Choosing the right self-directed IRA Custodian or professional advisor to assist you with your IRA and its investments is an important decision. When searching for professionals to assist you in this area, you will fin many individuals and firms who claim to be experts in the field. This can make the selection process difficult, but with a little preparation you can create your own scorecard to help separate those “in the know” from those who might steer you down the wrong path.
Starting out
To begin, you need to know that the term “self-directed” has taken on a life of its own. This term was once used to denote firms or individuals who specialized exclusively in the sale or administration of non-publically traded investments, such as real estate, tax liens, private equities, partnerships and limited liability companies. However, many advisors and IRA service providers now insert this phrase into their marketing literature, advertisements and websites simply because it generates phone calls and drives traffic to their websites.
When you contact the individual or firm, you might find that what they call "self-directed" is simply an attempt to repackage their traditional investments products, such as stocks, bonds and mutual funds. In other cases, you might find that they have created a limited selection of investments, such as hedge funds or non-publically traded REITs which they offer under their traditional commission arrangements. But do not despair: With a little time and effort, you can narrow your search to those who can really offer the investment flexibility and advice you seek.
IRA custodians
First you will need to find an IRA Custodian that is willing to hold these non-traditional investments. If you have a particular area of interest, such as private equities or real estate, you will want to find a firm that has experience in administering these types of assets. To begin this process, search the internet using key words such as “IRA” and the investment product you are interested in, e.g., “IRA Trust Deed.” This should generate results of firms who specialize in this particular area. Once you have found possible custodians, create a list of questions and a scorecard to refine your selection process.
Here is a list of possible questions and reasons why you want to know the answers:
- What type of entity is the IRA Custodian? is it a bank, independent state chartered trust company, securities broker dealer or a privately owned business.
- Who, if anyone, regulates the firm? Examples: FDIC, OCC, SEC, state banking commission.
Reason: You will want to work with a regulated firm. Regulators typically audit such firms at least annually and can help ensure that your assets are safeguarded. Also, access to financial information and other relevant information will be easier to obtain from a public...
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