according to another exhibit. 

"On April 17, 2019, Tesla, without notice, requested an immediate telephone conference call, during which Tesla purported to give verbal notice of termination of the Agreement and the Amended Agreement, without advance notice and contrary to the terms of the Agreement and the Amended Agreement," the lawsuit says. "This constituted a breach, repudiation and anticipatory breach of the Agreement and the Amended Agreement."

Lebronze Alloys is asking the court to force Tesla to pay for the alleged overdue charges, as well as reimbursement for its legal fees and other damages. 

Tesla did not respond to a request for comment from Business Insider.

It's not the first time Tesla suppliers have been unhappy with Elon Musk's electric-car maker. The Wall Street Journal reported in July 2018 that Tesla had sent a memo to suppliers requesting refunds. The memo said that the money was "essential to Tesla's continued operation," according to The Journal.

Later that year, in August 2018, 18 of 22 executives at automotive supply companies said in a survey reported on by The Journal that Tesla was a financial risk to their businesses. Eight of the 22 said they were worried about a Tesla bankruptcy. 

Tesla's cash situation has come back into the forefront of investors' minds again recently, as disappointing delivery numbers and quarterly earnings reports have sent the stock cratering to less than $200 per share. 

Shares of Tesla fell about 1% in after-hours trading on Tuesday following news of the lawsuit. 

Read the full lawsuit below:

  Lebronze Alloys vs Tesla by Graham on Scribd


SEE ALSO: Elon Musk made more in 2018 than the next 65 highest-paid CEOs combined, according to a report

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US Bank's travel rewards card is a solid option — especially if you already bank with them

Tue, 05/28/2019 - 4:37pm

Business Insider may receive a commission from The Points Guy Affiliate Network if you apply for a credit card, but our reporting and recommendations are always independent and objective.

  • With the US Bank FlexPerks Travel Rewards Visa Signature Card, you can earn 2x points per dollar in your top spending category between gas stations, grocery stores, and airlines.
  • Plus, you'll get 2x points per dollar on your cell phone bill and charitable donations.
  • Redeeming points for travel is easy, with extensive booking options and no blackout dates.

Saving up rewards points for travel can unlock flights, hotel nights, and more at fun and exciting destinations around the world.

The US Bank FlexPerks Travel Rewards credit card offers up to 2x points per dollar spent, which can go a long way towards free travel. To decide if you should add this card to your wallet, it's important to look at the rewards, benefits, and costs. Read on to learn more.

The US Bank FlexPerks Travel Rewards Visa has a somewhat unique rewards structure

The US Bank FlexPerks Travel Rewards Visa Signature card offers an interesting combination of benefits and rewards. It isn't the very best rewards card out there, but it may be worth considering depending on your spending habits and travel preferences — and your desire to stick with US Bank. This card is also good for people who are averse to high annual fees, as it offers an especially valuable rewards program in relation to the cost.

The card earns 2x points per dollar on purchases with cell phone providers, plus charitable donations. It also potentially earns 2x points per dollar at gas stations, grocery stores, or airlines — but only on one of those categories. Whichever of those categories gets the most of your spending each monthly billing cycle will earn 2x points — the other categories, and all other purchases, get 1x point per dollar.

Points are worth 1.5¢ each when redeemed for travel. That means you earn an equivalent of 3% on the best purchases and 1.5% on others. 

The card currently offers a 25,000 point bonus worth $375 toward travel purchases after spending $2,000 in the first four months. It charges a $49 annual fee.

Considering the annual fee, you would break even spending just $3,267 per year on "everything else" purchases. But there is potentially even more value from the card's benefits that make it worth consideration.

The FlexPerks Travel Rewards card has plenty of useful benefits

The card charges no foreign transaction fees, something useful and expected with this type of card. But it has one unique feature that is very cool and potentially very valuable.

For each flight you book with the card using your points, you get up to $25 in reimbursements for baggage fees or in-flight purchases. If you book two award flights per year and take full advantage of the $25 allowance, you made up the cost of the annual fee right there.

Another benefit the card offers is the Visa Signature Concierge. This service can research and purchase things like flights, hotels, rental cars, activities while traveling, or even online orders like flowers for a special someone.

There are also a handful of travel and shopping protections, including auto rental collision damage waiver and some extended warranty protections. It also offers travel accident insurance and gets you preferred rates at three popular rental agencies.

