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Wealth Hacks

Are You Being Ripped Off By Social Media Influencers?

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Advertisers spent a cool $1.69B on Instagram influencers last year, a figure expected to double by 2019.

Because of the hype surrounding this trend, its early infancy, along with the (alleged) direct-to-consumer access influencers supposedly provide, there’s a lot of reasons brands are jumping on this.

But how effective is this? Are they for real? Or are they really just full of shit?!

Or even #FraudNews, as the President would say? There are a lot of layers to this so hang tight.

Just some basic stats: The Association of National Advertisers surveyed its members, which found that 75% of marketers currently work with influencers. OK, so far, so good.

Within that pool, 43% plan to pump more money into influencers next year. Of those who did not yet use influencers, 27% indicated they would in next 12 months.

Source: Mediakix

Here’s the big issue.

It’s super easy to game the system. Again, the layers. First one being fake followers.

You can create a fake influencer in two minutes, post some modeling pics from some cute girl in Australia, name her Logan Gerwitz, acquire a shitload of followers, and boom, you’re in business.

One agency actually made money off a fake “influencer” account…

In fact, to prove this, one influencer marketing agency did exactly that—and then had brands pay thousands of dollars for sponsored posts, just to showcase how easy that shit was to pull off.

The first subheader said “How Anyone Can Get Paid To Be An Instagram Influencer With $300 (or Less) Overnight.”

Pretty creative and compelling, right?

Here’s what they did. (They’re named Mediakix, btw, just so that’s out of the way. Shout out to them.)

From there, they applied to campaigns on popular influencer marketing platforms. You need 10k followers to get that.

“How To Build A Completely Fake Instagram Influencer Account”

They created two totally fictitious Instagram influencer accounts, built solely with bogus followers and engagement: 1) a lifestyle and fashion-centric Instagram model and 2) a travel and adventure photographer.

The model influencer was built from a one-day photoshoot. Another completely from stock photos. (Real talk.)

Fake Instagram Influencer Account Wanderingggirl

Once the profiles were create, Mediakix did two things: 1) bought fake followers, 2) bought fake engagement.

(On some odd matrix shit, their campaign actually is a brilliant form of meta-marketing. Defrauding to showcase others’ fraud all the while maintaining some sort of Robin Hood’ish ethical high road that somehow makes me believe in them more…And now my head’s exploding. Back to the story.)

How they got paid

Once there was a decent level of engagement, Mediakix set out to get that moolah. Once you have a following, all you have to do is sign up on an influencer marketing platform (here are eight) where brands and influencers match up.

Per Mediakix:

Once we had the accounts on a few platforms, we applied for new campaigns daily. The application process ranged from simply clicking a button to writing a short message to the brand, depending on the platform’s requirements.

Results. We secured four paid brand deals total, two for each account. The fashion account secured one deal with a swimsuit company and one with a national food and beverage company.

The travel account secured brand deals with an alcohol brand and the same national food and beverage company. For each campaign, the “influencers” were offered monetary compensation, free product, or both.

In other words, pay for a few follows, scam a brand out of dollars. It’s a form of catfishing, serving as an allure of something enticing…but ultimately not real.

But there’s more…

Here comes that aforementioned #layer again.

Ali Mahvan, CEO of shopping app Sharebert, produces and hosts influencer merchandise. Under this arrangement, influencers promote their own products, ranging from hoodies to t-shirts and collect the lion’s share of proceeds.

With follower counts from $50k to 1M, you’d think it’s easy money for influencers, right? Not so fast.

“We’ve worked with influencers with 10k followers and influencers with 10M followers,” Mahvan tells WealthLAB. “One of the strangest things we’ve noticed is that follower count very rarely coincides with sales.”

Influencers he’s worked with appeared to have great engagement, lots of content and, obviously, lots of followers. But the results, he says, were “embarrassing.”

Oddly enough, the influencers still had an expectation of compensation, despite not moving a single item.

“They couldn’t move their own merch,” Mahvan says, “but were insulted they weren’t paid for the quote-unquote effort they put in to quote-unquote promoting their own merch.”

Is the influencer economy doomed?

