A different view of financing for your future

Dec. 20, 2010

By Dr. Andrew M. Goldsmith

According to FBI records, on February 15, 1933, “Slick Willie” Sutton and a confederate attempted to rob the Corn Exchange Bank and Trust Company in Philadelphia, Pennsylvania. Sutton, disguised as a mailman, entered the bank early in the morning. Unfortunately for Willie, the curiosity of a passerby caused the robbery attempt to be abandoned.

However, 11 months later, on January 15, 1934, Sutton entered the same bank with two companions through a skylight. When the watchman arrived, they forced him to admit the employees as usual. Each employee was handcuffed and crowded into a small room and Sutton made off with the loot.

Sutton was an accomplished bank robber. He usually carried a pistol or a Thompson submachine gun. “You can’t rob a bank on charm and personality,” he once observed. In an interview in the Reader’s Digest published shortly before his death, Sutton was asked if the guns that he used in robberies were loaded. He responded that he never carried a loaded gun because somebody might get hurt. He stole from the rich and kept it, though public opinion later turned him into a perverse type of Robin Hood figure. He allegedly never robbed a bank when a woman screamed or a baby cried. It is estimated that Willie Sutton stole perhaps $2 million in his career, and spent more than half his adult life in prison. When asked why he robbed banks, Sutton simply replied, “Because that’s where the money is.”

The bank is where the money is. We all use banks and continue to make deposits and withdrawals. The banking and finance industry has received a lot of attention lately. According to the International Banking Society, the public perception of commercial banks is that they are a failing industry.

The reality is that the banking system is much more complex than what we hear about on the evening news. In fact, banking and finance are among the best business models. Many individuals, families, and institutions have generated fortunes through banking. Take for example the Rothschild family. Currently, it is estimated that their net worth is somewhere between 100-300 trillion dollars, and it all started with a family bank.

This article will discuss reasons for establishing your own bank, ways to finance your future, and how to create a legacy for your family. It will provide you with only the basics that will enable you to do all three.

If the Rothschilds’ wealth is in fact in the realm of 100 trillion dollars or more, they would still not be the wealthiest family in the world (that would be the Waltons of Wal-Mart fame), but regardless, they are very wealthy. They have interest in, or own banks, railways, mines, finance companies, oil, diamonds (DeBeers), gold, wine, and the Federal Reserve Bank -- yes -- the U.S. Federal Reserve Bank. The Rothschilds’ wealth funded the Suez Canal purchase, the building of London’s “Tube,” and multiple wars including the defeat of Napoleon and the Vietnam conflict.

Interestingly, it all started with a meager beginning in a Frankfurt ghetto. The five Rothschild brothers established small banks in five different European cities. Gradually, they built a banking empire that now spans the entire globe. The Rothschild family continues to teach banking concepts to future generations. Training in banking, finance, and wealth preservation is required for family members in order to acquire an inheritance. Furthermore, the family has agreed to borrow money only from family banks. This family has effectively become their own best customers.

An important thing to remember is that in the banking system, there is only one source of money. Money circulates from banks to lenders, to borrowers, back to banks, and the cycle continues. The obvious objective is to inject you into the equation, not just as a borrower. Substitute your name in front of the bank, and create: “Your Bank.” So, how do you start a bank?

Starting your own bank or becoming a financier is actually quite simple. You have done it before. Whenever you make a purchase, regardless of whether you pay cash or borrow the money, you are financing a deal, and you are paying interest.

I know what you are thinking because I have had this conversation with many of you already. “I pay cash for everything so I don’t pay interest.” Well, Dr. Cash, you are either going to pay interest to somebody else or there is an opportunity lost on investments with that cash. So, what if you could do both, make the purchase and collect interest?

If you were to start financing through your own bank, you would need a safe holding tank for your cash. This holding tank, ideally, would generate its own interest in a tax-free environment and allow you to withdraw and deposit funds whenever you need to. The great news: Such holding tanks have existed for over 200 years and have been used by the Rothschild family, investment banks, and large corporations, and often are products provided by life insurance companies.

Life insurance companies are regulated to maintain cash reserves to cover potential claims. These companies are some of the largest, most profitable companies in the world. Also, very often, they will offer the policy owner a guaranteed rate of return, or a return of premium. Some newer products even include indexed accounts covering U.S. and/or foreign markets.

According to John Bogle, founder of the Vanguard Group, indexed funds are the only way to guarantee your fair share of the market gains. Also, in response to demand, companies now exist that provide a holding tank for your money and can assist you in the financing process.

Regardless of what type of account you use, your money will continue growing. Furthermore, money can move into and out of these accounts. In some instances, you continue to gain interest on the original balance even after you withdraw money. Accountants and attorneys can set up these accounts so that upon death, you can leave a large amount of wealth to help fund a bank for future generations, or a trust to fund a foundation or charity. The point to take home is this: Why generate more wealth for the bank when you can generate more wealth for yourself and your family using existing support systems?

