[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.
[00:00:38] Seth Hicks Esq.: Hello and welcome to Private Banking Strategies Podcast with Vance Lowe and Seth Hicks.
[00:00:42] Seth Hicks Esq.: How are you?
[00:00:43] Vance Lowe: I’m doing great and I’m anxious to continue on our discussion from our last podcast.
[00:00:50] Seth Hicks Esq.: We’ve been talking about the smart risk framework and how families make wise decisions and how important that is in building a successful private bank. We talked a little [00:01:00] bit in the last episode Vance, about the purpose of a smart risk framework to avoid speculation and emotional decision making to protect your capital, ensure liquidity when the right opportunities come along.
[00:01:14] Seth Hicks Esq.: And we talked about some risk filters and we were, we were in the midst of discussing risk filters like cash flow support, and capital protection. Let’s dive into the next leg of our smart risk filters, competence and experience. When you’re deploying your banking capital, you want to make sure that it’s in your lane.
[00:01:33] Seth Hicks Esq.: I like to say, and I’ve come to learn over my short life that every man is a fool. More things than they’re an expert at. If you’re wanting to ensure competence and experience as you deploy capital, you need to make sure that you are competent.
[00:01:49] Vance Lowe: Everyone that has a little bit of entrepreneur blood in them thinks that they can start their own company and be successful at it.
[00:01:58] Vance Lowe: The shocking truths [00:02:00] are for 10 businesses that start up this year. Five of them will be gone in five years, but the sad truth is four more will be gone. In the next five years, only one out of 10 actually succeed and make it. So the pessimist is gonna say, well, gosh, you know, it’s the, I don’t wanna take that risk.
[00:02:20] Vance Lowe: And the entrepreneur say, you mean I only have to start 10 businesses and one will succeed? That’s the optimist. Okay. But what we’re talking about here is know your limits, know what your capacity is, know where, what you’re trying to do in, in banking and in loans. You know, there’s always a loan committee when applications come in and a loan is applied for, there’s a committee of heads and they’re of all different makeup industry, sales, media, whatever else.
[00:02:51] Vance Lowe: These come into these meetings, these approval meetings, and they talk about the loan, and they go over a whole bunch of criteria to see if this is [00:03:00] a profitable or an acceptable loan. And so the competence has to be there. Do these guys know? What they’re doing, let’s take a look at their five-year plan.
[00:03:10] Vance Lowe: When I say that, everybody looks at me like a deer in headlights. What’s a five year plan? You know, they haven’t got anything thought out. Well, do you have a one year plan? Well, I’ve got some math and some notes and some numbers, and this is what I think it will happen, and we see very quickly where the competence is, whether there is any or not.
[00:03:31] Vance Lowe: And so this is what we’re talking about here when it’s coming in for putting your money to work. Do we know what we’re doing? Is it going to succeed? Is it gonna make the a borrower better off? And is it gonna make the bank and the investors of the bank. Family better off. So we have to do that. The experience also comes in many times.
[00:03:53] Vance Lowe: It’s a brand new idea. You know, it’s a franchise. Somebody talked them into opening up a ice cream store or [00:04:00] whatever it might be, and they want to go do that because, you know, they’ve swallowed all the, the hype and everything, but they don’t have any experience at it. So when it comes to hiring people and managing and doing the books, the inventory, the supplies, they don’t have any, they have no clue.
[00:04:17] Vance Lowe: What’s the learning curve? So number three is pretty darn important when it comes to whether you’re gonna set up a situation for success or an automatic situation for failure.
[00:04:29] Seth Hicks Esq.: And a lot of our clients are already established. They have family offices, they have core competencies and experience and expertise that they know how to run in their lane.
[00:04:40] Seth Hicks Esq.: For instance, we have numerous successful real estate investors all the way from. Mom and pop own duplexes too. Large, large developers with tens of millions of dollars in their wealth structure. And one of the common denominators, whether it’s real estate or whether it’s a [00:05:00] franchise, a coffee shop, whatever, that people have a core competency and expertise in, that’s where they can deploy capital wisely in a smart risk framework.
[00:05:10] Seth Hicks Esq.: And not to say that every opportunity that is unknown to someone should be passed, but that’s. Part of what the smart risk framework does is it, it actually brings those checks and balances in from other family members that create deployment opportunities that are in line with the family mission. It’s not, you know, they’re not deploying capital for get rich quick schemes, or the guy who’s gonna take over a multimillion dollar welding company doesn’t know how to weld.