In spite of the ease with which you can hack your follower count, influencer pay is still determined by the number of followers.

“I won’t name names, but we’ve dealt with influencers that had a quarter million followers, typically charged upwards of $1,000 for a single sponsored post,” says Mahvan, whose platform produces, designs and then gives the Instagram post and/or story to distribute. “And they couldn’t sell one piece of merchandise with their own face on it.”

To combat this, there are verification softwares popping up left and right to gauge the veracity of these accounts. Dovetale, another company listed in the same NYT report, says it uses over 50 metrics to determine account legitimacy.

Basically, a social #FakeNews meter of sorts, trying to make influencer marketing great again.

“Growth pods…”

But Mahvan says the influencers are still getting around that cat-and-mouse game by resorting to growth pods or engagement pods, a form of inter-influencer engagement, commenting on each other posts to inflate the engagement.

“It’s all real followers and real likes but it’s fraudulent activity,” Mahvan says. “Everyone in the Pod is only there to grow their own following so the engagement doesn’t mean anything.”

While fake followers can be detected with these verification softwares, growth pods can’t—they’re real people.

Influencer crackdowns

Unlike Twitter, who’s cranked down on #FakeUse hard, Instagram—while cracking down—has come off a bit more laissez faire about the whole thing, encouraging advertisers to use third-party account “verifiers” to make sure accounts are real.

“We knew this kind of day of reckoning would come,” Erick Schwab, the co-founder of Sylo, which vets influencers for fraud, told NY Times. “We’ve gotten tons of brands, agencies, vendors emailing us, who we’ve been having conversations with for a while, but now they’re sort of like, this is being demanded.”

Source: New York Times/Captiv8

“They’ve artificially inflated this influencer economy and brands were just ready to get on to the next thing, which still was better than advertising in print,” Mahvan explains. “But outside of agencies with vetted influencer accounts—and we get fantastic results with those—you’re pretty much pumped and dumped the entire influencer economy.”

FWIW, here’s Mediakix’ infographic on the influencer marketing market. And before you splurge on influencer marketing, just make sure you know what you’re getting into.

 

Real Estate Investing

Cap Rate, Explained

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Whenever you’re pitching, shopping, brokering or hunting deals, one of the first terms you’ll come across is the “cap rate.”

Short for capitalization rate, at its most basic form, the cap rate indicates the annual yield on a real estate property.

But that’s not all it’s good for. It can also indicate valuations, feasibility of a deal, and what you should pay for a property. Here’s WealthLAB’s Cap Rate, Explained.

What is a cap rate?

The basic formula of the cap rate is the property’s net operating income (NOI) divided by the purchase price. It basically means the yield (return) of the property without considering debt or anything else. Or, in layman’s terms, it lets you know (an estimate of) your cash flow in advance.

Cap Rate Example

Let’s take a 20-unit property in Atlanta listed for $2 million. The rent roll for the year comes out to $300,000 with operating expenses totaling $100,000.

$200k divided by $2M = 10% = a 10% cap rate. (In everyday lingo, you’ll hear people call that a “10 cap.”)

How can I use it?

Quite a few ways. The most basic one is to compare the cap rate of a property you’re considering investing in vs. the average cap rate for the market. This would let you know whether you’re getting a good deal or not.

Pro forma

You can also use it when projecting income against a property you plan to upgrade. Then it would be a “pro forma cap rate.”

Find your price

You can also use it to find the price you’re willing to pay. But perhaps your strategy says you’ll only buy properties at a 12% cap rate. So now you can use the cap rate to calculate what your offer should be.

Using example above, if NOI is $200k, simply divide by your desired cap rate offer price (12%) = $1.66M = your offer price.

What’s a good cap rate?

It all depends, really.

Depends on the market, the state of the property, the cost of capital. In so-called gateway markets (think New York City, London, Tokyo etc.), the cap rates are lower because of the idea that — just like bonds and other “safe” instruments — investing in big markets is a safe play.

In addition, properties in big markets traditionally trend upwards—thus offsetting the lower cash flow.

In smaller markets, where there are less job, less people, and therefore less rental demand, the value doesn’t trend upwards as much; they remain stagnant.

