[00:00:00] Intro: Welcome to Private Banking Strategies Podcast with Vance Lowe and Seth Hicks, your secret weapon to protect your assets and never have to start over financially again. Vance and Seth help high net worth individuals, families, business owners, and investors structure and asset protected fortress for their families.
[00:00:21] Intro: Learn how to keep what you earn and use the velocity of money. To create your own private banking system. Join us on this journey as we explore the secret strategies of the rich and political elite and help you take total control of your financial security. Now onto the show.
[00:00:37] Seth Hicks Esq.: Well hello and welcome to Private Banking Strategies Podcast with Vance Lowe and Seth Hicks.
[00:00:41] Seth Hicks Esq.: Vance, how are you today?
[00:00:43] Vance Lowe: Hey, I’m doing wonderful. Looking forward to our topic today.
[00:00:46] Seth Hicks Esq.: Me too. Fantastic. We are talking about a smart risk framework for your private banking strategies. Smart risk framework includes how you apply wisdom. [00:01:00] And the systems and the strategies. We talked about what the purpose in the past few episodes of what smart risk is, and we talked about avoiding speculation and preventing emotional decisions, and having models that capture downturns and worst-case scenarios so that you can power through.
[00:01:19] Seth Hicks Esq.: And we talked about it in the context of real estate investment. We talked about long-term goals and safeguarding the family bank with these stewardship principles. So today I would like to drill down with you some on a very key and fundamental part of the smart risk framework, which is documentation and stewardship of your bank, documentation of your capital sources coming in, capital deployments, your loans, and how your family bank stewards those loans.
[00:01:51] Seth Hicks Esq.: Let’s start there.
[00:01:52] Vance Lowe: Let’s do, because it seems to be human nature to procrastinate and not have as much discipline [00:02:00] as we need to have. And if we don’t, we fall into trying to remember, forgetting and not executing the way we need to. In Nelson Nash’s book, he talks about a grocery store story. And all of our clients put themselves as the grocery store owner and understand how the flow of something works.
[00:02:20] Vance Lowe: In a lending business, you have to be able to have documentation. You have to create a loan, you have to be able to track it. You have to know at all times how much interest has been paid, how much principle has been paid, what the due date is, and document that just because it’s our own. Or in a family environment doesn’t mean you get to skip steps.
[00:02:42] Vance Lowe: But time and time again, when we’ve got a client coming in and needs a little bit of rescue, you know, rehab, so to speak, we find that the attention to the details are not there. They’re trying to skip steps, you know, they’re just not as attentive as they need to [00:03:00] be. So, every loan we have needs to be, you know, set up the proper way as if we’re out on the street and doing a loan for a regular client, even though it’s off the street.
[00:03:12] Vance Lowe: It’s in a family, it’s in your private environment. Or your private economy, you’re required to be able to go through a loan process. If you don’t, then it’s going to fail. If we don’t, then we’re going to be, as Nelson says it, in his grocery store story, we’re going to be stealing the peas. So that’s the whole emphasis that is driving us to have this conversation today, is to be able to come up to the plate and be able to meticulously know exactly where we are always on all loans, for not only ourselves, but for everybody else.
[00:03:46] Vance Lowe: So what’s that going to entail, Seth? What does that documentation look like?
[00:03:51] Seth Hicks Esq.: Well, let’s back up and talk about the grocery store example that Nelson Nash has used as a cornerstone example. [00:04:00] You’re a grocery store owner. You have all this inventory of, uh, products, beans and meats, and we talk about peas. So, there’s cans of peas and you’ve got your stock inventory and.
[00:04:13] Seth Hicks Esq.: Your family comes along and because it’s their grocery store, the wrong idea is to just load up your grocery store cart and go out the back, load your car up and don’t pay for anything. But Nelson rightly points out that the profit margin on the sale of a can of peas is much lower than one might think.
[00:04:31] Seth Hicks Esq.: And it takes the 17 more cells of cans of pea to make up for one that was stolen. So, the stake, the taking, or the stealing, or not paying yourself back actually will implode your banking. Every transaction must be documented. So, loan agreements and promissory notes are standard in the family banking operation such that there are [00:05:00] repayment schedules that are kept.
