7 Big “No-No’s” When Choosing a Self-Directed IRA Custodian

November 29, 2017  --  Episode #287

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Let’s talk about choosing a self-directed IRA custodian, shall we?  I’m Bryan Ellis.  This is episode #287.



Hello, self-directed investor nation!  Welcome to the broadcast of record for savvy alternative asset investors like you where each episode, I help you to find, understand and profit from exceptional alternative investment opportunities!

Boy I’m potentially opening a can of worms today.  But that’s ok.

And before I do, let me go ahead and say to the 3 or 4 self-directed IRA custodians who don’t like being held accountable for their own words and will likely want to send me cease and desist orders after you hear this episode:  Don’t bother.  You’re not the only IRA companies who suck, you’re just among a small group.  So I’m not even talking about anyone in particular.  But you know, if the shoe fits…

So, self-directed IRA companies… big topic.  Let’s dig into it today on episode #287, shall we?  To join the conversation here on SDI Talk, give us a call toll-free at (833) SDI-TALK or send email to [email protected] or probably best of all, visit today’s show page at SDITalk.com/287 and join the conversation there.

So allow me to say right off the bat:  I think that most self-directed IRA companies do a good job for their clients.  I really do.  I think the quality of service in the industry has, on average, risen quite a bit in the past 5 years as more competitors have entered the marketplace and have forced some of the older, sloppier operations to do a better job.

But it would be absolutely incorrect to say that there aren’t some bad apples in the bunch.  But the bad apples are, thankfully, the exception and not the rule.

I’m not going to tell you what custodian to choose today, because the answer to that question can be very different for you than for me.  But I’m going to act like the IRS and rather than tell you what you can do, I’m going to give you some thoughts on what you shouldn’t do.

And I want it to be clear:  If I mention any custodians today in a positive manner, it’s not because I’m being compensated or rewarded by any of them.  That’s absolutely not the case.  My thoughts are wholly independent.

So here’s the first big no-no:  Do not choose a custodian just because they are large or old.  Really, just don’t do it.  I know of custodians that have multiple billions of dollars of assets under care, have been in business for a very long time, and who have a whole lot of client accounts… and still, they’re terrible.  Just awful.  So don’t choose a custodian just because they’re large or old.

If you prefer a larger custodian, I’ve got a tip for you.  And by the way – I don’t think that it’s necessary to give preference just to the upper tier of custodians, I really don’t… but I know that’s what some of you prefer.  If that’s you, consider using this as a guideline:  Consider giving prefer to the company who has the largest average account size.  In order words, ask the custodian to identify their total assets under custody and total number of client accounts.  Whatever that number is is their average account size.  My advice – based on anecdotal experience, albeit a whole lot of it – is that companies with larger average account size tend to provide better service.  Not sure why that is, but I’m basing that largely on the volume of NEGATIVE comments I receive about custodians, and for whatever reason, particularly among the bigger custodians, the ones who have the largest average account sizes tend to have the least complaints.

Second big no-no:  Disregard the presumed “credibility” that comes with having attorneys – even those who claim great knowledge of tax and IRA law – at the helm of your IRA company.  Remember, my friends, at the end of the day, these people are NOT serving as your legal counsel, they are your IRA custodian.  So here’s my tip associated with this “no-no”.  Your lawyer is obligated to act and advise with YOUR best interests in mind.  Your IRA company isn’t.  No matter how many lawyers work for your IRA company, you STILL need a third-party attorney who you pay for that specific service… and that attorney should be disconnected from your IRA company entirely to eliminate conflicts of interest.

Third big no-no:  Be very careful when you see the words “IRS-approved”.  Absolutely NO investments are approved by the IRS, period.  If you doubt that, see the notice published by the IRS about that very topic that I’ve linked on SDITalk.com/287 where the IRS states this in no uncertain terms.  Also, your alarm bells should begin to sound if you’re pointed to a piece of the IRS Field Service Manual for justification in calling a thing “IRS-approved”.  All the Field Service Manual is is a guide for IRS agents to use during audits.  It can be changed at any time, absolutely any time, by the IRS Chief Counsel or Treasury Secretary without submission to or approval by Congress or the public.  That means that what is “approved” today could be prohibited tomorrow.  And thus, my tip for this particular IRA company “no-no” is to have a bias against those who suggest or otherwise try to ride the concept of IRS “approval”, and remember that even if the IRS does in fact approve something – which they don’t – but if they did, that approval would be true for all IRA companies, and not just those who hitch their star to the concept of IRS approval.

My friends, there are actually 4 more rather serious no-no’s I want to share with you, but to do so will drive us over our time limit for today.  So be sure to join me tomorrow for this very show.  In fact, if you enjoy what you’re hearing here, I’d be eternally grateful if you’d stop by iTunes or Stitcher or Google Play or wherever you listen to this show and give us a rating and review and subscribe to the show.  That really helps this show a lot, and I’ll be really grateful to you!

My friends, thanks for listening, and remember:  Invest wisely today, and live well forever!


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Bryan Ellis

I am host of Self Directed Investor Talk, which I'm told is America's #1 podcast and for affluent self-directed investors. I'm also something of an expert in self-directed IRA's, solo 401k's and 1031 exchanges. You can find more of my writing in some cool places like TheStreet.com, Entrepreneur.com, ThinkRealty and even Forbes (that was always one of my goals!). I live in metro Atlanta, Georgia with my wife and business partner Carole Ellis(she's a real business partner... not just because she's my wife... I'd want to work with her if I wasn't married to her... and I'd want to marry her, too). I also have 4 children ranging in age from 2 to 20 (yes, you read that correctly). It's my goal to be the name everybody thinks of when they think of Self-Directed IRA's and Solo 401(k)'s.