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Meeting of the Minds - Harnessing Africa's potential through research - @cmu_africa https://www.youtube.com/watch?v=JMUZgI2hBqA

Thu, 01/16/2020 - 10:24pm  |  Timbuktu Chronicles
CMU-Africa's inaugural Meeting of the Minds research symposium was held from 15th – 16th March 2019 in Kigali, Rwanda. The symposium was organized in partnership with the Mastercard Foundation Scholars Program under the theme: “Harnessing Africa’s potential through research”, to explore ways in which academia can catalyze Africa’s innovation economy through research with a specific focus on STEM innovations that can address problems and opportunities in Africa.

Meet Carol Ibe (@carol_ibe) founder of JR Biotek @JRbiotek established to advance knowledge and technical skills in applied biosciences and STEM in Africa. https://www.youtube.com/watch?v=T9opzA5f4K8

Thu, 01/16/2020 - 10:14pm  |  Timbuktu Chronicles
JR Biotek Foundation was established to educate, train, inspire and empower Africa's present and future scientists and leaders to tackle challenges in Africa. With the help and contribution of scientists from the renowned Department of Plant Sciences, University of Cambridge, we develop and provide world-class scientific laboratory training and other initiatives aiming to foster research and innovation in tertiary education institutions and national research institutes across Africa.

TECH COMPANIES IN FINANCIAL SERVICES: How Apple, Amazon, and Google are taking financial services by storm (AMZN, AAPL, GOOGL)

Thu, 01/16/2020 - 7:01pm  |  Clusterstock

Tech giants are set to grab up to 40% of the $1.35 trillion in US financial services revenue from incumbent banks, per McKinsey. Three of the largest US tech companies — Apple, Google, and Amazon — are particularly encroaching on financial services and threatening incumbents with their size and ability to attract massive, loyal user bases.

Apple is deepening its financial services play as a means of invigorating revenue, and its expertise could make it a legitimate threat to legacy players. Google's platform-agnostic approach, wide international penetration, and top talent position it as a hub with unrivaled global reach beyond just consumer payments. And Amazon — which has eaten up market share in every industry it's touched, and now has its sights on financial services — could swiftly undercut legacy players.

In The Tech Companies In Financial Services report, Business Insider Intelligence will examine the moves that Apple, Google, and Amazon are making to gain a larger foothold in the global financial services industry. We will then detail each tech company's threat to incumbents and outline potential next steps based on their existing moves in the financial services sphere.

The companies mentioned in the report include: Apple, Amazon, Google, Goldman Sachs, Mastercard, Barclaycard, Citi, Chase, Capital One, Paytm, and PhonePe.

Here are some key takeaways from the report:

  • Apple's expertise in consumer-facing tech products makes it a legitimate threat to legacy players. Its next move could be a debit card or PFM app, both of which would be cohesive with its existing offerings.
  • Google's money movement and commerce services form a payments hub with unrivaled global reach. Google could pursue global expansion by modifying its offerings in other markets like it did in India, pursuing Europe, and even delving into digital remittances.
  • Amazon is an expert disruptor — and it has its sights set on the financial services industry next. Amazon could develop checking and savings accounts, bring Amazon Pay in-store, and white-label its Amazon Go store technology to deepen its financial services footprint.

In full, the report:

  • Outlines the threat posed by Apple, Amazon, and Google to legacy financial players.
  • Identifies each tech giant's strengths, weaknesses, opportunities, and threats moving further into financial services.
  • Discusses each company's moves in financial services and their anticipated next steps in the space.

Interested in getting the full report? Here are two ways to access it:

  1. Purchase & download the full report from our research store. >> Purchase & Download Now
  2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now

The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of tech companies in financial services.

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These 5 factors are transforming the payments experience for both consumers and businesses

Thu, 01/16/2020 - 6:05pm  |  Clusterstock

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JetBlue is raising its bag fees for the second time in just 2 years (JBLU)

Thu, 01/16/2020 - 5:20pm  |  Clusterstock

The next time you check a bag before your JetBlue flight, you can expect to pay more than you're used to.

The airline announced on Thursday that it was raising bag fees for the second time in two years. 

Effective immediately, passengers will have to fork over $35 for a first checked bag — up from $30 — and $45 for a second bag — up from $40.

There's still a way to get the old pricing, though. The airline said passengers can get a $5 discount when they add a checked bag online or through its app at least 24 hours before the flight, as opposed to adding the bag at check-in or at the airport.

Customers who hold a JetBlue cobranded credit card will continue to get checked bags for free, as will passengers who pay for a more expensive fare.

The airline first introduced fare segmentation in November 2019, including a new basic economy fare type — called "Blue Basic" — and several other tiers. "Blue Blue" fares — the second-highest economy tier — include one checked bag, but the highest flexible fare, "Blue Extra," does not.

Passengers flying in the airline's Mint business class get two free checked bags, as do Mosaic-level frequent flyers.

A spokesperson for JetBlue told Business Insider that the airline hoped passengers would add bags in advance and not pay the higher fares.

In doing so, the airline hopes it can "reduce transactions in the airport lobby and improve the customer experience."

"We believe it makes sense to charge for the added services that only certain customers use while keeping customer's favorite features included in low fares for everyone who flies us," the spokesperson added.

Ancillary revenue for unbundled services, including fees from checked bags, have become a major business factor for global airlines. JetBlue made more than $270.2 million from baggage fees in the first nine months of 2019, according to the US Department of Transportation. US commercial airlines earned $4.3 billion in total during that same period.

JetBlue was among the last US airlines to start charging for checked bags. Southwest does not charge for the luggage, which the airline pointed on in a tweet following the JetBlue announcement.

SEE ALSO: JetBlue is the latest airline to sell basic economy — here's what the most restrictive fare includes

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NOW WATCH: Why Lamborghini's new hybrid is bad for the environment

Google parent Alphabet just reached $1 trillion in market value for the first time ever (GOOGL)

Thu, 01/16/2020 - 5:02pm  |  Clusterstock

  • Google parent company Alphabet on Thursday hit a $1 trillion market valuation for the first time ever.
  • Alphabet joins Apple, Microsoft, and Amazon in a small group of US companies that have reached the milestone. Microsoft and Apple are still valued at more than $1 trillion, but Amazon is not. 
  • The record for Alphabet comes shortly after Sundar Pichai became CEO in a historic leadership shift. Wall Street analysts have been bullish on the change. 
  • Watch Alphabet trade live on Markets Insider.

Google parent company Alphabet hit a $1 trillion market valuation today for the first time ever, becoming the fourth US company to reach the milestone. 

Shares of the company gained as much as 0.8% Thursday to achieve the market capitalization. 

Apple was the first US company to hit the milestone market valuation in 2018. Since, Microsoft and Amazon have also touched $1 trillion market values. Apple and Microsoft are still valued at more than $1 trillion, but Amazon has since fallen below the number. 

The stock gains and consequent record valuation for Alphabet come amid increased calls for online privacy and antitrust regulation that have proven challenging for the business. But despite those concerns, Alphabet and shares of other technology companies have continued to climb, solidifying their spots as leaders in the US market and economy. 

Alphabet's record market valuation also comes after a historical change in leadership at the company. In December, co-founders Larry Page and Sergey Brin announced that they would step back from the company, which they founded in 1998. Sundar Pichai took on the top role and is now the CEO of both Google and Alphabet. 