[00:05:01] Seth Hicks Esq.: Just as if you went and borrowed money from the corner bank to purchase a car or purchase a house or purchase business or expand business, there’s going to be repayment terms. You’re going to be making monthly payments with a prescribed annual interest rate, and you’re going to have an amortization schedule over a certain amount of years, depending on the type of loan that you have to pay back.
[00:05:26] Seth Hicks Esq.: So, the same documentation, the same procedures, the same strictness. Repayment is required. In your fi, private banking strategies, you must have the promissory notes, a repayment schedule, an interest rate that fits within your cashflow, and you have to make those things happen. And it’s so simple. Now with modern day banking, you can literally set those things up online and they take place without you having to do anything after it’s set up.
[00:05:55] Seth Hicks Esq.: So, I think the next. Level that we kind of dig into is, well, [00:06:00] how do I know what type of loan repayment to set up? And we talk about, well, if I’m the banker, don’t I want 50% interest? And the answer to those questions is yes and yes, but how do you do it?
[00:06:12] Vance Lowe: Yeah, let’s delve into that and let me back up one more step into practicality, folks.
[00:06:18] Vance Lowe: What we do here is if we are practical in setting up and repaying our loans, if we’re honest with ourselves, when we take it out of the back, we think we’re getting an advantage. We take the groceries out the back, or if we give a client or ourselves a discount on a product, we think that there’s an advantage to doing that and there’s not.
[00:06:41] Vance Lowe: If we pay full price, we have our spouses load up their grocery cart and go out the cash register and take away all sales ads and discount coupons, and she ends up having to pay full price. There’s a lot more profit on that isn’t there? And who gets that [00:07:00] profit? The owners do. And whenever we do loans, the advantage of doing the loans, the practicality is we control the loan.
[00:07:07] Vance Lowe: If situations change, we can restructure the loan because we need to make sure the money comes back. What we can’t do is spend the money and then forget about it and not make the payments because that forces everything else to subsidize, you know, that theft. That’s what we’re talking about here. It’s not that, oh, if I don’t make the payment, I get away with it.
[00:07:30] Vance Lowe: Uhuh, you don’t. It costs you more by not making the payment that does making the payment. So
[00:07:37] Seth Hicks Esq.: I think that’s where people get hung up a lot of times is they go, well, I hear you saying that, but. I don’t see how that really plays out with numbers. And so you have to actually sometimes play the numbers out.
[00:07:49] Seth Hicks Esq.: The first time that I read Nelson Nash’s book, I’m thinking, you gotta sell 17 cans a piece to make up for that 3% profit you were gonna make on that. One can. Like how do you even stay in [00:08:00] business? That doesn’t make sense, but it does if you’re a grocer. It does if you have inventory and cash flow and you understand the profit on each sell that you make, it does make sense.
[00:08:10] Seth Hicks Esq.: And the same thing with banking. It should be second nature, common sense, absolute like base level that when you borrow money from a bank, you have to pay it back. This bank is no different, and it doesn’t matter who owns it, whether it’s you and your wife or you and your extended parents, you know, it doesn’t matter.
[00:08:33] Vance Lowe: We have these false ideas because most of us refuse to follow correct money principles. And the one I think that we’re talking about today that involves loans and stealing from ourselves is called the, the law of 10 percents. That’s a kind of like a biblical law. The first thing we are supposed to do all the time is pay ourselves 10%, but we don’t.
[00:08:56] Vance Lowe: We leave it till the end, or we either pay ourselves. [00:09:00] And then when we get down to all of our expenses, we usually end up not having any more money because we paid ourselves the 10% or we perceive that was the reason we don’t. But yet we’ve got one more bill and people throw their hands up in the air and say, Hey, I’ve gotta take this money and pay that bill, and they pass up the most lucrative.
[00:09:20] Vance Lowe: Opportunity for an investment you could ever think of. If you split yourself in two and say it’s the person in the mirror who has the obligation to make the payments. ’cause they go to work, they earn a paycheck and come home and they spend the money, we’re gonna finance that for ’em. And same thing inside a low, that payment represents money flowing back to us and it means a second touch.