[00:05:39] Seth Hicks Esq.: Maybe that’s the case if he’s the CEO and has managers that know maybe it could be, but those checks and balances prevent speculative investments, emotional decisions, lifestyle issues. I mean, how many times is it when patriarchs and matriarchs pass and there’s death benefit that flows to the next generation and they want to buy [00:06:00] Lamborghinis?
[00:06:00] Seth Hicks Esq.: Having a smart risk framework and your your private family bank structure in place, with the missions already set in place by the matriarch and patriarch, those things don’t come into play. We drive in between the lines. These are the lines, these are the rules of the road, and that helps people avoid those mistakes that commonly happen to folks where money’s just put in their lap.
[00:06:22] Vance Lowe: That reminds me of a rule that we used to teach to clients, especially back in that money management game as well as here. We all have mentors, we all have professionals that we go to. And Seth, you’ve had to correct me several times when it comes to points of law, because of this very thing, we trust somebody explicitly, they’ve helped us out.
[00:06:46] Vance Lowe: A good CPA, a good attorney, a good whatever. And we go to them and ask them for advice on a topic that is not their expertise. That’s where we get into [00:07:00] trouble. We all think, yeah. Let me give you some really good typical examples that I have faced and have, has caused disaster time and time again going to a CPA to get tax strategy advice.
[00:07:13] Vance Lowe: A CPA is not a tax strategist, never was, never will be. They just prepare forms. They work for the IRS, but yet we ask them questions, how can I pay less in taxes here and there? And they can say a few things, and half the time, 50% of the time it’s, it’s worse. Especially when they’re talking about. ERISA programs qualified because that’s what they’ll put you into and the money’s tied up and more taxes and more everything to try to avoid a small percentage of taxes today.
[00:07:43] Vance Lowe: The other group might be, and I don’t mean to pick on ’em, because I think the, the expertise is absolutely needed. I have needed it throughout my life, but that is surgeons, doctors, technical fielded professionals who make a tremendous amount of money for the hours that they work. [00:08:00] When they go into investment, I think it’s the main group that lose the most money because they’re not prepared.
[00:08:05] Vance Lowe: They don’t go in and they’re taking advice from someone else. They’re making a tremendous amount of money, and so they have a false sense of security. Seth, we’ve got clients that have done this. They think what they do is good. They listen to advice, and then they’ll listen to the opposite advice and they’ll take the one that is, is a little more greedy.
[00:08:24] Vance Lowe: I think whatever it is, and the asset management side for that professional group is woefully insufficient. So we need to make sure the competence is there, the expertise is there, that it is real. It isn’t fictitious. It’s another issue. Sometimes we ourselves think we’re better at something. Think we can do something when we really can’t and we’ll prove it to most people.
[00:08:50] Vance Lowe: A lot of us think we really know how money works. It’s easy to get in there and people just sit back and are in awe that I had no idea. [00:09:00] I had no idea this is the way money’s made. I thought it was about interest rates. Everybody thinks it’s about interest rates. I thought I had my money to work. It really is asleep for me, isn’t it?
[00:09:11] Vance Lowe: So there’s a lot of things that we have to do, and you can’t do a legitimate loan and not have that experience and that competence because you’re not gonna get the money back unless you’ve got really good collateral,
[00:09:24] Seth Hicks Esq.: right? And that’s, I think, that’s where the checks and balances come in. When there’s a structure in place, you’re gonna avoid risky business.
[00:09:31] Seth Hicks Esq.: You’re gonna avoid risky endeavors that you may not have. The ability to pull off and other people looking into the process are gonna be able to have decision making authority in that process. So you are submitting yourself to a family banking economy and family banking rule about how your family deploys capital.
[00:09:53] Seth Hicks Esq.: And everyone may not have the exact same ideas about that, and that’s fine. And if you don’t. Want to [00:10:00] use the family bank capital, go do it your way. It’s not a bad word or a sin, but that’s how you preserve the family bank.
[00:10:08] 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?
[00:10:18] 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.
[00:10:38] Vance Lowe: The family bank is the safe haven folks, right? Every procedure, everything you’re thinking of about here builds the bank.