If you are into chatting about travel, you can take advantage of a Hideaway Report membership — an exclusive travel industry community — valued at $250 per year (digital membership cost).

In addition to travel, the card offers a few other redemption options such as cash back, gift cards, and merchandise rewards. However, these redemption options give you a lower value per point than travel, so you should generally avoid those redemption methods unless you really need the statement credit to help you pay off your balance.

Should you get the FlexPerks Travel Rewards card?

This card clearly offers enough value to pay for the costs. The signup bonus is worth as much as seven and a half years of annual fees. You only have to spend a few hundred dollars on the card per month to break even. If you do all of your regular spending on this card, it's easy to see how the rewards would stack up and turn into free travel.

The card would be more exciting if it offered an ability to transfer rewards to airline or hotel partners. The 2x rewards on charity and mobile phones is useful. The bonus on a category you spend most is also great, but some competing cards offer better bonuses and more valuable rewards. However, you'll have to pay a higher annual fee to get them.

If you are willing to pay more than $49 per year or want cash back rewards instead of travel, you can find more exciting cards elsewhere. However, if you are a big fan of US Bank and want to keep all of your financial accounts under one roof, or just find the combination of rewards and benefits enticing, this card is easy to justify.

Click here to learn more about the US Bank FlexPerks Travel card from Business Insider's partner, The Points Guy.

READ MORE: The best credit card rewards, bonuses, and benefits of 2019

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UBS surveyed 8,000 smartphone users around the world, and the results should worry Apple (AAPL)

Tue, 05/28/2019 - 4:16pm
  • UBS surveyed around 8,000 smartphone owners in the US, UK, China, Germany, Japan, and India, and found the overall 12-month forward-purchase intent had fallen to the lowest level since it started conducting the surveys.
  • "We continue to see extending device lifetimes, weak near-term purchasing intent and with these issues compounded by the disruption Huawei faces, we forecast smart-phone units declining 7% in 2019E," UBS said.
  • The findings spell bad news for Apple in particular.
  • Watch Apple trade live here.

Feeling less than jazzed about the latest smartphone update? You're not the only one. 

UBS recently surveyed around 8,000 smartphone users in the US, UK, China, Germany, Japan, and India, and the findings spell bad news for many of the major players in the smartphone market. Specifically:

  • UBS found the overall 12-month forward-purchase intent, a sign of whether respondents were looking to buy a new phone in the next year, had fallen to the lowest level since it started conducting the surveys.
  • That, coupled with the disruption surrounding Huawei, led UBS to cut its forecast for smartphone units in 2019 by 7%.

In particular, the charts spell bad news for Apple. To be clear, Apple is still a UBS analyst pick, with a price target of $225, versus the current price of around $180. But it still faces the following problems:

  • UBS says that on its latest supply-chain analysis, it thinks iPhone procurement volumes in the first half will be down 32% year-on-year.
  • The percent of people planning to buy an iPhone has fallen in the US. Android has now overtaken Apple as the most retentive brand. Apple probably can't raise prices anytime soon. And it's lost some of its allure as an aspirational brand.
  • And in China, Apple's status as a trusted brand has taken a hit, its retention rate has dropped, and the percent of people planning to buy an iPhone in China has dropped sharply.
To the charts:Fewer people plan to buy a phone in the next 12 months.

Because everyone is holding on to their phones for longer.

The percent of people planning to buy an iPhone has fallen sharply in China and dropped in the US.

Android has now overtaken Apple as the most retentive brand on the smartphone market.

UBS says that over time it believes this will "increasingly pose a headwind to Apple's ability to take share."

Th note added: "This can also be seen if we look at the destination of consumers who are switching OEM - in prior periods Apple would have been a net-gainer in this base but now the outlook is much more balanced which we believe is a consequence of the improved retention that has built up around the Android ecosystem." 

UBS says Apple's average selling price (ASP) has likely hit a ceiling, meaning there's not much room to raise prices.

And Apple's been losing some of its allure as a "aspirational" brand with unique products.

Apple's status as a trusted brand in China has also taken a hit.

Apple's retention rate has dropped in China in particular.

Apple is possibly a victim of the on-going trade tensions between the US and China, according to UBS. 


Trump's tariffs are inflicting pain and uncertainty across the market. Comments from very different American companies show how.

BlackRock, Vanguard, and other big asset managers are placing big bets on tech. But some advisers have major concerns about the new platforms.