[00:09:41] Vance Lowe: That’s why it’s so valuable. Let’s say it’s a $200 payment. It isn’t about $200. It’s about $200 every single month. Or we take that $200 and we go buy more debt, and now we make $20 and we take that $20 and buy more debt, and now we make another two. So we’re not only making [00:10:00] 200, we’re making another 20, and we’re making another two.
[00:10:03] Vance Lowe: And we miss out on that when we miss that one payment. That’s what we’re talking about. It isn’t about the one payment. And when it comes to product or anything like that, the cascading effect. Yeah, we’ve gotta raise prices on cans of peas or whatever else to cover the theft, and it doesn’t end there.
[00:10:22] Vance Lowe: That becomes a habit. That’s where discipline comes in. If the grocery store owner takes the the food out the back, you think the employees won’t try to sneak some out the back. The store fails when the loan process is not repaid properly. The interest mounts up, so we have to have a schedule. We have to go in every single month and decide whether that payment is made.
[00:10:45] Vance Lowe: If the payment’s not made, we have to enter that honestly as zero. Or if it was a smaller amount, we put the amount that was paid and the loan is recalculated and it will shock you at the end of the loan how much that missed payment is [00:11:00] gonna cost you. We go through that in, in our training and setting up and running our lending company with the software.
[00:11:07] Vance Lowe: How? One payment, I don’t know. For me, I show an example on my home, $1,100 payment and I missed one after a couple of years of making payments and I put zeros in there. I did that twice in a row ’cause cashflow was bad and then had the money to make it up. But I used it as a training example. I let ’em see at the end of the loan.
[00:11:28] Vance Lowe: Those two $1,100 payments were $67,000 balloon payment. At the end of a note in a mortgage, don’t ever not make up a past payment on a mortgage. Your mortgage company will go, yeah, I quit. Okay. You know, we’ve charged you enough penalties. Just keep making the normal payment. And they’re just smiling because of how much you gotta come up with when you sell that house or at the end of the loan.
[00:11:54] Vance Lowe: So following these procedures, Seth, being able to have the schedules [00:12:00] know where you’re at all the time and be disciplined to be able to do that are critical.
[00:12:05] Seth Hicks Esq.: Let’s take it into the family context where you have a matriarch and a patriarch that have made generation one policies on themselves and they’ve got policies on their three children.
[00:12:18] Seth Hicks Esq.: They’ve got policies on their six grandchildren and they are in their seventies, and so son one wants to start a new business son two already started a restaurant that’s successful and he’s making cash flow payments back to the family bank that fit within what he projected. And the third is a daughter, and she’s not using any of it right now ’cause she doesn’t have a need or a purpose.
[00:12:45] Seth Hicks Esq.: But the first brother gets into a bad investment, isn’t able to make the payments back, and that creates a big, big load on the private family bank because someone has. Pay for that money that [00:13:00] was lent out to the son that couldn’t make a go of an investment, couldn’t make a go of a business, didn’t find a job after he got out of his expensive four year college education, whatever the case may be, that creates a drag on the entire family banking system.
[00:13:16] Seth Hicks Esq.: And so if one sibling is. Stealing the peas and going out the back door with the peas and the beans from the grocery store, the rest of the family has to absorb that and take on that debt. Yeah, and so one of the things that we have to work out among multi-generational a hundred year family bank folks is what happens when.
[00:13:38] Seth Hicks Esq.: Someone fails, what happens when they’re not paying back? And those are hard decisions that need to be made upfront when you’ve got an extended family because the rules have to be in place for everyone to know where the lines are. And you can’t allow one son or one daughter [00:14:00] to steal the peas or not pay the loan back that they borrowed from the family bank.
[00:14:05] Seth Hicks Esq.: So those are structured protocols. Sometimes those are done in various forms of documentation, different structures. Sometimes people have trust, some people have different entities. It depends on what they do and who they are and what their skill sets are.
[00:14:23] Midroll: Did that story feel like it was about you? Do you feel like you are generating a lot of revenue but are not moving forward as fast as you would like?
[00:14:34] Midroll: Do you feel you should be making more progress toward your financial goals? Do you feel stuck? Let us help you get unstuck. Are you ready to take action and get your own private bank? Please visit us at www.privatebankingstrategies.com.