[00:10:46] Vance Lowe: It doesn’t shrink it. We can’t afford to have it shrink. We have to have those doublings. We have to have those things. So mentorship isn’t. Important. Hey, can I do this loan in the family bank? Well, let’s take a look at it. Are we prepared or are we not? You [00:11:00] know, we really can’t, you probably ought to do this on the outside if you can’t and, and, and have the family accept that, okay, we went to the committee.
[00:11:07] Vance Lowe: It’s just not what the family bank can absorb at this time. You’re trying to buy a new car and there’s no. Equity in the car if you should not be able to work and we can’t absorb that, or the home is too big, you, you’d be so darn tight. What would, what would happen if you lose your job? You don’t have the assets to back that up.
[00:11:25] Vance Lowe: You don’t have this or that. So the family bank needs to pass on that. So the family bank might also specialize in a certain class of assets, so to speak. Hey, we’re really good at this. This is our heritage. You know, they’re really good at it, you know, they touch it. They know how to do it. If nephew doesn’t, the expertise is in the family.
[00:11:45] Vance Lowe: Hey, I found this place. Help me out here. Is this something that would be a good idea? It’s specializing. It’s not a jack of all trades. So those are the, I think the main key components for competence and [00:12:00] experience that is necessary components inside a successful operation on a private family banking system.
[00:12:09] Vance Lowe: What’s the next thing? I think we go to Seth.
[00:12:11] Seth Hicks Esq.: Well, you have to have worst case scenarios, downside planning and investments have a stop loss, so to speak, an exit plan. Stress tested numbers many moons ago, and it seems like a prior lifetime, I was heavily involved in real estate and one of my friends and partners was much more seasoned in that.
[00:12:34] Seth Hicks Esq.: Real estate investment. So I had sent him some numbers and spreadsheets on some investment properties that already owned, and he looked through my numbers and he says, yeah, that’s, it’s pretty good, but your, your vacancy rates are not high enough. Your make readys and repairs on tenant turnovers are not high enough.
[00:12:55] Seth Hicks Esq.: Your management fees and screw ups and poor management is not [00:13:00] have a high enough margin. And I said, okay, thank you. And then I said, no, my numbers are right on. And they weren’t even close to right on. There were higher vacancies, there was massive make ready costs that obliterated months of profit When tenants tore up properties, there was all.
[00:13:18] Seth Hicks Esq.: In consuming tax battles with reassessment of values in this particular state every year at Texas, they reassess property values every year and on investment properties. They can suck the profit and the equity out in one year, and that’s exactly what happened. And so all the numbers in the financial planning were too rosy.
[00:13:41] Seth Hicks Esq.: There was a rosy perfect projection that I made and he now owns like 5,000 apartment doors. It’s very successful at real estate investment and numbers, and I would’ve been better off having a different forecast. I don’t know that it would’ve necessarily made a huge difference, but the point is competency and [00:14:00] mentorship and new endeavors, even when you think that you’re pretty good at it, is always something you should consider.
[00:14:06] Seth Hicks Esq.: And with a family, for example, that is successful in real estate, there’s gonna be multiple people at the table that have wise minds. And we have numerous clients like that that have family offices in various disciplines, and that’s where we see the most success. So, but downside planning, being able to understand, hey, these numbers are not working.
[00:14:28] Seth Hicks Esq.: We need to readjust, recalculate, remanage, or perhaps exit completely. Are you gonna be able to weather depreciation cycles, things like that. Fallback on repayment of debt, protective buffers.
[00:14:41] Vance Lowe: The reason I think I was successful to whatever I did in real estate, I think I owed to him. He was actually a banker, but he was in charge of the real estate portfolios.
[00:14:53] Vance Lowe: So he was an expert on that end, and he didn’t force anything on me. He would let me kind of [00:15:00] decide what I wanted to do, like when I got married. Where we were gonna live first, and I gave him an idea and he would come back and said, okay, I like that idea, but maybe look at it this way. So we actually bought a home just before we got married.
[00:15:15] Vance Lowe: Most people can’t do that, but it was just a little home. Back then it was, we bought the whole house for $20,000. He bought that home and he set up a refinancing for us, and then we moved from there to a duplex. You know, we outgrew that. We started having kids and he said, well, give me a plan. And I did.