The change at the top was cheered by Wall Street analysts and in particular Michael Levine of Pivotal Research, who increased his Alphabet price target to $1,650 from $1,455 and upgraded the stock to "buy" from "hold" on the leadership change. 

Having Pichai at the helm of Alphabet offers "the most optionality for multiple expansion for the stock we have seen in years," Levine wrote in a note January 6. 

There's also been recent optimism around Google Cloud, a competitor for Amazon and Microsoft's cloud services. While Google Cloud is still behind its biggest rivals, the business is poised to go from $8 billion in cloud revenue to nearly $17 billion in 2021, according to Lloyd Walmsley of Deutsche Bank

Alphabet has gained 8.3% year-to-date through Thursday's close.

 

 

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NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption

A new lawsuit says Jeffrey Epstein trafficked and sexually abused dozens of young girls on one of his private islands in the Caribbean. Here's an inside look at the islands.

Thu, 01/16/2020 - 4:53pm  |  Clusterstock

Convicted sex offender Jeffrey Epstein had an expensive real-estate portfolio that included two neighboring private islands.

In 1998, Epstein bought Little St. James, a 72-acre private island in the US Virgin Islands, for $ 7.95 million. The island was dubbed "Pedophile Island" and "Orgy Island" by locals, according to the Los Angeles Times.

Next to Little St. James sits Epstein's second private island, Great St. James. Epstein purchased the second island in 2016 for a reported $18 million.

According to New York Magazine, Epstein planned to build a compound on Great St. James but was issued a stop-work order in December for not obeying environmental regulations.

On August 12, 2019, just days after Epstein died by suicide in a Manhattan jail cell — where he was being held on charges of sex trafficking and conspiracy to commit sex trafficking — the FBI raided Little St. James to search for evidence pertaining to the case against him.

Then, on January 15, 2020, Virgin Islands Attorney General Denise George filed a lawsuit alleging that Epstein and his associates lured girls and young women to the island, where they were forced into sexual servitude and prevented from leaving.

Keep reading for an inside look at Little St. James and Great St. James.

SEE ALSO: 10 of the most bizarre details people have reported finding in Jeffrey Epstein's NYC mansion, from a painting of Bill Clinton in a dress to prosthetic breasts mounted on a bathroom wall

DON'T MISS: The famous connections of Jeffrey Epstein, the elite wealth manager charged with sex trafficking young girls

Jeffrey Epstein owned two private islands in the US Virgin Islands: Little St. James and Great St. James.

Source: New York Magazine, Miami Herald



The islands sit next to each other off the coast of St. Thomas.

Source: Google Maps



The first of Epstein's US Virgin Island purchases was Little Saint James.

Source: New York Magazine



Little St. James spans 78 acres.

Source: Business Insider



Epstein bought it in 1998 for $7.95 million.

Source: New York Magazine



He flew underage girls to the island on his private jet as recently as 2018, Vanity Fair reported, citing locals.

Source: Business Insider, Vanity Fair



The Los Angeles Times reported that the island has been dubbed "Pedophile Island" and "Orgy Island" by locals.

Source: Los Angeles Times



The island includes five buildings: a villa-style compound, a library, a cinema, a detached bathhouse, and cabanas. According to New York magazine, there is also a "flamingo-stocked lagoon" on the island.

Source: Curbed, Business InsiderNew York Magazine



The main residence and compound sit on the northeast point of the island, and a pair of guest houses sit on the northwest and southeast points of the island. The mansion has a distinctive turquoise roof.

Source: Business Insider, AP



The island also has a temple structure that boasts some strange features. One of those features, Business Insider previously reported, is a door that appears to be designed to keep people inside.

Source: Business Insider



The island is believed to have been Epstein's primary residence.

Source: Miami Herald



In 2000, Epstein started Jeffrey Epstein's VI Foundation on Little St. James.

Source: JeffreyEpstein.org



According to its website, the foundation gave $35 million to Harvard, kick-starting the university's Program for Evolutionary Dynamics. However, Vox reported that a source close to the contribution said the donation sum was actually much smaller — $6.5 million.

Source: JeffreyEpstein.org, Vox



The larger of Epstein's two islands is Great St. James.

Source: Google Maps



It spans 165 acres.

Source: New York Magazine



Epstein purchased Great St. James in 2016 for a reported $18 million.

Source: New York Post



Epstein planned to build a compound on the island but was issued a stop-work order in December for not obeying environmental regulations. According to the New York Post, the stop-work order was ignored, and construction on the island continued.

Source: New York Magazine, New York Post



The Virgin Islands Daily News reported that the compound was supposed to include an amphitheater and an "underwater office and pool."

Source: Virgin Islands Daily News



To the public's knowledge, Epstein owned four other luxury residential properties: a mansion in Manhattan, an estate in Palm Beach, Florida, a ranch in New Mexico, and an apartment in Paris.

Epstein's seven-story mansion on East 71st Street was valued at $77 million in a recent court document. However, the New York City Department of Finance valued the home closer to $56 million earlier in 2019. In Florida, his Palm Beach estate, which he purchased in 1990, is estimated to be worth over $12 million.

In New Mexico, Epstein owned a 7,500-acre ranch that was appraised at over $18 million in 2013.

He also owned an apartment in Paris on the famous Avenue Foch. However, very little information on the apartment is available to the public.



His real estate portfolio has played a major role in the sexual-abuse allegations against him.

On August 12, 2019, just two days after Epstein was found dead in a Manhattan jail cell, the FBI raided the island, according to the Miami Herald.

Then, on January 15, 2020, Virgin Islands Attorney General Denise George filed a lawsuit alleging that, as recently as 2018, Epstein and his associates took girls and young women to Little St. James and forced them into sexual servitude and forced labor.



Facebook has cancelled efforts to put ads in WhatsApp, more than a year after its founders resigned in protest of the effort (FB)

Thu, 01/16/2020 - 4:51pm  |  Clusterstock

  • Facebook will reportedly retreat from its efforts to include advertisements in WhatsApp's messaging service, the Wall Street Journal's Jeff Horowitz and Kirsten Grind reported on Thursday.
  • The decision to disband a team dedicated to implementing ads on WhatsApp is a surprising turnaround in Facebook's efforts to monetize one of its most popular services. 
  • A Facebook spokesperson confirmed that WhatsApp was currently prioritizing building features for businesses and pushing its payment services in other countries. Ads will remain a long-term opportunity for the company, the spokesperson said.
  • The move comes more than a year after WhatsApp co-founders Brian Acton and Jan Koum left the company, after clashing with Facebook executives over the effort to monetize the app. 
  • Visit Business Insider's homepage for more stories.

Facebook is shelving plans to include advertisements in its WhatsApp messaging service, according to a new report. 

The company recently disbanded a team that explored the best ways of integrating ads onto WhatsApp, the Wall Street Journal's Jeff Horowitz and Kirsten Grind reported on Thursday.

The move is a surprising about face in Facebook's efforts to monetize its various products, particularly one of its most popular services. Facebook acquired WhatsApp for $22 billion in 2014, and has since been searching for ways to monetize the company's 1.5 billion userbase. 

Facebook had previously said that WhatsApp would begin placing ads in the Status section of the app, beginning in 2020. The advertisement giant even teased what the new WhatsApp ads would look like at a Facebook Marketing Summit. 

But now, WhatsApp will focus on building features that let businesses communicate with customers in the app, as well as providing payments services to other countries, a Facebook spokesperson confirmed to Business Insider. Ads will remain a long-term opportunity but will not be subject to a specific timeline, the spokesperson said.