For that reason, they’re deemed more risky and you’d seek a higher cap rate to get higher cash flow to mitigate that risk.

And valuation?

Yes, cap rates are also used to value properties. Again, going by the average cap rates for a given market, once you recapitalize (refinance), the lender—vs. the free market—will set a value of your property.

So the value would be found like this: NOI divided by cap rate. Let’s use the Atlanta 20-unit as an example. That particular type of property in that particular market has an average cap rate of 8%.

$200k NOI divided by 8% = $2.5M = your property’s value.

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Personal Finance

The Main Benefits of Being Financially Independent

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Being financially independent means different things to different people.

To some, it means retiring and traveling the world, relaxing at home, or doing whatever you love.

For others, it means having the financial stability to have at your back, while you continue your career or business.

In general, financial independence is defined as when your passive income is higher than your living expenses. Here’s the issue though…

It can be a moving target.

You need different levels of income at different points in your life. Let me explain

How Much Money Do I Need?

If you are 18 years old and have no debts, are healthy, and can get by with little, the amount of income you actually need to get by is very low.

Eventually, you might get married, have a family, a dog, etc. So, the income you need to sustain this is a lot higher.

Then, the kids move out and you downsize. You need a lot less again.

Then you start to get older and you find your health failing you. Your costs will go up once again.

So, at a minimum, I’ve already outlined 4 different points in your life where your “financial independence number” will go up or down.

Regardless of the difficulty in calculating exactly how much you’ll need, there still are a lot of benefits to strive for financial independence. Let’s take a look at those.

Freedom of Choice

I already alluded to it a bit, but the biggest benefit to financial independence is freedom.

As soon as your passive income is higher than your wages, you’ll find that you don’t need that job. You can continue to work, but you don’t have to. So, all the stress is gone.

Same goes if you’re a business owner. You can continue to grow your business if you want, but you don’t need to.

You could opt to walk away from it and do something else entirely. It allows you could leave the high paying job and find a job that is more rewarding.

Whatever you choose to do, it’s because you’ve achieved Financial Independence.

You’ll Be Able to Make More Money

You can never unlock your true potential as long as you are a slave to your job or business. It’s hard to pursue other opportunities when you can’t afford to leave your job.

As an employee, you can earn money by working more, getting a raise, or getting better positions. But, you are actually very limited because most of your time is dedicated to the job.

And that brings us to the heart of financial independence – time. The most valuable commodity is time, and if your time is spent working for someone else, it isn’t spent finding new opportunities for growth.

By growing your passive income to the point where you don’t have to work anymore, you can unlock that time and harness all of your intelligence and creative power to pursue more valuable endeavors.

You’ll Actually Get to Retire

If you haven’t realized it yet, Social Security is going to go broke, pensions can disappear overnight, and even state or municipal government benefits can be slashed to pennies on the dollar.

While some people will be able to retire with these, we should not depend on them entirely. Doing so will make it far less likely that you’ll have the security you need or want in retirement.

But, retirement isn’t something many of us worry about until it’s far too late. We don’t save or prepare, then find ourselves unable to retire.

So many people work until they are no longer able to work and they are forced to retire. By then, they have no way to actually enjoy any of their ‘retirement.’

If you are financially independent at a young age, you are kind of already retired. Additionally, you can continue to work and just save everything to get to a point where you are truly prepared for retirement.

You might even be able to afford to retire early and enjoy your later years to their full potential.

Passive Income is Like Unemployment Insurance

Unemployment insurance covers only a portion of your lost wages. But, if your passive income is already at or above your wages, then it’s like a really good insurance policy.

The fact is that many industries are changing and advancing, which is leaving its older workers behind. Having financial independence means that you’ve got something to fall back on and can take your time to find new work without worrying.

You Can Plan

A lot of people never plan ahead. While they might plan their next vacation, wedding, or Black Friday shopping spree, most people aren’t planning for their finances next month let alone 20 years from now.

A lot of that comes from the belief that it’s impossible to get ahead, be successful, wealthy, and secure. Planning ahead would just be depressing.

But, if you work to attain financial independence, planning for the future becomes fun. Who doesn’t want to think about the future when the world is your oyster?