[00:15:34] Vance Lowe: And then he would take a look at it. What I’m talking about is. He had the expertise to take a look at it and refine it. But then on the downside, this is where I really learned the lessons. Just like you said, he knew when to pull the plug. He said, oh, we bought some land in in a town. He said, this is a great opportunity.
[00:15:53] Vance Lowe: I think the development will grow like this. We have to hold onto this land for X amount of time. And so I bought 20 [00:16:00] acres. Of land and I made payments to him for 10 plus years, and all of a sudden he came back one time and said, they’ve moved a different direction. We need to sell the land, and if we sell the land, we can get at least every payment we’ve made back out of it with the interest.
[00:16:17] Vance Lowe: And so we did. I tried to get into a, another piece of property to build a house. I decided not to build a house, and the land was about to foreclose because I didn’t keep payments on it. And I learned another lesson that I couldn’t expand myself too much if I didn’t have the capacity to make the payments.
[00:16:36] Vance Lowe: So you’ve got to have that downside planning. You’ve got to know when to pull the plug and if you’re gonna be a bank that this is why they come in a lot faster than people want them to. They shut a loan down far faster than, well, give me a little more time. Give me this, give me that. No, because of the collateral.
[00:16:54] Vance Lowe: Okay. They need to make sure that they’re not jeopardizing any bank asset, any of the, any of [00:17:00] the loan proceeds, and they don’t, banks don’t lose money even on default loans. So, great downside, I guess you could call that your exit strategy. When somebody says stress tested numbers, what does that mean, Seth?
[00:17:13] Seth Hicks Esq.: Well, it’s like I was describing in my spreadsheets with my friend and senior real estate investor, it’s like, your vacancy rates are too low. I may have had 10% vacancy rate, and I thought, well, I’ve got great tenants. They’re never gonna turn over. And six months later there’s a default and that one leaves and you’ve got tons of turnover.
[00:17:33] Seth Hicks Esq.: And then when they turn it over, they destroy things. And then you’ve got some that don’t wanna leave and you’ve gotta evict. Them, and it’s like all the numbers need to be stress tested. You cannot create a rosy picture for yourself and go, everything’s just gonna go perfect. You have to have a continuum and worst case scenarios, and that’s what stress tested numbers mean.
[00:17:55] Vance Lowe: You really do, and then you should also have a fallback repayment [00:18:00] strategy. Ideally, if I have some real estate and it’s income property and if things go wrong, if things go to my worst case scenario, the income doesn’t come in, what resources could I turn over to make those payments? So there’s a fallback, or if there’s absolutely nothing, then the decision has to be made accordingly because of that.
[00:18:22] Seth Hicks Esq.: Well, and if real estate context, I think healthy loan to value ratios with your private bank, you would take the asset back, sell it, and the loan would be made whole plus probably. But that’s if you’ve got the proper loan to value ratios. And I learned in real estate investment that tenants can destroy properties.
[00:18:44] Seth Hicks Esq.: Literally destroy years of profit with ne neglect and just problems of, you know, there’s so many different angles we’re talking about, like mom and pop, real estate investment as opposed to like buying large tracks of land and building infrastructure and [00:19:00] selling lots, being developers. And so. We’re trying to give you like simple examples for the common people, but the same principles apply no matter what your sophistication is.
[00:19:12] Seth Hicks Esq.: And I think it bears repetition in mentioning that you said, well, we’ve got very smart people, like a surgeon for example, and they’re very good at what they do. They make a lot of money, and then they have a financial advisor. They have some, you know, body bring them opportunities and they deploy capital outside their skillset, their expertise, and.
[00:19:32] Seth Hicks Esq.: Many times might fail, so many times don’t. But that’s something that with other smart inquiring minds at the table, you, even if you’re a surgeon, you can have mentorship in real estate, for example, or mentorship in banking with private banking strategies, for example. Or I’ve, I’ve got a good friend who’s a surgeon and he can build almost anything.
[00:19:56] Seth Hicks Esq.: It’s kinda like you, I mean, you’re like a master woods [00:20:00] craftsman, and no one would know. But we all have our expertise. If I were gonna build something by wood, I would want you looking over my shoulder.
[00:20:07] Vance Lowe: I, I’ve watched a surgeon stay in his field. I was introduced to him because, you know, I had to have back surgery.