The tech giant's decision to shelve its WhatsApp ads plans comes more than 18 months after WhatsApp cofounders Brian Acton and Jan Koum left the company, along with a slew of other company executives. The two cofounders had been vocal about their opposition to advertisements long before Facebook had expressed an interest in buying the app, calling ads "the disruption of aesthetics, the insults to your intelligence and the interruption of your train of thought," in a 2012 blog post.

Facebook's push to bring ads to the app had caused its co-founders to clash with Facebook CEO Mark Zuckerberg and COO Sheryl Sandberg. In a later interview with Forbes, Acton revealed that he had resigned from the company in protest of its efforts to sell ads on WhatsApp. 

SEE ALSO: The US and China's tech cold war is far from over, even with Trump's trade deal. Here's why tech companies will remain on the front lines of the trans-Pacific rivalry.

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NOW WATCH: Apple just released iOS 13.2 with 60 new emoji and emoji variations. Here's how everyday people submit their own emoji.

Mortgage trading had its hottest year since the Great Recession, helping Wall Street investment banks blow past revenue estimates

Thu, 01/16/2020 - 4:47pm  |  Clusterstock

  • Wall Street's top bond-trading houses have reported stellar revenues in fixed-income trading for the fourth quarter and strong results for all of 2019. 
  • Part of the explanation is a low baseline: 2018 was a lousy year for bond trading overall, and the fourth quarter was especially challenging.
  • But the firms also benefited from an unexpectedly strong performance from a small corner of the fixed-income market: agency mortgage-bond trading.
  • Industry experts say mortgage-backed securities trading topped $2 billion in 2019 across the industry — the largest tally since before the Great Recession and a more than 550% gain from 2018.
  • With bonus season here, agency mortgage traders are licking their chops. They're expected to be among the best-compensated in FICC this bonus cycle.
  • Visit BI Prime for more stories.

Wall Street's top bond-trading houses have kicked off earnings season with a bang, thanks in part to a small trading desk that grew revenues more than 500% across the industry in 2019.

JPMorgan Chase and Citigroup were first out of the gate to report fourth-quarter earnings for the industry's top investment banks, beating analyst expectations more broadly on Tuesday but also posting especially eye-popping numbers in fixed-income, currencies, and commodities (FICC) trading.

JPMorgan increased FICC revenues 86% in the quarter compared with last year and 13% for the full year to $14.4 billion. Citi saw a 49% increase in the quarter and 10% for the full year to $12.9 billion.

Goldman Sachs released earnings on Wednesday, reporting a 63% jump in FICC trading for the quarter and 6% for the year to $7.4 billion. Bank of America also reported on Wednesday, posting a 25% gain in fixed-income trading in the quarter and about flat for the full year with $8.4 billion.

Morgan Stanley, last to report, announced on Thursday a 126% gain in the fourth quarter and an 11% gain for the year to $5.5 billion.

Part of the explanation for the staggering improvement resides in a low baseline. FICC revenues have been contracting for years, hitting a five-year low of $64.2 billion in 2018 among the 12 largest banks, according to the industry-consulting and data firm Coalition.

The fourth quarter of 2018 was particularly abysmal amid jolts of volatility that spooked investors and sent markets into tailspin. Amid the chaos, JPMorgan posted its worst bond-trading results since the financial crisis.

So a rebound was baked into expectations to a certain extent. 

But the firms also benefited from an unexpectedly strong performance from a small corner of the fixed-income market: agency mortgage-bond trading.

Known by investors as agency residential-mortgage-backed securities (RMBS), these bundles of home loans are issued by government-sponsored agencies like Fannie Mae and Freddie Mac, and they're generally considered high-quality assets — not to be confused with the subprime securitized housing products that helped sink the economy and spark a financial crisis more than a decade ago. 

While final numbers are still settling, Coalition estimates revenues from agency RMBS trading to finish at more than $2 billion in 2019 across the industry. That's the largest tally since before the great recession and a more than 550% gain from 2018, when the top 12 banks combined were at about $300 million.

In its earnings presentation, Bank of America attributed its fourth-quarter fixed-income-trading gain to "improvement in most products, particularly mortgages."

"Last year mortgage products across Wall Street had a sort of difficult quarter," Paul Donofrio, Bank of America's chief financial officer, said in an earnings call with media. "This year was the opposite of that."

Goldman also attributed its FICC gains in part to mortgage trading, both for the fourth quarter and for the full year. JPMorgan and Citi weren't as specific, but each called out strong performance in the broader divisions in which their mortgage-trading desks fall under. 

"This is the best year we've seen in the past decade," Amrit Shahani, the research director at Coalition, said of the agency RMBS performance in 2019.  

Representatives for the banks declined to comment for this story. 

Fed rate cuts spurred mortgage trading

The Federal Reserve, by cutting its benchmark rate by 25 basis points three times in the latter half of 2019, played a critical role in the RMBS rebound.

Like most bonds, mortgage-backed securities tend to increase in value when interest rates decline, as investors can benefit from the increasing spread between the security they hold and the lower market rates.

That can especially be true for specified pools — mortgage bonds packaged to offer certain characteristics, such as particular geographies or loan sizes, which can account for how quickly the loan is repaid. 

Amid the crush of refinancings in 2019 from homeowners who also wanted to cash in on the dropping rates, investors worked up a ravenous appetite for such mortgage assets that protected against quick repayments — since an early loan payoff means fewer interest payments to the investors and a potentially lower return. 

JPMorgan and Citigroup had the strongest performances in agency mortgage trading for the full year, according to multiple industry insiders, followed by Bank of America, Goldman Sachs, and Morgan Stanley.

An industry source told Reuters in October that JPMorgan was on pace to eclipse $500 million in revenues from agency RMBS trading in 2019. A source familiar with the firm's results told Business Insider the bank finished with more than $700 million — more than double the entire industry haul in 2018.

With bonus season here, agency mortgage traders are licking their chops. They're expected to be among the best-compensated in FICC this bonus cycle, according to a compensation white paper by the Wall Street executive-recruiting firm Options Group. 

"With bonuses being announced at some of the biggest US banks this week, we anticipate agency mortgage and linear-rates trading to be the biggest winners in FICC compensation," Jennifer Montalvo, a partner at the firm and the author of the white paper, told Business Insider. 

Montalvo also said "there may be compensation inflation this year" amid the "the robust hiring across the securitized product sector."

But it's unclear how much value the agency RMBS trade will have in 2020. The Fed signaled in October that it was pausing its rate cuts and likely to hold rates steady throughout the coming year.

This story has been updated to include earnings results from Morgan Stanley. 

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Charles Schwab pulled the plug on a nearly $100 billion program that distributed rivals' ETFs — and it's a direct result of axing trading commissions (SCHW)

Thu, 01/16/2020 - 4:43pm  |  Clusterstock

  • Charles Schwab has shuttered a program used to sell products from third-party firms like State Street and BlackRock for zero commissions. 
  • The move underscores the difficult spot asset managers have found themselves in following the major brokerages' decisions to eliminate online trading fees late last year.
  • The wealth management and brokerage firm said in its fourth-quarter earnings results on Thursday that the move came "as a result of the elimination of online trading commissions for US and Canadian-listed ETFs."
  • The program also promoted the ETFs in the program to its thousands of RIAs, but asset managers that spoke with Business Insider said the promotion alone was not worth paying OneSource fees.
  • Visit BI Prime's homepage for more stories.