[00:14:54] Seth Hicks Esq.: But how does a family report to one another? How do they periodically.
[00:14:59] Seth Hicks Esq.: [00:15:00] Check in. What, do you have any framework or guidelines for folks on that? Like how often should we review loans?
[00:15:07] Vance Lowe: You know, the rule of thumb that seems to be very successful is that all loans are reviewed every 90 days, quarterly, you know, if everything’s normal, the second a payment goes beyond the late period.
[00:15:21] Vance Lowe: And it’s missed. Then you’re all over on that loan to try to figure out why was it forgotten? You know, was it set up in bill pay but didn’t actually get there? You know, is something happening? Has the earnings changed? Are the funds there to be paid or not? The faster you get on a loan that misses its first payment, the easier it is to steer the ship to correct and minimize the loss.
[00:15:45] Vance Lowe: So we need to find out the reason. One of the biggest reasons is people being laid off at work. They have a system set up, they feel absolutely secure. Everything’s fine, and through some fault not of their own. They [00:16:00] no longer have the income to make that payment. This is where the family bank can come in and help shield that because since the loan is controlled, it can be refinanced.
[00:16:12] Vance Lowe: That loan. Payments can be postponed for six months. That doesn’t mean the interest doesn’t start. It keeps going every single month, and that will mount up in the loan and that person will be responsible for that payment, but it could be totally restructured and, and drawn out and, and have a much lower payment to meet the needs of a person if it’s an accident.
[00:16:34] Vance Lowe: It can be postponed till they get back on their feet. Resources could be located, found, or whatever else. What are the options? So you start that. You don’t wait for several months. You start that process early. You know, that introduces what’s called collateral. What type of loan should a family bank be doing, and what can they absorb?
[00:16:54] Vance Lowe: Is the criteria that we should consider. If we’re gonna do a used car loan, we shouldn’t be [00:17:00] doing. Car loans on new vehicles because of the depreciation, our banks are not large enough to absorb the depreciation. If that car immediately goes out and gets in an accident or it defaults, there’s no collateral there to assure that loan will be paid off.
[00:17:18] Vance Lowe: If we finance or if we purchase existing loans, say in the back half of the loan. Period process on a five year loan, if we pick up a loan two and a half years or less, that is very profitable. There is equity in the car. That car itself could be sold and that loan could be paid off if it had to be that.
[00:17:39] Vance Lowe: If it’s the fault. Of the borrower, if they caused being terminated, for instance, they got into drugs or you know, they just mouthed off or something. They got lazy and decided to quit and thinking they can, you know, make the family bank pay because they’re mad at the family. A car would be immediately repossessed before the second payment [00:18:00] is ready, if it’s determined that that can’t be made up.
[00:18:03] Seth Hicks Esq.: So yeah, regular review of outstanding loans and making sure cash flow is on time and in place. And we’ve talked about. A family bank. The gentleman since passed, but he had two older daughters that as he began to expand his policies and they had over a hundred life insurance policies, none of which were on him because he was uninsurable, but on family members and business partners, that the capitalization of their bank became so large that they simply began making hard money loans.
[00:18:36] Seth Hicks Esq.: Party private loans, and that’s all these two siblings did was run the bank, underwrite banking, document banking, enforce compliance, and then taking back collateral if necessary. And so they basically became. Private money lenders through their own family bank. We’re we’re talking about small potatoes, so to speak in some of our examples, [00:19:00] but that particular operation, they were lending tens of millions of dollars, and so there was secured transactions, collateral.
[00:19:08] Seth Hicks Esq.: If they’re making real estate loans, they will. Foreclose and take the property back.
[00:19:13] Vance Lowe: You know what’s funny? The people you’re talking about was one of the people that trained me. He started off as a farmer’s agent, and this was occurring 25 years into the plan. They were into the. Hundred of millions of dollars, not hundreds of millions.
[00:19:30] Vance Lowe: I mean the millions of dollars out in loans, hundreds of thousands in payments coming in every month. And it took these two, they worked out it full time. They had third party loans. He owned interest in one of the major hotels on Las Vegas, strip and lent to dentists and chiropractors and. He had a collection squad he used to tease about if they wouldn’t make their payments, he uh, would have Guido go visit them.