You’ll Be Less Stressed

Money is one of the leading causes of worry and stress in our society and in most households.

Having more passive income can help with your finances, allowing you to enjoy the company of your spouse and children. It can allow your family to actually enjoy each other rather than always being stressed over paying bills.

Why Aren’t You Chasing F.I.?

What is holding you back from pursuing financial independence? Comment below.

This article originally appeared on IdealREI.  Follow them on Facebook, Instagram and Twitter.

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Wealth Hacks

How To Preserve Family Wealth By Planning For Succession

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In the UK alone, an estimated £5.5 trillion is due to be passed between generations over the next 30 years – according to Kings Court Trust – yet according to the Attitudes Survey 2019, only half of Ultra High Net Worth Individuals have a robust succession plan in place.

Most inheritance handovers will be seamless. However, lack of a succession plan is a concern because it takes time to devise a holistic strategy to transfer decision-making responsibilities to the next generation. Not surprisingly, there are numerous barriers to the process: timing, lack of clear objectives and in some cases the decision maker or head of the family might not be ready to hand over authority.

Alongside all this, changing family structures and a wide span of generations present challenges of their own. For example, children in different branches of the family might be treated differently, as might stepchildren and grandchildren, particularly concerning property or fine art.

Passing on wealth is a major concern for wealthy families and while there is no way of rubber stamping the transfer process, there are three approaches that one can take to prepare for successful transition.

Promoting a vision

Image result for vision

Apart from wanting to provide a comfortable level of wealth to future generations, it is important to start by identifying clear objectives: defining how future generations should benefit from an inheritance; identifying what that might mean, to whom and in what proportions.

Some families want to maintain consistency in their philanthropic ventures, while others are more focused on creating a lasting legacy. Is there a philanthropic purpose for your wealth and if so, does it align with your family’s values? For instance, there are hundreds of foundations dedicated to different causes; from well-known ones such as the Wellcome Trust to the smaller such as the Peter Harrison Foundation. Each one has its own mission.

Sometimes the interests and focus of the head of the family do not align with the children or grandchildren. For example, baby boomers might be comfortable investing in manufacturing, but Gen X and Gen Y might prefer an emphasis on sustainable investing or in technology venture capital. There will even be wide disparities in risk tolerance amongst the beneficiaries. And then there are myriad human factors; everyone will have different personal views, experiences and needs.

Preparing the legacy

At the same time, it is important to create the right governance structures and identify the corporate trustees and lawyers that will assist you in achieving the smooth transition of assets.

Taking an integrated approach with this is one of the keys to successful transfer and management of wealth. For example, what type of structures should be established; trusts, private trust companies, foundations or even groups of companies? Co-ordinating with the relevant experts depending on the assets held and structures required is essential too.

Clients with family located internationally will need to understand the implications to the wealth transfer of offshore and regional tax regimes, for example. Even US and UK FATCA and the automatic exchange of information need to be taken into account.

It’s all about the people

Image result for family generations

 

Wealth transfer is of course about preservation of assets, but it is also about people. The succession structure needs to fit the individuals within the family. Some members of a family might have little understanding about finance so it might be necessary to educate them or even negotiate with them for the transition ahead. More competent individuals might want a more flexible structure in order to apply their knowledge.

It is therefore vital that the succession planning process, which can take up to a decade, includes open dialogue with key beneficiaries right from the start. A survey conducted by Moore Stephens found that nearly a quarter of respondents highlighted the difficulties when trying to reach agreements in the decision-making process.

It is quite common for people to avoid discussions about money and lack of communication can seriously hinder the process; beneficiaries need to know more than just the names of trustees or advisers.

At JAR Capital, I advise clients to include their beneficiaries gradually. To begin with it might just be an exercise in sharing information, but over time the next generation becomes more interested and seeks to take on more responsibility. This could include taking an active role in investments and governance or spearheading the family foundation.

There is no doubt that issue of intergenerational wealth transfer is a thorny one. Nevertheless, we believe that those families that take action in advance to preserve their wealth for future generations will ensure an orderly and harmonious succession of assets.

This article originally appeared on ValueWalk. Follow ValueWalk on TwitterInstagram and Facebook.

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