The broker wars have uncovered some complicated alliances, and it's not always clear who's friend or foe. 

Discount broker Charles Schwab just shuttered a nearly $100 billion program where it sold products from third-party asset management giants like State Street, JPMorgan Asset Management, and BlackRock.

The wealth management and brokerage firm said in its fourth-quarter earnings results on Thursday that it discontinued the program, called Schwab ETF OneSource, "as a result of the elimination of online trading commissions for US and Canadian-listed ETFs."

The move, completed in the fourth quarter, highlights the tough reality the money-management industry has found itself in following the major brokerages' decisions to remove online trading fees for stocks and ETFs late last year.

Thanks to stock-trading startup Robinhood jumping in with zero-commission trades, heavy-hitters like Schwab and Fidelity have had to follow suit and look to asset managers like BlackRock to cover the lost revenues. Outside ETF providers, however, are in a fee battle themselves, and have pushed back at paying extra for a spot on broker programs and platforms.  

The investment industry has lowered sticker prices for the end consumer  — mutual funds and ETFs are significantly cheaper now, even actively managed options, than a decade ago. But this lost revenue has inflamed the long-time rivalry between asset managers and brokerages, which now have to divvy up a smaller pie.

The zero-sum game has led to clashes between big-name money managers and brokerage platforms.

Ameriprise banned salespeople from Pimco, AB, and Franklin Templeton from talking to the brokerage's advisers in 2017, for example, after the sides couldn't agree on how much to pay for access. 

At the time Schwab ETF OneSource was discontinued, it had 15 providers in the program and more than 500 ETFs, a company spokesperson said. It had just over $94 billion in assets at the end of the third quarter, a filing showed. 

Third-party providers paid the firm at least four basis points on all assets in the program annually to be a part of ETF OneSource so their ETFs could trade commission-free like Schwab's own in-house funds. At more than $94 billion, Schwab brought in at least $37 million in fees from asset managers that were also competing with Schwab's own, ultra-cheap funds.

The program also promoted the ETFs in the program to its thousands of RIAs, but asset managers that spoke with Business Insider said the promotion alone was not worth paying OneSource fees.

"The big selling point of the program was the commission-free trading of your funds, so your salespeople didn't have to convince an adviser to convince his client that your ETF was so special that it was worth a commission," said one representative from an asset manager familiar with the platform, who asked not to be identified because their firm still has a relationship with Schwab and was not authorized to speak to the press. 

The fees have pushed out at least one ETF provider before the program's closure — ProShares left the platform in 2017 over disagreements on costs and customer data. 

Schwab's ETF business did not have to pay itself a separate fee to participate in its own program.

Assets once counted under the OneSource umbrella will now be included with other third-party ETFs. Schwab reported nearly $621 million in total ETF assets at the end of the fourth quarter, with the lion's share coming from third-party providers. Schwab has a similar platform for mutual funds.

An evolving industry 

When the San Francisco-based firm launched ETF OneSource in 2013 with 105 commission-free products, the firm marketed it as a platform that opened up investors and advisers access to "the most commission-free ETFs anywhere in the industry."

At the time, it launched with its own Schwab-branded funds as well as major providers including State Street, Guggenheim, and Invesco's PowerShares line.

Schwab in March 2019 said it would doubled the number of ETFs on the program to just over 500. The massive iShares line at BlackRock, the world's largest asset manager, joined the program with 90 funds. Invesco, State Street, JPMorgan Asset Management, and others added to the number of funds already on the platform. 

Schwab is meanwhile set to close on two major acquisitions in 2020: longtime rival TD Ameritrade for about $26 billion, and some of USAA Investment Management's assets for $1.8 billion.

Schwab axed online trading commissions in October after Interactive Brokers said it was rolling out a new offering with unlimited, commission-free trades on US-listed stocks and ETFs — a move that pushed rivals' shares lower.

The online brokerage industry and the broader digital financial services industry it sits in has come to be redefined by firms' quick moves to commission-free or dirt-cheap transactions and capabilities to draw in a new generation of customers. 

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NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.

My husband and I were always good with money until a surprise surgery left us with $10,000 of credit card debt. Here's how we paid it off in 8 months.

Thu, 01/16/2020 - 4:21pm  |  Clusterstock

  • My husband and I were always good with money — we lived within our means and didn't carry credit card debt, so we didn't watch our day-to-day spending too closely.
  • However, when we both changed our jobs and were surprised by medical bills for an unexpected surgery, we just couldn't keep up with the expenses.
  • Soon enough, we had $10,000 of credit card debt. Once I started scrutinizing our spending, though, we were able to pay it off in less than a year.
  • Read more personal finance coverage.

When my husband and I met, neither of us carried credit card debt. We lived within our means, spending the money we made to travel and dine out at new or interesting restaurants within the Minneapolis/St. Paul area.

After dating for a year and a half we rented a small 1-bedroom apartment together in a suburb of Minneapolis. When our lease was up for renewal and we wanted more space, we realized we could buy a home for roughly the same monthly payment as a 2-bedroom rental apartment nearby.

So that's what we did. We started our home search and ended up buying a modest 3-bedroom, 2-bathroom home on the other side of town. I was still teaching at the time, and my husband was transitioning from entrepreneur to corporate employee, so we wanted to make sure we could afford a home on one salary in the event we needed to.

What happened next was completely unexpected. My husband needed to have surgery on his shoulder, and insurance barely covered any of it. Although we had been great at living within our means, we didn't have a lot of extra savings and when the medical bills started rolling in, we couldn't keep up. That, coupled with me leaving my stable teaching job to pursue entrepreneurship, really took a toll on our finances.

We never worried about what we'd been spending — but now we had to

After we bought our home, but before the surgery, I had changed jobs. Then, post-surgery, I switched jobs again, taking a full five months off when our daughter was born. I did receive six weeks of short-term disability pay, but otherwise that time was unpaid. Then, four months after returning to work, I left to stay home with our daughter full-time and pursue my own financial coaching business. It was the right decision for our family, but still a financially straining one.

At one point my husband and I had close to $10,000 of credit card debt racked up between medical bills and not adjusting our lifestyle with the loss of my income. We had been so "good" with money up until this point in our lives, and I had a lot of shame around the fact that we had recurring credit card debt. I decided it was time to take back control of our finances.

I was no stranger to using a tracking/budgeting software, but had been neglecting to watch where our money was going over the years. We never felt we needed to worry about what we were spending, but looking back now I realize that it would have helped us prevent the mound of credit card debt we had gotten ourselves into.

Seeing where our money actually went was a real eye-opener

The first thing I did was type out all of our fixed expenses, including all memberships, subscriptions, and bills. This right away made me realize what we signed up for that we didn't actually need, or worse, weren't using at all.

I then subtracted all these fixed expenses from the amount of income we had coming in each month to determine what was left over. That leftover amount was what we got to spend on variable expenses such as groceries, entertainment, and dining out.

The next thing I did was link all of our accounts to Mint in order to categorize and track all of these discretionary expenditures. I set up spending targets so I knew when we were getting close to the amount I had allocated to that category. This was a huge eye-opener and made us realize how we were spending our money, especially on food!

By checking in with our accounts on a daily basis, I was able to help our family stay on track and free up cash to send to our debt. We were able to pay off that debt within eight months, and have been able to keep it off since. Now I usually only check in with our accounts on a weekly basis, but I still use the same cash flow template and the spending targets to keep our family on track to reach our bigger financial goals (like paying off our mortgage early).