[00:20:14] Vance Lowe: But I watched him through the years build his office, his clinic, very, very successful surgeon, top surgeon in the United States. But he parlayed that, go to the hospitals, you know, and use. The surgical tables and all that, and I guess he’s charged X amount or or whatever else. So he decided to buy the hospital.
[00:20:34] Vance Lowe: The next thing he did, all of his patients needed drugs, pain medication, whatever else. So he bought the pharmacy, he bought the building that he is his offices in. And I, I would say I’ve known him for maybe 25 years. Multimillionaire. Over each operation he does, and I think he does probably five operations a week on two different days, five or six, a hundred and twenty [00:21:00] five to $150,000 surgeon fee for each one of those operations.
[00:21:04] Vance Lowe: So he makes that good income, but he’s got profit coming in everywhere. So it was the. Ability to stay within one’s own expertise and not have to rely on someone else. He just knew the hospitals, he just knew the pharmaceutical, all of this stuff. So they did that. They stayed within their realm. I don’t know if he’s had any non successes or not.
[00:21:28] Vance Lowe: I’m sure he has, you know, but I think that’s a success. I don’t know how far he is going. He’s over 65 now. He doesn’t plan on retiring. He loves what he does. He’s very fit and strong, and. We got a great family. So
[00:21:42] Seth Hicks Esq.: yeah, in that process he used other experts and people in their fields and did the homework to succeed, but was in his vertical of the medical offices.
[00:21:53] Seth Hicks Esq.: Medical facilities, medical services, which he understood very well. And so in that regard, he’s [00:22:00] staying within his medical vertical. He’s not trying to go build housing developments.
[00:22:04] Vance Lowe: No. It’s just whatever will enhance his profession.
[00:22:08] Seth Hicks Esq.: Right.
[00:22:08] Vance Lowe: I see. It’s all around what he does and it boosts his profit margin way up.
[00:22:15] Vance Lowe: So he doesn’t run any of that. Everyone else does. So I guess the profits up or down based on the management success, but he’s kind of owns. Things,
[00:22:24] Seth Hicks Esq.: right? And that creates the opportunities being reciprocal and cyclical in a real estate context. It’s like having a parcel of land with a few anchors and a restaurant and you owning all of it.
[00:22:36] Seth Hicks Esq.: And the people who go shopping get the food and get the gas, and they spend money all in that same location, which. You know, you try to streamline your ownership. So if you guys are enjoying what we’re talking about, go to our website, private banking strategies.com. It’s private banking strategies.com, and we’ve got a book there that we’d like to offer you.
[00:22:57] Seth Hicks Esq.: And you can have the book in PDF or [00:23:00] audio version. It’s called Secrets. The Banks Don’t Want You to know. That will help you grow wealthy and we red pill a number of issues. That book is something that resonates with you and this podcast is something that’s making sense to you. Put your name and email in and you’ll have an opportunity to schedule a call with Vance and go on an exploratory call journey.
[00:23:21] Seth Hicks Esq.: What’s the exploratory call like Vance?
[00:23:24] Vance Lowe: We call it a test drive. We want to get you prepared right up front. We’re gonna ask for a few numbers. Ask a bunch of questions, and if you’ll put your numbers in, at least ballpark them to where they’re fairly accurate, you’ll get a more accurate outcome, of course.
[00:23:39] Vance Lowe: But we want to show you the difference of staying the way you are versus switching to your own private banking strategy month by month over an eight year period of time. We’re not gonna introduce growth, we’re not gonna introduce any assumptions. We’re just going to do the math and the comparison. The difference will be.
[00:23:57] Vance Lowe: What is the difference of spending my money and [00:24:00] having to go back to work to replace it and do it again versus using my money and getting it back and bringing new money in? Which do you think would be the better result? So we have a lot of fun doing that. That’s why I do this. It makes people understand what money really is.
[00:24:16] Vance Lowe: Our clients always win when they follow the process. They always win.
[00:24:22] Seth Hicks Esq.: That’s awesome. Well, thanks for joining us on this podcast, folks, and we hope you join us again next time.
[00:24:27] Vance Lowe: Thank you very much.
[00:24:28] Outro: Did that story feel like it was about you? Do you feel you should be making more progress toward your financial goals?
[00:24:36] 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.
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