Tue, 05/28/2019 - 4:12pm

  • Big asset managers like BlackRock, Vanguard, and WisdomTree are increasingly offering or investing in technology for financial advisors to use with their clients. 
  • Some advisers said that the move from offering investment products to technology solutions could raise conflicts of interest and privacy concerns.
  • Visit Business Insider's homepage for more stories.

Big asset managers like BlackRock and Vanguard have much to gain from pushing into technology for financial advisers – but some advisers are eyeing what they have to lose, with concerns around client privacy and conflicts of interest.

At a time when the industry is seeing an exodus of money from high-revenue products like mutual funds, managers have invested internally and externally in platforms aimed at financial advisers. The products help advisers, who manage more than $6 trillion in North America oversee portfolios and evaluate risk. For managers like BlackRock, adviser technology is adding new revenue streams, increasing brand loyalty, and bringing in more money to its products. 

But some advisers say they're wary of using products directly or indirectly owned by managers, concerned that asset managers could exert too much influence on where their clients' data and money go.

The stakes are high. A March report from Morgan Stanley said managers could add $10 billion to $15 billion in revenue by 2023 if they continue to expand mass customization solutions, technology that allows advisers to tailor their offerings to individuals. That could be a critical source of revenue as investors flee higher-fee active funds. Morgan Stanley predicted that iindustry revenues will grow 1% annually for the next five years, compared to 4% for the last five years.

See more: Vanguard thought its app was just for millennials. Then it realized older investors spend just as much time on it, and it's changed how it thinks about design.

At recent events and in conversations, financial advisers highlighted the potential pitfalls – and a few positives – of asset managers' tech efforts. The discussions come as asset managers are expanding their reach. Earlier this month, Vanguard's CEO revealed it's in the early stages of building a platform for financial advisers, which will be similar to its wildly popular Personal Advisor Services.

'No voice with BlackRock'

Heather Fortner, the chief operating officer at SignatureFD, which oversees more than $3 billion, said the tech push presents "an enormous risk" to advisers, despite some upside. 

"I love the investment in the technology. Taking a really good technology platform and putting a ton of money into it so it can be better and develop at a faster pace and that it can actually master what it's doing in a better way – I love that," Fortner said at Morningstar. "What I don't love about it is putting all our eggs in one basket."

She said she's concerned about choosing a single provider that may not offer flexibility to advisory firms.

"I have no voice with BlackRock. BlackRock's enormous," Fortner said. "If I choose that firm, and I have no voice, and they eventually decide that this one small thing that they're doing doesn't make economic sense to their overall business, but it is my whole business, and it fuels my whole business, I've really put our business in a really bad spot."

Joel Bruckenstein, who founded T3 Consulting Services to advise wealth firms on digital transformation, countered that advisers have that risk with any platform, since "things could change tomorrow." 

He recommended advisers think through when, if ever, using an asset manager's platform would breach their fiduciary responsibility. Surveying the tech options right now, Bruckenstein said that's not a concern, "but that doesn't mean it couldn't turn into a problem in the future." 

While some advisors relayed worries about clients' data being stored and potentially misused by asset managers, one wealth manager told Business Insider that his younger clients had no such concerns since they've become accustomed to frequent privacy lapses from Facebook and other major companies. They, unlike Baby Boomer investors, have no expectation of privacy from the start.

Managers' tech evolution

Vanguard is only testing its platform right now, so it's too early to understand any specific risks – or benefits – for advisers.

"We're continually looking for new ways to enable advisers and expand our existing suite of services to our financial adviser clients," a Vanguard spokesman said. "We often receive requests for access to methodologies that have been perfected in our Personal Advisor Services offering and we're in the beginning stages of building out those capabilities in order to help advisers improve end investor outcomes."

Vanguard's product, coming by 2021, will enable the $5.2 trillion firm to compete with BlackRock's Aladdin Wealth, which is used by more than 30,000 financial advisors at nine wealth management companies, including Morgan Stanley, UBS, and HSBC. In November, BlackRock said it would buy a minority stake in financial technology firm Envestnet for $123 million. About 92,000 financial advisers use Envestnet's wealth management platforms, which include portfolio management, reporting and other capabilities. There are about 300,000 financial advisers in the US.  

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"We engage advisers through a combination of personal engagement and technology," a BlackRock spokesman said. "We want to understand their needs and deliver solutions that meet them. Digital solutions save advisers time to focus on their clients' needs, help them forge deeper personal connections with clients and put the value of their advice at the forefront of their relationship."