Fast forward a few years and we have a healthy emergency fund and will be paying off the rest of my student loans and my hubby's car loan within the next month. I can honestly say we wouldn't have been able to make strides this fast if it wasn't for my commitment to getting a handle on where our money was going each month. It seems elementary, but I tell all my clients that the first thing they need to do is figure out where their money is going.

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Katie Oelker is a financial coach, personal finance writer, and podcaster.

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A quick guide to what Trump's 94-page trade deal with China included — and left out

Thu, 01/16/2020 - 4:09pm  |  Clusterstock

  • The US released the text of an interim trade agreement with China this week.
  • It offered for the first time the details of what will be expected in a new chapter of relations between the two largest economies.
  • Here's a quick guide to what is included.
  • Visit Business Insider's homepage here.

The Trump administration released the text of an interim trade agreement with China on Wednesday, offering for the first time the details of what will be expected in a new chapter of relations between the two largest economies. Here are the main takeaways on what's included in the 94-page document. 

SEE ALSO: IT'S OFFICIAL: Trump signs China trade deal, says tariffs could be lifted in phase 2

China pledged to buy more US products

China agreed to increase its purchases of American products and services, including agricultural and energy exports, by $200 billion within two years. But critics have questioned whether there would be enough demand to meet the steep quotas and noted that the stipulation clashed with the free-market trade approach championed by Republicans. 

"Interesting how an objective of the trade deal is to end state directed commerce and trade," said Joseph Brusuelas, the chief economist at RSM. "Yet, the very premise of the agreement is predicated on state to state directed transactions. This almost surely sets up future rounds of tension and tariffs."



Intellectual property protections were strengthened

Protections for trade secrets, pharmaceutical-related intellectual property, patents, and other intellectual property have long been sought by the Trump administration, which cited the theft of these in a Section 301 investigation that started the trade dispute. 

The agreement also said China would no longer force foreign companies to hand over technology, such as when they apply for permits and otherwise have to work with the government. Industry leaders cheered this chapter, which also included a pledge not to direct or support investments aimed at acquiring foreign technology for the Made in China 2025 plan. 

 



China reaffirmed it would be transparent on the movements of its currency

China said it would be more transparent on any interventions that influence the strength of the yuan, such as through public disclosures of its reserves and balance of payments. 

But those requirements were not a significant departure from what has long been expected by the International Monetary Fund. G20 countries including China are already barred from wielding their currencies as a weapon to compete in the international market. 

"There is nothing in the currency provisions of the deal," Brad Setser, an economist at the Council on Foreign Relations and a former Treasury official, wrote on Twitter. "But [US Trade Representative Robert Lighthizer] also has crafted a deal that should deliver on his boss's top priority: reducing the bilateral trade deficit."

Trump has often lashed out about the strength of the dollar against other currencies, which makes exports relatively expensive abroad. This month, the Treasury Department reversed a decision to label China a currency manipulator. The rare move came after the yuan breached a key level, but experts questioned whether it was politically motivated. 



Industrial subsidies were not addressed

The large-scale subsidies and cheap loans awarded to businesses in China were also flagged in the Section 301 investigation. But there were no commitments in the phase-one agreement to resolve the long-running issue, which American officials and executives have long argued has put domestic companies at a disadvantage in the global market. 



It isn’t clear how effective enforcement will be

The US has struggled to secure an enforcement mechanism that would lock China into economic commitments, which it has been known to backtrack on in the past. When the two sides were seen as on the verge of a trade deal in May 2019, China reversed on pledges to rewrite related domestic laws.

As part of the process, the US and China will hold regular meetings. If any complaints are filed, the two sides ageed to address them on a bilateral level as opposed to through a third party. After a 90-day appeals process in which trade negotiators attempt to resolve the complaint, the US can take "proportionate action" if it chooses.

Tariffs remain on more than $360 billion shipments from China, leaving the administration with what has emerged as its preferred source of leverage over the past two years. But those come at a cost for American companies and consumers.



The No. 2 mutual-fund manager of 2019 is a green-energy and tech investor. He told us how he picks the companies with the brightest futures — and offered a peek into his portfolio.

Thu, 01/16/2020 - 4:04pm  |  Clusterstock

  • Garvin Jabusch told Business Insider how he chooses companies for the tech- and renewable-energy-focused Shelton Green Alpha Fund, the second-best performer among large-cap mutual funds in 2019.
  • Jabusch said he has succeeded in investing in innovators with strong intellectual-property positions and those benefiting from long-lived economic trends.
  • He combines that approach with a value- and fundamental-based philosophy that emphasizes revenue growth and cash flows.
  • Click here for more BI Prime stories.

Investing in the technologies of the future involves keeping track of things that aren't easily measured in numbers.

But Garvin Jabusch managed to stay on top of them in 2019, and then some. He comanages the Shelton Green Alpha Fund, which invests in innovative technologies and beat 97% of its peers. With a 43.7% return, it ranks No. 2 among large-cap US mutual funds for the year, according to Kiplinger.

While the fund had endured a couple of rough years before that, Jabusch said his strategy hasn't changed since its inception in 2013. He said sentiment shifted in his favor while he focused on the trends that matter most for his investments, a combination of company performance and focus on new technologies.

"We want to find the firms with the best fundamentals. And then we want the ones that own the most IP around the best innovation," he told Business Insider in an exclusive interview. "We want to think about what is going to grow into not just the next quarter or even year but over the next half decade, decade, even couple of decades."

Intellectual property is key to that approach. Jabusch said he wanted to find the companies that have developed technologies that their competitors would have to build on, giving them an advantage and long-term sources of revenue from licensing.

Here's an example of how those threads can come together: One of the Green Alpha Fund's biggest investments is in First Solar. According to Jabusch, the company benefits from the plunging cost of solar energy, an economic trend that has giving it a crucial advantage over fossil fuels. Meanwhile, in America it has a near monopoly on the type of solar panel that's cheapest to make.

"That's an example of the intersection of a great new technology that's more productive than its predecessor and then seeking the owners of the smartest IP," he said. "The overall approach is to think a little bit more about economics and a little bit less about finance."

Other major areas of focus include wind energy, CRISPR gene therapies, and chipmakers with an eye on developing industries like artificial intelligence and robotics. He also has positions on Tesla and Alphabet. Its largest current positions are on the Danish wind-turbine company Vestas, chipmaker Applied Materials, First Solar, the solar and wind company TerraForm Power, and the tech-consulting giant IBM.

Despite his futuristic focus, Jabusch does consider himself a fundamental investor. He looks for companies that are growing and betting on themselves and ignores per-share numbers entirely, he said.

"I want to see expanding revenue. I want to see proven ability to expand margins. I want to see increasing free cash flows, and I want to see the firm doubling down on its innovation," he said.

He added that he uses a modified version of Graham-Dodd valuation to asses them. He combines a look at companies' discounted cash flow and the value of its assets with an assessment of the economic trends supporting their businesses.

"With the world changing so fast, it's hard to do value investing without marrying it to macro even though that would be heresy to a traditional value person," he said. "We think you've got to be looking ahead, and you have to marry macro to your overall approach because without that, you don't have a very informed view about what kind of growth you can expect."

SEE ALSO: A strategy chief at $7 trillion BlackRock reveals the 4 trends that will shape how the world invests for the next 10 years — and why the trade war won't scare her away from China

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NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption

FREE SLIDE DECK: The Future of Fintech

Thu, 01/16/2020 - 4:02pm  |  Clusterstock

Digital disruption is affecting every aspect of the fintech industry. Over the past five years, fintech has established itself as a fundamental part of the global financial services ecosystem.