John D. Rockefeller was famous for doing this. Considered the wealthiest American ever, Rockefeller displayed relentless self-discipline in financing. He would never give-up a potential 8% gain to another institution. Instead, he methodically self-financed multiple business deals to ensure that he not only profited from the actual investment but also from the financing as well. If self-financing worked for John D. Rockefeller, doesn’t it make sense that it could work for you?

But once again, I know what you are thinking because I have sat next to many of you at plenty of dental seminars. Remember the talk when the speaker said, “We are dentists and we should do dentistry, not financing”? My question is: What is holding you back? Ok, I get it; it’s the risk, right? Well, what if you could decrease the risk? If the odds were highly weighted in your favor, then I am sure it would be much more appealing.

I understand odds because I grew up in Nevada. Being a young adult in Nevada, I was exposed to all the offerings of the gambling industry. As I am sure you are aware, the odds are stacked against you at the casino. However, if you are going to engage in those activities, it is in your best interest to know the rules of the game and to play the game with the best odds. I found that craps was one of those games with the best odds, but, of course, you can still lose everything playing craps in a short amount of time.

So, imagine if your favorite casino introduced a game where you could gamble $350 and get a potential 40:1 return and, if you lose, they would just return your initial investment. Sounds too good to be true, and I would not expect any such game to appear in Las Vegas soon. But, a properly structured finance deal can be exactly what I described.

Imagine if you perform a service for somebody and you offer your own financing. What are you giving up besides your time and the cost of materials and labor? If the patient covered at least your costs, then you would only be out the time. After that, any other payments are icing on the cake, with interest.

Personally, my concern in dental finance was the collection side of financing. What dental speakers should really be saying to you at dental seminars is that you are a better dentist than collections agent. Fortunately, companies do exist that have the ability for you to outsource this service.

After some research, I found a company called Comprehensive Dental Finance that works exclusively with dentists and for dentists. They handle everything for you on the collection side from A to Z. Because this company handles the entire process, you can focus on dental treatment, and your only potential loss is your time. Providing financing to your patients can provide greater access to care for people everywhere. Also, by self-financing, you benefit from the gain in interest that companies like Chase and families like the Rothschilds and Rockefellers understand.

I started my own “bank” about nine years ago. After only five years, I had already used my family bank to fund the purchase of a car. I invested in my bank for five years and once it had sufficient value, I made a withdrawal, or loan from my bank. With the funds in hand, I paid cash for the vehicle, getting some additional discounts as well. Keep in mind, too, that you do not pay taxes on loans. Then, I put myself on a three-year repayment schedule at 6.9% interest to pay back my loan. Plus, the cash in my banking account continued to grow at a guaranteed rate of 4%, so the money in my bank ended up growing at a 9.9% total interest rate. That’s 9.9% in a bear market when most banks are offering 1% on money market accounts. That is when I started to really see the potential.

The goal of your bank is to raise capital. You could continue to be your own best customer of your bank, but what if you started to provide financing from your bank for your services? As I previously mentioned, the only risk is the loss of your time as long as you can get the patient to pay your costs. What I found is that with a company like Comprehensive Dental Finance, they will prequalify the patient, set up your bank, put your patient on auto-pay, and handle collections. In this scenario, the patient typically repays the loan.

Since we know the downside, what about the upside? Let’s say a patient finances $10,000 worth of treatment with you for periodontal surgery, assuming an overhead of $350. As long as the patient pays their first payment, which most do, your only risk is your time. As long as the patient continues to pay back the loan on a five-year note at 5.9% interest, you end up increasing your net worth by over $11,000 in a separate corporation. That is a great deal and one that a Nevada boy would take all day long.

With dentistry consistently listed in the top earning professions, there is no reason that dentists should ever retire without accumulating massive wealth. Certainly, there is absolutely no reason that any dentist should ever retire in debt. My wish for you is that you research this topic more.

The potential for you to amass a fortune still exists regardless of age or income. You don’t have to be like Willie Sutton and rob banks. Instead, build the bank. The reality is that building wealth through this strategy requires discipline. You have already displayed massive discipline to get where you are in life. So, I encourage you to build your own bank. Build it strong and build it to last.

What you do with your wealth could bless many lives during or after your lifetime. One of the greatest blessings of all is to live your life so that your legacy outlives your life. You already make a tremendous difference in the lives of your patients. Now you have a tool to make a difference in their lives even after you no longer hold a handpiece in your hand. Visit http://goldsmith.cdfinance.net/ and watch the instructional video and sign up for a free webinar to hear more about Comprehensive Dental Finance.

Andrew M. Goldsmith, DDS, FICOI, FIALD, is a partner at Promise Family Dentistry in Colorado Springs, Colo. He is a member of the American Medical Marketing Association and the American Marketing Association. He speaks about marketing and social networking and maintains a Facebook page for dentists called “Social dentists.” Contact him at [email protected] and visit http://goldsmith.cdfinance.net/ for more information.