WisdomTree, meanwhile, owns a 41% stake in digital advice firm AdvisorEngine, with the option to buy out the remaining interest this year. AdvisorEngine was used by 14,000 managers at 1,500 firms as of last June, according to its most recently available figures. WisdomTree did not respond to requests for comment.

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There are 3 reasons China just took over a bank for the first time in 20 years, and 2 of them are a huge deal

Tue, 05/28/2019 - 3:37pm

  • China just took over Baoshang Bank, a small bank in Inner Mongolia that reported a pretty clean balance sheet. It's the country's first public bank takeover in two decades.
  • There are three reasons that could've led China to its decision to take over the bank. It could be because it was part of a huge "gray-rhino" conglomerate, because regulators said it was a "credit risk," or because policymakers are trying to introduce moral hazard into China's debt-laden financial system — or all three reasons could've been involved in the decision.
  • If the last two are correct, hold on to your hats.

The question isn't why the Chinese government took over Baoshang Bank — a small commercial bank in Inner Mongolia — but rather why the government told us it took over the bank at all, and what that rare disclosure means for China's banking system at large. 

The Baoshang takeover is the first public government takeover of a Chinese bank since the country's financial crisis in the late 1990s, but it's certainly not the first takeover in general. Over the past two decades the government has many times recapitalized struggling banks or forced them to merge with state banks or other trusted corporations. When it has done this, though, it has done it quietly.

That's what makes this Baoshang situation so strange — the fact that regulators are injecting some fear into the market.

"One of the more unusual aspects of the Baoshang drama is that it's been reported — not only that, but high-level authorities have publicly expressed concern that there may be bank runs and financial institutions that 'disappear,'" J Capital Research, a China-focused investment firm, wrote in a note to clients.

"This is peculiar for an economy that claims to be growing at 6.5%, have average NPL rates under 1.5%, and that has buoyant construction and property markets," the note added.

What a fool believes

As J Capital said, if you buy the statistics — China's financial system shouldn't have a problem. 

Perhaps in the same way, if you look at Baoshang's latest numbers, it shouldn't really have a problem either. The bank hasn't released an annual report since 2016 (published in 2017), but back then it showed a nonperforming-loan (NPL) rate of 1.68%, according to the investment bank Nomura. That's up from 1.41% a year before — so not terrible on paper, especially not with $60.8 billion in assets and $27 billion in deposits.

This certainly does not appear to be a bank that poses "credit risks," which the Chinese government cited in its takeover decision.

But there are other peculiar, and perhaps equally important, things to note about Baoshang.

  • It was part of a massive conglomerate called Tomorrow Group, which is controlled by a fund manager named Xiao Jianhua.
  • In 2017, Xiao, who used to run money for China's elite, was arrested on fraud and embezzlement charges in Hong Kong. Right after that, Baoshang's credit rating was downgraded.
  • China has cracked down on similar huge financial conglomerates (like Anbang Insurance) over the past few years. These are "gray rhinos" that the government believes are so large and opaque that they can hide issues. 
  • One source told the Chinese business publication Caixin that Baoshang functioned as a "cash machine" for Tomorrow Holdings, and another said that it had helped Tomorrow put together at least $21.7 billion in funding through shadowy practices.

So is this takeover about Baoshang's parent company? Is it about Baoshang's balance sheet? Or is it about messaging to China's financial sector that moral hazard has been introduced? 

How about a little of all three?

A wise man has the power to reason away

If the Baoshang takeover is about the parent company, consider this a continuation of the detangling of opaque "gray-rhino" conglomerate assets that the government has been undertaking for some time. It is not, then, some kind of warning of some potential cataclysmic financial event.

If it's about Baoshang's balance sheet, then consider it yet another example of the most dangerous tension in China's debt-riddled financial system. To keep the system growing, banks have to continue to extend more and more credit, but not all of that credit is going to be good. J Capital said Baoshang "is involved in literally thousands of lawsuits seeking repayment of delinquent loans, with interest as high as 18%, or 24% with penalties, generally secured in side agreements." 

What this tells us is that the balance sheets of Chinese banks are not to be trusted. On paper (at least the latest ones available for the public and media to see), Baoshang is healthy. The government is acknowledging that papers lie — a dangerous notion to introduce in a country where economists already question basic gross-domestic-product data.