Fintech startups have raised, and continue to raise, billions of dollars annually. At the same time, incumbent financial institutions are getting in on the act, and using fintech to remain competitive in a rapidly evolving financial services landscape. So what's next?

Business Insider Intelligence, Business Insider's premium research service, has the answer in our brand new exclusive slide deck The Future of Fintech. In this deck, we explore what's next for fintech, how it will reach new heights, and the developments that will help it get there.

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Free tax filing is available to 70% of US taxpayers. Here's how it works.

Thu, 01/16/2020 - 3:55pm  |  Clusterstock

Tax season 2020 begins just after the new year. 

Employers are required to send tax documents to workers on or before January 31, which you'll use to file your taxes for 2019. The deadline to file and pay any tax you owe is April 15.

If you're an employee, your employer will send a W-2; if you're a freelancer, you may receive multiple 1099 forms. In some cases, you may have other statements, such as income earned from an interest-bearing savings account or interest paid on a loan, or even taxable bitcoin gains.

Free tax filing is available on the IRS website with income restrictions

Taxpayers with an adjusted gross income (AGI) — your gross income minus any above-the-line deductions — below $69,000 are eligible to use the IRS' free tax filing portal. According to the IRS, that's about 70% of US taxpayers, or around 100 million people.

The portal lists 10 different tax preparers, including H&R Block and TurboTax, that charge no fees for filing your tax return. The companies impose various income limits — they all require the filers' AGI to be somewhere below $69,000 — as well as age restrictions.

These online services help you prepare your tax return step by step and are typically easy to navigate. Some also offer free filing for state income tax returns, while others charge a fee. 

Some tax preparers don't list the free file option clearly on their websites, so it's best to go through the IRS website if you know your AGI is under $69,000. 

H&R Block, TurboTax and others offer free tax filing at any income level

You can still file for free if you made more than $69,000 in 2019. However, instead of navigating through the IRS' free file portal, you should go directly to the company's website.

Two of our top picks for best tax software, H&R Block and TurboTax, offer free tax filing for very simple tax situations, regardless of your income level. Credit Karma Tax also has completely free federal and state tax filing with no income restrictions.

Even if you qualify to file your taxes for free, it may be worth it to hire a pro if your financial situation is complicated. A CPA can offer professional insight, find ways to save you money, and help with future tax planning strategies.

Once you're ready to file your taxes, the IRS recommends electronically filing and requesting direct deposit for your refund. You'll typically get your tax refund within three weeks, rather than the standard six weeks, and it's safer than getting a check in the mail.

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I inherited $10,000 when my grandpa died and spent the money in 3 ways that changed my life

Thu, 01/16/2020 - 3:38pm  |  Clusterstock

  • When my grandpa died, my dad gifted my sisters and me $10,000 each from the money he inherited.
  • I used it to pay off debt, buy a used car, and start an emergency fund. This set me on a path to financial security that changed my life.
  • The gift also motivated me to start building wealth. Even though I don't want to have kids, I want to be able to show the same kind of generosity to my loved ones one day.
  • Read more personal finance coverage.

A few months after my grandpa died, I woke up to an email from my dad with the subject, "Check Your Bank Accounts."

The email was sent to my sisters and me. It read, in part, "It amazes me that my mom and dad were able to raise seven kids on a single income. We weren't rich but lived a nice middle-class life. My mom was the queen of coupons." Knowing my dad, this didn't surprise me.

He continued, "What's even more amazing is that not only did they raise a family on one income, but they were also able to save. My dad left a significant inheritance to his kids and I want to share part of that with you girls."

He'd deposited $10,000 in each of our accounts. I couldn't believe it.

To someone with a massive trust fund, this probably doesn't sound like a life-changing amount. But for me, it completely changed my finances and the way I think about money.

I used it to pay off debt, buy a car, and start an emergency fund, and my entire life changed

Around the time I received that email from my dad, I'd been working for the past two years to pay off credit card debt using balance transfer credit cards; I'd accumulated the debt after moving abroad and changing careers. 

My balance was down to $3,000, and I had just six months left before the 0% introductory APR would end and I'd have to pay the regular interest rate on my remaining balance.

The first thing I did that morning, after processing what I'd read, was log on to my credit card account and pay off my entire balance. Just like that, I was officially debt-free. It felt like a huge weight had been lifted — I could do anything!

I still had $7,000 left. Toward the end of the email, my dad had written, "Don't just pay bills, (although maybe you need to use some of it for that). Think about how to use at least part of it for something that's memorable and meaningful for you."

I thought for a while about how I could use the rest of that money in a way that would meaningfully impact my life, and not just in the short run. I knew I wanted to save a portion of it, but I also wanted to spend a little on something special.

I'd moved to Costa Rica several years prior, and I'd been living there car free ever since. While I do enjoy life without a car, it had become difficult to go anywhere without one because the rural town where I live only has bus service once per day. 

Apart from making everyday errands a bit of a pain, living without a car meant I rarely got to take advantage of living in a country so filled to the brim with beauty, because going on trips to the beach or to a new hiking spot was such an ordeal. 

So, I spent $3,000 on an older, used car that I paid for in cash.

Finally, I put the remaining $4,000 in a high-yield savings account. This would be the beginnings of my emergency fund, something I'd long wanted to create once I paid off my debt. As a freelancer with unstable income, and as someone living abroad, far away from any family, I needed one. 

I've since built up that emergency fund to $30,000, leaving me enough to cover emergencies or loss of work, but also to invest in myself and take risks when opportunities arise. This has improved my quality of life just as much as being debt-free.

Why my family's generosity made me want to start building wealth, even though I don't want to start a family of my own

If you had asked me what $10,000 could do for my life a couple of years ago, I would've recited the things I could use it for. 

I knew that money could help me in a material sense, but I didn't anticipate just how much it would shift my mentality, the sense of optimism and freedom I would feel to finally be on the road to financial security. 

Achieving a sense of financial security changed every aspect of my life, from my mental health to my career to my relationship. While I could've gotten here without that $10,000, that timely boost was just what I needed to see the light at the end of the tunnel and realize that I was capable of taking control of my financial life.

This made me understand the power that even small gifts can have in a person's financial life, especially in times of need. I'd never considered wealth-building or worried about leaving something behind before because I didn't plan on having kids. 

However, that gift from my grandpa made me realize that I didn't need to have kids to give back in the way that he had. If I could manage to build a little wealth, that would give me the power to help and support any of my loved ones if they one day need it. 

I could save money to go toward a niece or nephew's college tuition, pay for my youngest sister to go on a graduation trip, or help my best friend pay for a costly car repair. Maybe one day I could take my dad on a trip as a thank you for everything he's done for me.

This motivated me to kick my savings rate into hyper speed and finally start investing for the first time in my life. The basics of wealth building are this: make more money, save more money, and invest more money.

I set a goal to increase my income as a freelancer last year and already achieved it, so my goal for this year is to continue moving steadily upward while further diversifying my sources of income for added stability. 

My other goal is to save at least 50% of my income, made possible by the fact that I live with very few fixed costs — a low rent payment, thanks to living in a rural area, and no car payment — and a high income level relative to those costs.

That savings will be split between making sure I always have sufficient cash reserves on hand in a high-yield savings account and building my medium- and long-term investments.