[00:19:57] Vance Lowe: And it’s all part of a policy and procedure ’cause you [00:20:00] can’t not get your money back. The bank fails if you do that, you’ve gotta always know that that money’s coming back and take steps to make that happen.
[00:20:08] Seth Hicks Esq.: So it’s important when you’re running your initial structures and you’re making loans to your children or to your grandchildren, that they understand the stewardship expectations, that this is a, an arm’s length contractual.
[00:20:22] Seth Hicks Esq.: Arrangement and agreement, and just because their blood relationship doesn’t change the terms of the bank, that’s what secures everybody. That’s what secures the children and the grandchildren and the greater whole is you don’t bend rules for. One person and you’ve talked about, well, okay, we, you analyzed various life situations.
[00:20:45] Seth Hicks Esq.: There’s ability to modify the loans and create a different repayment schedule whereby they’re still participating and it’s effectively a loan modification. And that’s not defaulting and that’s not poor stewardship. That’s actually [00:21:00] good fiscal stewardship and it shows the effort and not every sibling will borrow or repay with the same amounts.
[00:21:09] Vance Lowe: Right. It’s the incentive of a private family bank. If, if we want an incentive, yes, we’ll take advantage of the incentive. It’s because everybody cares about it. It’s family. Family works with family. If it’s, you know, an unforeseeable situation, we can restructure a loan if we need to. Where on the outside they’ll laugh at you.
[00:21:30] Vance Lowe: Oh, you had got in a car accident. You still have one good leg, can’t you go back to work? ’cause we’re not gonna change the payment. You default. We take the car where in a family bank we can work with that. We can figure out a loan to keep the money working and know that it’s going to come back in eventually.
[00:21:46] Vance Lowe: That’s what we care about. We care that the money is working. The volume of return is what it’s called. The payments are always coming back and so. Yes, that all has to be reported. All that has to be up [00:22:00] in a family council. If there is a loan and it’s set up and definitely something can’t happen, then there are consequences.
[00:22:07] Vance Lowe: The benefits also are, hey, you know, you finish paying off your loan. You make equity, earn equity in the family bank. A portion of that interest earned in the bank can be ownership for you as you’re working up the ladder. So there’s all kind of great ties by participating and fulfilling the obligations inside of a family bank.
[00:22:29] Vance Lowe: It makes the bank very prosperous and we all share in that prosperity.
[00:22:34] Seth Hicks Esq.: And that’s why we’ve talked about, I, I describe it as following the lines that are on the road. You know where to drive, you know where to stop, you know what the speed limits are. That’s called stewardship. You have the accountability and the transparency.
[00:22:49] Seth Hicks Esq.: Everybody knows what they’re dealing with. Everybody knows what they have access to and the reality of it. Some siblings might say, well, I’m the firstborn and I, I get this. [00:23:00] It’s my inheritance and this is mine. And have entitlement mentalities sometimes. And look, you’re gonna be in a foxhole with somebody before this life is over, whether you choose to go into business and you’re going to have alliances and.
[00:23:16] Seth Hicks Esq.: People that are in your foxhole and people that aren’t in your foxhole. And I have found that it’s better to have your own family and blood in your foxhole than others. And so this creates a system for family and blood relationship to create something that most people don’t have in our country. That most people are living paycheck to paycheck, they’re beholden to the third party banks, and he who holds the gold makes the rules, so they have to go.
[00:23:44] Seth Hicks Esq.: Begged Wells Fargo and Bank of America for money. We’re talking about a system that’s outside of that worldly system. It’s your own family banking system, and it allows you and empowers you to do the same things that you can do anywhere else [00:24:00] in the world, except without the strings and without lying prostrate before Wells Fargo begging them for money.
[00:24:07] Vance Lowe: And it’s all about having money working for you instead of money working for someone else, and you’re trying to get an interest rate, and you’re taking all the risk in a family bank. Your money is working for you. You’re making the profits. You’re making the interest and the earnings. So do it right.