Lastly, if this is about moral hazard, then perhaps regulators are telling the market to prepare for some losses. Nomura said, "regulators did not state they would guarantee all the liabilities of Baoshang Bank," adding that depositors and creditors with over 50 million Chinese yuan in assets at the bank "will need to negotiate with the takeover task-force for repayment."

Before you chock that up to China's trade war with the US, remember that the Chinese economy has been slowing for some time. At the end of last year and into the beginning of this year, policymakers were legitimately worried, and Chinese President Xi Jinping has for months been warning that things were going to get more difficult economically. Trade war or not, deleveraging the financial system was going to be painful for China.

So perhaps policymakers are telling the market that there are too many balls in the air now and some of them are going to have to hit the ground. Point is, at least they're letting us know.

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Experts say your office 401(k) is the best place to start investing. Here's how it works.

Tue, 05/28/2019 - 3:21pm

  • Employer-sponsored 401(k)s are retirement savings accounts that make investing simple by directing part of your pretax salary into an investment account and paring down investment options.
  • To invest in a 401(k), you need to make three decisions: how much of your salary you want to contribute, which funds you want to invest in, and what percentage of your contributions should go toward each investment.
  • Generally, it's best to avoid funds with expense ratios above 1%, unless your company offers a contribution match that's higher than the fee.
  • You can change your contribution rate and manage your investments at any time through your account on the plan provider's website.
  • Visit Business Insider's homepage for more stories.

Though it's synonymous with retirement savings, the 401(k) plan is best way to start investing, whether you're in your 20s or your 40s.

A whopping $5.3 trillion was held in 401(k) plans at the end of 2017, accounting for nearly one-fifth of all retirement assets in the US, according to the Investment Company Institute.

401(k)s make investing simple by directing part of your salary into an investment account and paring down investment options. Here's exactly how to invest in a 401(k) at work:

How to invest in a 401(k) 1. Find out if you've been automatically enrolled

Many companies have an auto-enrollment feature in their 401(k) plans. Unless an employee opts out or changes their deferral rate, a predetermined portion of their pretax paycheck will be contributed to their 401(k). The default contribution rate varies depending on the company's plan specifics, but typically ranges from 2% to 5%.

To find out if you're enrolled in your company 401(k), check your paystub or contact your human resources team.

2. If not, enroll now

If you're not already enrolled, your human resources team can give you the instructions or forms you need to do so.

3. Find out if you have a company match

Ask your human resources team or check the 401(k) plan documents to find out if your company offers an employer contribution match and exactly how it is calculated.

An employer match is free money. To qualify to get the free money, you'll need to defer some of your own salary into your 401(k). For example, an employer may promise to match 100% of its employees' contribution, up to 3% of their salary. That means if an employee who earns $60,000 a year contributes 10% of their salary ($6,000), the employer will contribute $1,800 (3% of $60,000) for the year.

Minimally, many financial experts recommend contributing enough money to your 401(k) plan to qualify for your employer match before turning your attention to other tax-advantaged retirement accounts.

Are you saving enough for retirement? Find out with this calculator from our partners:

4. Understand your company's vesting schedule

Any contributions you make to a 401(k) are yours to keep, though you won't be able to access the money before age 59 and a half without incurring a penalty and/or paying income tax.

That said, any contributions your employer makes to your 401(k), including matches, may not be yours right away. Your 401(k) plan's vesting schedule outlines exactly when your employer's contributions will be yours. You can contact your human resources team to find out about your company's vesting schedule.

Most 401(k) plans have either cliff vesting or graded vesting. A cliff means that contributions made by the employer won't be the employee's to keep until they've worked at the company for a specific period of time, usually two or three years. Graded vesting means that a specific percentage of the employer's contribution vests each year the employee is at the company.

For example, your company's 401(k) plan may have four-year graded vesting — after one year of service, 25% of their contribution is yours; after two years of service, 50% of their contribution is yours; after three years of service, 75% of their contribution is yours; and finally, after four years of service, 100% of any past and future contributions are yours to keep and invest in your 401(k).

If you leave the company before your vesting period is up, you'll lose any portion of your employer's contribution that isn't already vested.

5. Choose your deferral rate

A lot of people get caught up deciding how much to contribute to their 401(k), but anything is better than nothing.

The good news is your deferral rate — the amount of your paycheck that's deferred from income taxes — is not set in stone. Most plans will allow changes to the deferral rate (also called a contribution rate or savings rate), at any time, though it could take up to a month to go into effect.