At the end of last year, I opened an investment account with Vanguard and started with a basic three-fund portfolio, which includes three index funds: the Vanguard Total Stock Market Index Fund (VTSAX), Vanguard Total International Stock Index Fund (VTIAX), and Vanguard Total Bond Market Fund (VBTLX). This will be the foundation for building my net worth in the years to come.

If I were only thinking about myself, I wouldn't feel pressed to build wealth. I'm comfortable living on relatively little, and as I mentioned, I don't want to start a family. But my grandpa and dad's generosity made me want to be capable of doing the same for others.

Join the conversation about this story »

NOW WATCH: A podiatrist explains heel spurs, the medical condition Trump said earned him a medical deferment from Vietnam

Stocks are the most expensive since the 1980s based on one critical metric

Thu, 01/16/2020 - 3:16pm  |  Clusterstock

  • Traders are paying the most relative to the S&P 500's price/earnings-to-growth ratio in more than three decades, Bank of America wrote in a Thursday note.
  • Bank of America began tracking the PEG ratio in 1986, and the index's current ratio of 1.8x is the highest the bank has observed.
  • The S&P 500's price-earnings ratio recently hit its highest level since 2002 at 18.6x.
  • The US market "is running on fumes," BofA strategist Savita Subramanian wrote, and stocks could see "multiple compression" before the year is out.
  • Visit the Business Insider homepage for more stories.

US stocks are the most overvalued they've been in at least three decades judging by their price/earnings-to-growth ratio, according to Bank of America.

The S&P 500's PEG ratio sits at an all-time high of 1.8x, the bank's analysts wrote in a Thursday note, adding that they only began tracking the measurement in 1986. A PEG ratio above one typically means a stock is overvalued relative to its long-term earnings growth expectation.

The PEG metric is calculated by dividing a stock's price-earnings ratio by the growth rate of its earnings over a specific period of time. The ratio is often used to determine a stock's value while also factoring in expected profit growth. 

The major index is only 1% away from the bank's year-end target of 3,300.

"The S&P 500 is running on fumes," bank strategist Savita Subramanian wrote. "We have pulled forward some of the gains from later this year, and could see some multiple compression."

Amazon and the index's energy stocks are the main culprits to watch for a pullback in the forward-looking ratio, she added.

The S&P 500 also trades at a price-earnings ratio of 18.4x, its highest level since 2002. The simpler multiple was mostly fueled by the S&P 500's dividend payout ratio, as shareholder payments have grown rapidly over the last decade.

"Payouts aren't likely to get much higher from here, and thus further P/E expansion on cash return is less likely," the team wrote, adding that financial stocks are "one sector with more upside in payout."

The bank used 20 different valuation methods to judge whether the 500-stock index is overvalued. The S&P 500 is undervalued only on the basis of price-to-free-cash-flow, according to BofA.

As for the fourth-quarter earnings season, the health care sector "screens best" based on predictive metrics, the team added.

Now read more markets coverage from Markets Insider and Business Insider:

US consumer confidence hits highest level since 2000

Charles Schwab touts record-high $4 trillion in client assets after erasing trading fees

A USC student and TikTok star with 1.6 million followers explains the 3 main ways she earns money, and how much she makes

Join the conversation about this story »

NOW WATCH: A big-money investor in juggernauts like Facebook and Netflix breaks down the '3rd wave' firms that are leading the next round of tech disruption

Here are the 30 most powerful people in Bank of America's $8 billion bond-trading division, which just had a big shakeup

Thu, 01/16/2020 - 3:04pm  |  Clusterstock

  • Business Insider is mapping out the power structure in the global banking and markets businesses overseen by Bank of America Merrill Lynch COO Tom Montag — one of the most powerful executives on Wall Street. 
  • In the kingdom that Montag rules over, no group looms larger than fixed-income, currencies, and commodities.
  • The group accounted for $8.4 billion in revenue in 2019, more than any other investment-banking business line at the firm. 
  • Our FICC org chart for BAML features more than 30 of the division's highest-ranking sales and trading executives. 
  • Click here for more BI Prime stories.

In the kingdom that Tom Montag rules over as Bank of America's chief operating officer, no group looms larger than fixed-income, currencies, and commodities — home of the firm's vaunted bond-trading group.

At Goldman Sachs, where he spent two decades and ascended to co-head of the firm's global securities division, Montag climbed the ranks on the back of a stellar fixed-income career.

After defecting to Merrill Lynch in 2008, and following the crisis-era merger with Bank of America, he quickly assumed control over the firm's sprawling investment banking and markets operations. And he built a juggernaut credit-trading operation that has routinely competed for the industry's top honors and raked in billions of profits for the firm.  

Business Insider in 2019 mapped out the power structure in the firm's global banking and markets businesses that Montag oversees. We started with FICC, as no division is more crucial to those operations, accounting for more revenue than any other investment-banking business line at the firm.

Even as the overall industry FICC wallet has contracted more than 20% to $64 billion in 2018 from more than $80 billion in 2013, Bank of America has cornered a top-3 position on industry league tables.   

In 2019, it pulled in $8.4 billion globally, second only to JPMorgan Chase and Citigroup, according to company reports. 

The firm's formidable FICC division has strength globally, but its legacy was burnished and its power center is rooted in the Americas, where it ranked second behind JPMorgan last year, according to Coalition's league table.  

Business Insider spoke with insiders, ex-employees, consultants, and other industry experts to gain insight into the reporting structure within Montag's fixed-income division. We've focused on front-office execs that bear the primary responsibility for driving the group's revenue — no operations or back office roles appear in our chart. 

A Bank of America spokeswoman declined to comment for this project. 

Business Insider updated this chart in January 2020 after breaking the news of a large reorg of the fixed-income trading group, including the departure of Frank Kotsen, a 23-year company lifer who ran global credit and special situations trading. We'll continue to update this chart as needed.

We have also mapped out the most powerful people in equities and investment banking

Here are the 30 most powerful people under Tom Montag in Bank of America Merrill Lynch's fixed-income division. 

Have more information about the organizational structure within Bank of America Merrill Lynch? Contact the reporter at amorrell@businessinsider.com or via encrypted chat with Signal or Telegram

Join the conversation about this story »

NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.

Casper's money-losing mattress business will face a tough IPO path, and some observers think the IPO might even get scrapped

Thu, 01/16/2020 - 3:03pm  |  Clusterstock

  • Online mattress company Casper, which filed for an initial public offering last week, could find it hard to complete its IPO, business experts told Business Insider.
  • Wall Street has soured on unicorns, or startups valued at $1 billion or more, that lose money.
  • Casper is losing money, thanks to high marketing, administrative, and return costs.
  • But the company's valuation could also hinder its IPO; comparable public companies that are actually profitable are valued far less on a price-to-sales basis.
  • "They all want to pitch themselves as tech companies," Synovus' Dan Morgan said. "To me, this isn't a tech company. I hate to tell you, you're just an online marketer that sells mattresses."
  • Click here for more BI Prime stories.

Wall Street may not end up being a friendly place for Casper.

There's a good chance that the company's bid to go public will meet with a chilly reception from public investors, business experts told Business Insider. WeWork's aborted initial public offering and the poor performance of many of the high-profile startups that completed their offerings last year could dampen demand for shares in yet-another money losing and arguably overvalued young company, they said.

"I would refer to Casper's IPO as 'Casper's possible IPO,'" said Robert Hendershott, an associate finance professor at Santa Clara University's Leavey School of Business. "If WeWork is any sign, it's going to be very hard for them to go public."

