Why do so few people become millionaires? It’s because they don’t know how. They don’t know what to do, and no one is talking in common sense. They’re talking in big terms, and why don’t the wealthy come back and never help the kind of younger middle guy? I don’t know. That’s why I’ve been doing this for decades.
What is wealth management? Here’s a few “technical terms.” So, private banking is usually for high-network individuals. What qualifies you as high-net worth? To be accredited, you have to make $250,000 in the last two years of tax returns, or $350,000 as a couple, or a millionaire, and that allows you, in America, to invest in any alternatives. Any PPM, any private placement memorandum.
Just because you have money, doesn’t mean you’re smart with money. There’s a lot of people who know how to make it. They don’t know how to invest it or keep it. So, just because you’re accredited because of your income levels, doesn’t mean you actually know how to invest your money. Hence, people go and park their money, and pray that someone does something with it. And they put you into a little software program, and it comes out in a little pie chart, and you’re going to make the most during your earning years, and then you’re going to make less as you get older.
Fascinating model. Not what I’m interested in. I want to make a lot and I want to have generational wealth. I want to pass it on to my children, and I want you to have a better life, as you are growing through this, and you can.
Private banking is everywhere, most banks have a private section, and it’s for high-net worth people. So, just go in and have a conversation. What does it take? What are the minimum requirements to be in the private banking side of the bank? And there are a variety of qualifications, depending on the banks, depending on what they invest in. if they’re heavily insurance-based or real estate-based, and how they invest themselves as a bank.
Wealth management firms are designed with security-licensed individuals to give you advice. Now that means park and pray. You’re going to hand them some money, they’re going to take fees and commissions. Most of them are undisclosed to the 17th page. Is that really what you want? Now, most people have portions of their wealth in a wealth management company, which I’m totally fine with.
So, notice that the common theme with all of this is, you don’t make enough money. If three percent is a hundred thousand dollars of income, you’re not even close to being able to be accredited. I want you to think about making more money. Put it inside corporate structures where you have the 81,000 pages of deductions.
Having a relationship with your bank, and I’m talking local private banks, and when I say they hold their own assets. The bank that I did this with, actually held the mortgage to my conference facility, and my real estate that I had when I was in northern California. So, there are local, they’re smaller banks. They hold their assets. They actually are where you get your mortgages from. And they don’t sell it away to Wall Street. So, they’re very heavy asset-based banks.
I went in knowing the bank structure. So, it’s a 10X, meaning, if you put in a hundred thousand dollars of deposits, they can reach up and go get a million dollars to loan out on personal loans, commercial loans, whatever they want to do with it. They make the spread. You don’t get a dime.
When you move to private banking, you’ll have opportunities to invest in a higher return, you know vehicles and different products, and things like that. But knowing the banking system has that, and when I’m done with you, I want to make you a millionaire. So, let’s just say you made a million. Well, now, you’ve given the bank the right to go up and get ten million dollars that they can loan out. That’s how banks work. They arbitrage the spread of deposits to what they can pull from the central bank.
So, knowing that, you need a relationship with the banker. I had a relationship with the president of the bank. It was a very small bank, and he knew me well. He knew me when I started, and I told him I was going to be a millionaire one day. He kind of giggled, and then I was and I am. And so, I went in, and I gave him a spread sheet one day and said, “So, here’s my spreadsheet. How much should I put in your bank, and how much I’ve helped you make. It’s time we have a relationship that’s mutual, which means I want to go buy a laundromat, it’s two hundred thousand dollars, and I want it for zero percent.”
So, they came back after they went to their committee and gave me a two percent loan on $200,000 in the bank. I said, “I know, but I’m using that to go make a bigger return, and I want to use your money to go buy a laundromat. I’m going to rehab it. I’m going to flip it. I’m going to sell it. I’m going to give you back your $200,000 and your 2 percent interest that I had the whole time, and I’m going to make the spread.”
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