In 2019, the IRS allows employees to contribute $19,000 to a 401(k), plus an extra $6,000 for folks over 50. To max out your 401(k) this year, you'd need to contribute about $791 every paycheck (assuming 24 bi-monthly paychecks over the course of the calendar year). For example, an employee earning $125,000 would need to defer 15% of their salary to reach the annual contribution limit.

6. Choose a beneficiary

You'll also need to name a beneficiary — the person who would inherit your 401(k) in the event of your death. It can be changed later if needed.

7. Browse investment offerings and pay attention to fees

The investment options in a 401(k) are carefully selected by the employer. Most 401(k) plans offer between eight and 12 investment options, which can be a mix of mutual funds, stock funds, bond funds, and even annuities.

There are two general types of fees you will see in your account:

  • Account management fee charged directly by the 401(k) plan provider
  • Fee charged by the mutual funds and ETFs in your 401(k) account (expense ratio)

If you're investing in your 401(k), the account management fee is unavoidable. If your provider is charging a management fee above 1% of your account assets, you may consider directing your savings elsewhere, such as an IRA with lower fees. However, it could be worth contributing if your employer offers a match that is higher than the provider's management fee.

Most mutual funds charge a management fee, too. This is listed on each investment fund as the expense ratio, or the fee rate as a percent of assets. Again, look for funds with an expense ratio below 1%, otherwise the fees could start eating into your returns.

8. Choose your investments

Aside from fees, there are two important factors to consider when choosing specific investments: your time horizon (how many years you have until retirement) and your risk tolerance (how much risk you can withstand).

If you have decades to invest before you need retirement income and are fairly risk tolerant, you may choose a fund with more stocks, as they're considered riskier than bonds.

Some 401(k)s offer "all-in-one" target-date funds that automatically rebalance to fit into your time horizon. You may see them labeled as "Target" or "Retirement Fund," plus a year. For example, a "Target 2040" fund is made up of a blend of investments that assumes retirement in the year 2040, so investments will need to be as conservative as possible by that time. You don't have to choose a target-date fund that matches your actual retirement age.

9. Choose how much of your contributions should be invested in each fund

As you choose your specific investments, you'll decide how much of your contributions will go toward each investment, usually expressed as a percentage.

If you only choose one fund, 100% of your money will be invested in that fund. If you create a portfolio with three different funds, you can decide what percentage of your contributions will go toward each fund.

10. Log on to your account through your plan provider's website to periodically increase your contribution rate and manage investments

You can change your contribution rate and manage your investments by logging on to your account through your plan provider's website (e.g. Vanguard, Fidelity, etc.). 

Most experts suggest increasing your 401(k) contribution rate at least once a year, or each time you get a raise.

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Stock markets are shrinking

Tue, 05/28/2019 - 3:06pm

  • The US stock market has de-equitised, a fancy term that basically means that companies are buying more shares than they are issuing, every year since 2011. It's shrunk 2.3% since 2018.
  • This is natural, according to Citigroup strategists led by Robert Buckland. "This is a rational response to a radical shift in the cost of equity and debt financing," the team said in a note.
  • Meanwhile, a second equity market, one for private equity, is growing just as the public market is shrinking.

The stock market is shrinking. 

More specifically, the US stock market has shrunk by 2.3% since 2018, according to Citigroup strategists led by Robert Buckland, adding to shrinkage in every year since 2011. In the UK, the stock market has shrunk 3% since 2018, meanwhile. 

This shrinkage, or de-equitisation, is a result of companies buying more shares than they are issuing.

Why are stock markets shrinking? Here's what's going on:

Buybacks: Yes, companies are spending lots of money on buybacks. Buckland et al say that 3% of the US stock market was redeemed in 2018. Debt is cheap, and equity is expensive. The cost of debt in the US is 4.1%, while the cost of equity is 6.7%, according to Citigroup. In the UK, the contrast is even more striking, with a 4.6 percentage point spread between the cost of equity and the cost of debt. So buying back equity enhances earnings per share, both in reducing the share count and reducing the overall cost of funding. 

M&A: There's been a bunch of big-ticket M&A of late, with much of that financed through debt. Think of it this way: Company X is worth $10 million and borrows the money to buy Company Y for $5 million. This, again, leads to de-equitisation, as it reduces the total amount of shares on the public market. (Also, reminder, M&A often destroys value.)