Casper filed for a public offering last week. Its IPO document revealed that it lost $65 million in the first nine months of last year, or about 20 cents for every dollar of revenue. Huge marketing and administrative costs have weighed on its results.

Wall Street has shied away from money-losing unicorns

So too have product returns. Like many of its competitors, Casper offers a generous return policy; customers can send back mattresses up to 100 days after receiving them. And consumers have taken advantage of that. Refunds, returns, and discounts cost the company $80 million in the first three quarters of last year.

Unfortunately for the company, Wall Street hasn't had much of an appetite lately for money-losing unicorns, or startups with a valuation of $1 billion or more — a level Casper reached with a funding round in February. Uber, Lyft, and Slack shares are all trading well below the prices at which they debuted last year. Pinterest and Peloton are barely above their IPO prices.

"I think that gravity is back," said Rob Siegel, a lecturer in management at Stanford Graduate School of Business, adding that companies both public and private are being forced to focus on their unit economics rather than on growth at all costs. "This is going to be a tough market to go public in."

Investors got burned so much last year by companies that were bleeding cash, that they almost certainly will be less aggressive about investing in such companies this year, Hendershott said.

"I think that we are going to see a lot fewer money-losing IPOs in 2020 than we did in 2019," he said.

Casper's valuation looks pricey compared to its peers

Part of what could hinder Casper's public offering — in addition to its losses — is its valuation. The company hasn't given an estimate of what it expects to be worth in its public offering, but private investors valued it at $1.1 billion last year. That would give it a price-to-sales ratio of about 2.7, based on its trailing-twelve-months revenue.

When compared with some of last year's IPOs, that doesn't seem super-excessive, said Dan Morgan, a senior portfolio manager at Synovus Trust and a longtime tech investor. When Uber debuted last year, it had a price-to-sales ratio of around seven to eight. Lyft's ratio at the time of its IPO was 11. And Slack's was a whopping 50.

But those aren't necessarily the best companies to which to compare Casper. The company after all is basically a mattress manufacturer. As such, its peer group includes Tempur Sealy, Sleep Number, and Purple Innovation. Collectively, those companies are valued at about 0.8 times their sales — or about one third Casper's corresponding valuation. What's more, unlike Casper, all three are profitable.

Purple may be the best company to stack up against Casper. It had similar sales in the first nine months of last year — $304 million for it, compared with $312 million for Casper. But its revenue grew at more than twice Casper's rate in that time period —47% compared with 20%. Unlike Casper, it turned a year-earlier loss into a modest profit of $126,000.

From those numbers, you might think that Purple would be worth a lot more than Casper. But you'd be wrong. Purple's market capitalization stands at $607 million, or about half that of Casper's last private valuation.

"I think it will be interesting to test this billion-dollar valuation point for this particular category," said David Hsu, a professor of management at the University of Pennsylvania's Wharton School. "It's not a great IPO market, obviously."

Casper isn't really a tech company

Another factor that could weigh on Casper is that investor sentiment has completely reversed on startups like it that aspire to be considered as tech companies but really operate in other industries. WeWork was the pre-eminent example of that phenomenon, Hendershott said. 

A year ago, SoftBank valued WeWork at $47 billion, and in its IPO documents, the company tried to play up its technology bona fides. But Wall Street investors saw through the ruse, recognized its as a real-estate company that was bleeding lots of money, and scoffed at the idea of paying a tech-like premium for its shares. The company ultimately pulled its offering, even after reportedly being willing to consider a valuation of as little as $10 billion. When SoftBank bailed out WeWork this fall — weeks before it was expected to run out of cash — it valued it at less than $8 billion.

Casper appears to be following in WeWork's footsteps, at least in terms of trying to present itself as a tech company. Its IPO paperwork mentions the words "technology," "technologies," and "technological" 121 times combined. That's more than even WeWork did.

In the document, Casper touted its "cutting-edge technology," bragged about its "large digital product and technology engineering teams," and talked about how its growth will be driven by "new technologies."

"We believe that technology will increasingly play a role in the continuous optimization of a sleep environment," the company said in the IPO paperwork. 

But the business experts weren't buying it — and they suspect Wall Street won't either.

"They all want to pitch themselves as tech companies," Synovus' Morgan said. "To me, this isn't a tech company. I hate to tell you, you're just an online marketer that sells mattresses."

Got a tip about Casper or another startup? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

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How to estimate the size of your refund before you even file your taxes

Thu, 01/16/2020 - 2:04pm  |  Clusterstock

Tax season can bring about headaches, but many Americans look forward to the annual consolation prize: a tax refund.

According to IRS data, over 111 million Americans received federal tax refunds for the 2018 tax year, averaging $2,860 per refund. The IRS will begin accepting tax returns for 2019 on January 27. You can file your taxes as soon as you have all the appropriate tax forms from your employer and any other businesses from which you earned income (wages, interest, dividends, etc.) throughout the year.

These forms must be filed and postmarked by businesses on or before January 31, so you should have everything you need to file your tax return by mid-February. If you file electronically and select direct deposit — the method recommended by the IRS — you should have your refund within 21 days.

But you don't have to wait until you file to find out the size of your refund, if you're owed one. As soon as you have your W-2 or 1099 forms from every employer you had in 2019, you can estimate your tax refund (or tax bill, if you underpaid in taxes) with the help of an online tax preparer.

Use a tax refund estimator to find out how much you could get back

H&R Block has a super simple tax refund estimator that takes just a few minutes to complete — you don't have to sign up for an account or pay for anything up front.

You begin by answering a few questions about yourself, including your marital status and age.

Next you can enter the necessary figures from your W-2 and 1099 forms. 

These are the only three numbers you'll need from your W-2:

  • 2019 total wages (box 1 on your W-2)
  • Federal income taxes withheld (box 2 on your W-2)
  • State income tax (box 17 on your W-2) — you can ignore this one if your state doesn't tax income

If you had multiple W-2 jobs in 2019, then you can enter the information for each one separately. If you had 1099 income, you can select "no" in the prompt above and you'll be able to add up all the estimated pretax wages from your various 1099s and include them as one. If you paid quarterly taxes, you can enter that amount a few steps later.

Next, you'll get a rough estimate of your tax refund.

If you want a more accurate figure, you'll have to provide more information about your financial situation, including whether you're a homeowner, have children, earn investment income, or have potentially deductible expenses. 

After you enter all your income sources and expenses, you'll get your refund estimate. It's good to remember that this estimate is only as reliable as the information you provide. If you left out a source of income, or your numbers are just approximations, your refund will likely look different.

A smaller refund doesn't always mean you paid more in taxes

Though many Americans rely on the windfall from a tax refund, financial experts say a larger or smaller refund is not indicative of whether a person paid more or less in taxes, but rather of the amount withheld from their paycheck. Receiving a smaller refund doesn't necessarily mean you had a higher tax bill than previous years. It could even mean you went home with a bigger paycheck throughout the year.

Big tax refunds generally mean you paid too much in taxes — you had too much income tax taken out of each paycheck, and now the IRS is returning what is rightfully yours. Instead of keeping your money in a savings or retirement account where it could earn interest all year, you essentially gave an interest-free loan to the government, Business Insider previously reported.

As Lauren Lyons Cole, a certified financial planner, said, "I always try to either owe slightly or break even when filing my tax return." A tax refund of zero means you optimized your income throughout the year, putting yourself in the best possible position to increase your net worth, she said.

Learn more about H&R Block »

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