How Basic Capital is private banking for the masses

The uber wealthy have built a symbiotic relationship between their assets and loans—and it’s all thanks to private bankers.

It’s a common misconception that the rich become ultra-wealthy because of what they sell. But in actuality, wealth is about ownership. Bezos didn’t become a billionaire by selling Amazon. He became king of the 1% because he was savvy enough to own Amazon for a long time, and knew that borrowing against his Amazon stock was a much more lucrative move than selling it.

So, how did Bezos know this but you don’t? It’s not because you missed a day at school—it’s because of his access to private banking resources.

“Private banking” may sound benign, but when you truly understand what it entails, and break down the literal wealth of opportunities it provides high-net-worth individuals (or “HNWI”)—you’ll soon start asking yourself how you too can benefit from this exclusive secret.

For far too long, the financial-planning industry has gate-kept too many secrets, allowing the 1% to drastically build wealth faster than those of us who only have access to the tools offered by the average brokerage. So, in an effort to level the playing field, we're breaking down what private banking is, the advantages it offers its clients, and how Basic Capital has taken a page from private banking services to build a platform that benefits the masses.

What is private banking?

Private banking, also often called Private Wealth management, is a broad term that covers a variety of services that banks provide to a select clientele. It’s very likely that the bank where you hold your checking account or mortgage, also has a private-banking division that provides personalized services to “HNWI” who’ve amassed a treasure trove of liquid assets of $10+ million.

For the average person, the institution where they manage their assets (IRA or brokerage investment account) is most likely different from where they manage their liabilities (a bank)—but HNWI tend to manage their assets and liabilities all in one place, allowing them to leverage the power of each other to maximize their investments.

What are the advantages of private banking?

While most of us look to tools like IRAs, 401Ks, and real estate to build wealth, ultra high-net-worth clients work with private bankers to catapult their net worth using privileged financial practices.

Private banking includes a plethora of benefits, such as access to personalized loans and exclusive investments, but their most-coveted feature is the ability to borrow capital in a favorable structure: secured by their existing assets and done on a limited liability basis, which lowers both the cost of financing and the risk. This well-structured financing not only allows the wealthy to benefit from their assets without selling them, but it also unlocks even more capital for them to finance the purchase of even more assets—from art and collectible purchases to financing commitments at other institutions, like private equity.

Imagine never selling an asset and still seeing your net worth skyrocket…

While the rich borrow to invest, the rest of us are stuck in a cycle of borrowing to consume. So, the rich get richer, not in spite of it, but precisely because of it.

Why should the rich be the only ones who get to have all the fun? Why can’t the average Joe also borrow at a low cost of capital and limited liability basis to start a wealth-building flywheel?

It’s not some sort of conspiracy meant to keep you out—unfortunately, the reason is far less dramatic and actually quite boring. Typically, these financing transactions are typically highly customized and structured for each specific client, meaning they take a lot of resources and a high degree of operational maintenance (i.e. $$$ for lawyers, trustees, custodians, auditors, etc.). Because of this, it only made sense for the bank to offer them to clients who had a minimum net worth of $5 million.

But the rest of us are catching on—and the private banking industry is losing a grip on its tightly held secrets.

How is Basic Capital private banking for the masses?

While Basic Capital doesn’t offer 1-to-1 private banking services like an FDIC bank, a good portion of our investment model draws inspiration from the tools regularly employed by private bankers to create a wealth flywheel. Here’s how:

We let you easily finance investment (instead of consumption): Financing your investment isn’t something the average investor is able to do without jumping through the hoops installed by the private banking world—but Basic Capital’s streamlined and standardized structure allows you to increase your IRA investment five-fold by pairing it with a fixed-term self-amortizing loan. With our simple and straightforward asset structure, we’re able to provide clients with the ability to snowball their savings and enjoy the predictability of a term loan.

Protective structure: The ultra wealthy never take out personal loans—and neither should you! They open limited liability companies and make them the borrower—this way, they get legal protection from the liability of the debt, while gaining exposure to the upside and limiting exposure to the downside. Basic Capital unlocks the same safe structuring for you by opening an LLC on your behalf that borrows and invests capital. You’re the owner—and you get to reap the benefits!

Favorable rates: Personal loans are expensive because they are unsecured, so they’re priced to protect the lender in case the borrower defaults. On the other hand, secured loans are less expensive because they’re backed by real assets that the lender can collect faster in case of default. Given that Basic Capital provides your LLC with financing that is secured by the assets of the LLC, we’re able to unlock a favorable rate that you wouldn’t otherwise have access to, unless of course, you have the means to work with a private banker.

Support you can count on: When it comes to finances, no one wants to be left out in the cold, wondering what the hell is happening with their money, which is why we want you to feel assured in our practices. As a fiduciary, Basic Capital is bound by the same laws as a certified financial planner, meaning we put your financial interests first and provide absolute transparency when it comes to your investable assets. Additionally, our team is available 24/7 inside the app to answer any and all questions that might be keeping you up at night.

Breaking down the private banking barrier with Basic Capital

While most private wealth management advisors won’t take you on as a client unless you’re a multi-millionaire, with Basic Capital, you can get started with as little as a $1,000 IRA rollover. Start catapulting your savings the same way that the ultra wealthy have done for years and finally catch a ride on the wealth flywheel.

While Basic Capital unlocks a lot of the positive features private banking offers its ultra wealthy clients, unlike private banking, we provide a much lower degree of customization. In order for us to unlock this powerful tool for the masses, we need to standardize the majority of the transaction, so it can be operational, scalable, and economical. The good news is that there is elegant simplicity in standardization—you get 90% of the benefit without the sky-high cost.

Still not sure Basic Capital is right for you?