IPOs: Private companies are waiting longer to go public (see Uber), while there's a surplus of venture capital and private equity dry powder, or cash waiting to be invested in private companies. That's meant that the flow of private companies on to the stock market via initial public offerings has slowed in recent years. 

Capex: Big companies used to issue equity to finance big capital expenditures, like a new plant or mine. But these investments have (1) been more muted in recent years, given a weak and volatile global economy following the Great Recession and (2) been financed with cash flow and/or, you guessed it, debt. 

This trend has some worrying for the public markets, wondering whether public markets have perhaps permanently become less appealing. (See here, here and here for more on this.) Buckland isn't so sure. He writes:

There has been much soul-searching about other drivers of de-equitisation. Maybe companies are becoming increasingly reluctant to use public equity markets because of burdensome listing requirements, increased scrutiny or investor short-termism. But we suspect these wouldn't matter much if cheap capital and high valuations were on offer, as they were in the late 1990s. 

Instead, he says that public equity markets are shrinking because companies can find cheaper capital elsewhere, with private equity and venture capital investors providing a second equity market of sorts. 

And overall, the shrinkage of the stock market is entirely to be expected, given the impact of quantitative easing and post-recession central bank policies on the cost of debt, according to Citigroup. 

"It is not our job to say whether de-equitisation is a force for social good or bad," the note says. "But we do see it is a rational capitalist response to major divergence in the cost of debt and equity."

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Here's how much a financial advisor costs

Sun, 05/26/2019 - 12:00pm

  • How much is a financial advisor? It varies, but always look for a fee-only financial planner or investment advisor who charges an hourly fee, fixed fee, or asset under management fee.
  • "Fee-only" means the advisor is only paid by the client and does not receive additional commission when a client invests in a certain fund or financial product.  
  • If you want to meet with a financial advisor a few times to create a financial plan, you'll likely pay an hourly fee between $100 and $300, on average.
  • Regular access to an advisor who can help you implement and maintain your financial plan usually commands a higher fixed fee, between $1,000 and $3,000, on average. 
  • If a financial advisor is managing your investments, their fee will usually be equal to 1% to 2% of your portfolio — this is the asset under management, or AUM, fee.
  • SmartAsset's free tool can help you find a licensed financial advisor near you »

A financial advisor can help you manage your spending, savings, and investments more effectively, but of course, they'll charge you for it.

And it could be worth the cost if you want to create a comprehensive budget or savings strategy, or if you're too overwhelmed or confused by your money to plan for retirement or invest in the stock market. You probably don't need a financial advisor if you want to know where to save money or invest a few thousand dollars (a robo-advisor may do the job just as well).

Financial advisor is a catch-all term that usually includes financial planners and investment advisors. It's imperative to look for financial advisors who follow the fiduciary rule, meaning they operate in their clients' best interest, and are fee-only. This means client fees are their only compensation and they don't earn commission when you invest in certain funds or buy financial products (that would be a fee-based financial advisor).

SmartAsset's free tool can help find a licensed financial advisor near you »

Fee-only financial advisors typically charge clients in one of three ways, according to SmartAsset:

  1. If a financial advisor is managing your investments, they'll charge a percentage of assets under management, or an AUM fee, usually between 1% and 2% of your investment portfolio.
  2. If you're visiting with the advisor once or twice to create a financial plan or get advice, you may pay an hourly fee, usually between $100 and $300.
  3. If you're looking for access to an advisor on a rolling basis — i.e. you want help implementing and maintaining your financial plan — you may pay a fixed fee, usually between $1,000 and $3,000.

You can call a financial planning or investment advisory firm directly to ask about their rates. For investment advisory firms with more than $25 million in assets under management, you can find exact fees in Part II of Form ADV — a document filed with the Securities and Exchange Commission detailing the firm's operations. Some firms will link to the form on their website, but it's also available through a search tool on the SEC's Investment Advisor Public Disclosure website.

If you're mainly looking for help managing your investments, a robo-advisor is often a cheaper alternative for small balances. Robo-advisors like Wealthfront, Betterment, and Ellevest set up and automatically rebalance an investment portfolio for you based on your goals and risk tolerance, and the annual management fee is just 0.25% of your account balance.

Some robo-advisors provide access to human investment advisors or financial planners for an extra fee. Robo-advisors can be a valuable tool for the average person with a long-term outlook who truly wants to "set and forget" their investments.

Need help with your money? SmartAsset's free tool can help find a licensed financial advisor near you »

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