[00:24:24] Vance Lowe: Treat this best, most lucrative asset. It really is. There’s nothing better than it. In the world. There’s nothing more lucrative than a lending company that’s profitable,
[00:24:36] Seth Hicks Esq.: and that’s why we have to have smart risk framework, and we have to have the things that we’ve talked about in the past few episodes that protect the decision making process for the family.
[00:24:48] Seth Hicks Esq.: Everybody knows the rules. Everybody knows that there’s stewardship and expectations for repayment. It ensures that your capital in the family bank is deployed [00:25:00] in. Smart frameworks. We’re not blowing money on speculative things. We’re not blowing money on emotional, I gotta have this. We’re not blowing money on things that just depreciate right When they roll off the lot like a brand, you know, Ferrari, and that protects the entire system.
[00:25:16] Seth Hicks Esq.: So there is an element of the greater good. You don’t get to make your own rules because you’re the firstborn son or because you’re the favored daughter. The rules apply to everyone in the family banking system, and whoever sets the family bank up dictates that. That’s what people come into. When families use the smart risk framework, they apply these principles.
[00:25:39] Seth Hicks Esq.: The capital becomes like a fortress. It’s a fortress that can pro provide strong and safe capital when it’s needed. People don’t realize what a value that is having dry powder ready.
[00:25:52] Vance Lowe: And it, you know, Nelson nails it in his book. It’s the golden rule. He who has the gold makes the [00:26:00] rules and it’s the power behind the family.
[00:26:02] Vance Lowe: It’s, it’s the solvency, it’s the feeling of wellbeing, of security. And it is a fortress, the way it’s set up can’t be a breach. They can’t come in and rob your bank, so to speak, because you know the money’s in very, very safe hands and, and you know where it should be in these contracts. So that’s why we do this.
[00:26:24] Vance Lowe: That’s, that’s the whole purpose of the paperwork and the procedures structure and the discipline for following this people. Please do that. Don’t cut corners because you are only hurting yourself.
[00:26:36] Seth Hicks Esq.: That’s right. Yeah. And folks, if you like what we’re talking about and you wanna learn more, go to our website@privatebankingstrategies.com.
[00:26:44] Seth Hicks Esq.: It’s private banking strategies.com. And there you’ll get an option to sign up for our weekly emails and we’ll announce our podcast that are upcoming and we’ll continue to teach you on how to create and operate. [00:27:00] A family bank, but you’ll also have the opportunity to read through a book that Vance and I published that is called Secrets the Banks Don’t Want You to Know.
[00:27:09] Seth Hicks Esq.: And that book is something that will red pill you to various issues in the banking industry and provide a great value and understanding how to get outside of traditional lending lanes and begin to start your own private bank. But even more importantly than that, you’re going to have, through those emails, access to Vance’s calendar, which only come through those emails, and there you can schedule an exploratory call with Vance.
[00:27:33] Seth Hicks Esq.: Tell folks what the exploratory call is.
[00:27:36] Vance Lowe: What we try to do is get people prepared to actually take the strategy, the whole banking strategy for a test drive. We use your numbers and then we show you simply, we get you ready. We get your mind, “in the ballpark.” So, you’re asking questions that pertain to the strategy and you, and you can see the difference right off the bat and you’ll know.
[00:27:58] Vance Lowe: In our [00:28:00] presentation meeting by the end of it, Hey, I want in or I want out. Just like a test drive with a car. You know, if you want that car or you don’t. So that’s what we try to do. We offer that to everybody that’s on us, and we hope everyone that hears this and thinks that the strategy might work for them, you know, do yourself an advantage and take some time and take a look at it.
[00:28:23] Vance Lowe: At least read our book because I think that’ll introduce the concept.
[00:28:27] Seth Hicks Esq.: Absolutely. Well folks, thanks for joining us on this podcast and we look forward to having you back on the next one, and we’ll see you then.
[00:28:35] Vance Lowe: Thanks very much.
[00:28:37] Outro: Did that story feel like it was about you? Do you feel you should be making more progress toward your financial goals?
[00:28:45] Outro: Do you feel stuck? Let us help you get unstuck. Are you ready to take action and get your own private bank? Please visit us at www.privatebankingstrategies.com. [00:29:00]
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