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How to Choose Your SDIRA Provider FAQ Guide

How to Choose Your SDIRA Provider FAQ Guide

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When is a custodian not a custodian?

If you’re new to the self-directed IRA space, you may have seen terms like administrator, custodian, and facilitator used to describe the firms that serve account holders.  Each provides different services and has varying degrees of accountability and oversight.

  • Administrators process the paperwork needed to open and maintain IRAs, including submitting reports to the IRS. They typically work in tandem with a custodian, who maintains possession of the account assets. Administrators perform ministerial compliance duties for the IRA program.

Experience counts when choosing an administrator. Look for one whose staff is trained and up to date on IRA regulations. Staff at The Entrust Group, for example, are trained and tested regularly on their knowledge.

They also hold designations from major industry associations such as the Certified IRA Services Professional (CISP) designation.  This designation is obtained through the American Bankers Association.   Entrust has been in business for 38 years, and some staff members have been with the firm for over 15 years.

  • Facilitators are non-regulated firms that typically focus on educating self-directed IRA investors. Some also connect individuals to firms that can help facilitate entity establishment such as establishment of single-member LLCs owned by IRAs.

True to its name, a facilitator should make it easy -- easy for you to understand self-direction, your investment options, and the rules governing self-direction. The Entrust Group, although an administrator, takes its educational mission seriously. Our Learning Center is an extensive library of free articles, webinars, how-to guides, and other resources.

  • Custodians are responsible for maintaining custody of the assets in an IRA. They are regulated by the IRS and other federal and state authorities. Every self-directed IRA must have a custodian. Custodians who specialize in self-directed IRAs will have the staff, expertise and capacity to keep custody of the alternative investments that self-directed investors typically choose.

The charter of these custodians also specifically addresses the custody of non-traditional investments typically held under a self-directed IRA.  Note that “custody” doesn’t necessarily mean physical custody. After all, if your IRA owns a building at 121 Main Street, the building stays on Main Street.

The custodian will keep possession of the deeds and related paperwork since the IRA holder must not have constructive receipt of the investment to keep the account assets tax-deferred.

Examples of custodians include banks, credit unions, or non-depository banks, and brokerage houses, although not all of these are set up to serve self-directed clients. The Entrust Group works with The Entrust Trust Company (TETC) to custody the assets. TETC is a company from the same owner as The Entrust Group. It is the first Self-Directed IRA custodian chartered in the State of Tennessee.

Questions you should ask:

  • Who regulates your firm?
  • Are you a member of the Better Business Bureau? (Search the Better Business Bureau and check the websites of your state regulators for complaints)
  • Are your funds FDIC-insured?

 

Do all custodians offer the same services?

Banks and brokerage houses that act as custodians for mainstream IRA investors are typically strongest in traditional investment assets like CDs, money market savings accounts, equities, and bonds. These custodians may not be the best choice for those looking to invest in alternative assets.

Among self-directed custodians, some custodians have a particular area of expertise: real estate, private placements, private stock, LLPs and LLCs, for example. Depending on your alternative investment needs, asset specializations can be limiting if you want to invest in more than one type of asset. TETC prides itself on allowing every type of investment permitted by the IRS in order to provide additional opportunities to its investors.

Questions you should ask:

  • What is your experience with self-directed IRAs?
  • What is your experience with (fill in your preference) investments?
  • What types of assets do you handle?
  • What volume or value of transactions do you handle?
  • How many years of experience do you have with (name of asset)?
  • What credentials do your staff hold in (type of asset)?

 

How do administrators and custodians get paid?

Self-directed IRA administrators and custodians charge a fee for their services. The Entrust Group offers two annual recordkeeping fee models:

  • Fees based on the number of assets in your account. For example, if you own an apartment building as your sole asset, you will be charged for one asset. If you also own precious metals and private equities, you will be charged for three assets. Fees are calculated annually and paid quarterly.
  • Fees based on the value of the assets in your account. The fee is based on a certain percentage of the value of the assets held under the IRA. The percentage of value-based fee schedules typically has a capped dollar amount as to the maximum fees allowable for the IRA.

There also are fees associated with opening the account, making specific transactions (buying or selling assets, for example), and closing your account.

Entrust believes in transparent, easy to understand pricing. Read more about our fees on our website.

Questions you should ask:

  • What is your fee structure?
  • How and when are fees assessed?
  • Ask yourself: Do I understand the fee structure?

 

How can I tell if the custodian/administrator has the scope of coverage I need?

There are three aspects to scope of coverage:

Time. Do you buy an asset and hold on to it for 10 years or do you buy and sell assets 10 times a month? In the latter case, you will need a provider that can process transactions quickly and accurately. Some offer automated services that can handle repetitive transactions. Others have extensive online portals. Be sure to ask about these capabilities when researching providers.

Questions you should ask:

  • What is the average turnaround time for processing transactions?
  • Are there limits on the number of transactions in a given time period?

Money. The size of a custodian’s business can be a clear indicator of its level of experience and expertise. A custodian should be willing and able to share with you the volume of assets—in specific categories that are eligible for IRA investment—under its custody.

Questions you should ask:

  • How many client accounts do you service?
  • How many custodial assets do you manage?
  • What assets types do you hold under custody?

Geography. Even in today’s connected world, you may be more comfortable working with a custodian or administrator with a branch network. This gives you the best of both worlds: the resources of a large firm combined with local expertise. The Entrust Group provides personal service nationwide (we have offices in each time zone), with a single point of contact model.

 

Do administrators, custodians and facilitators sell investment products?

Unbiased self-directed IRA companies don’t provide investment advice or recommendations. At The Entrust Group, we consider it is our job to help you understand your investment choices, not offer investments.

Some self-directed IRA companies do offer investments. However, if they do, this should be fully disclosed in their marketing materials.

Questions you should ask:

  • Do you sell investments?
  • Do I have the right to decline your investments and choose my own?

 

How important are online capabilities?

Chances are, you are accustomed to making payments, purchases, and finding entertainment online.  You should also be able to manage your retirement savings online -- easily and securely.

You can open an online account with The Entrust Group in less than 10 minutes. You can also submit the documentation to buy or sell real estate, request distributions, view your statements and make contributions using The Entrust Client Portal. Entrust prides itself on constantly improving the client experience and developing innovative solutions to help clients invest in alternative assets as efficiently as possible.

Questions you should ask:

  • Do you have a secure client portal?
  • How do you protect client information online?
  • What transactions can I conduct within your portal?

 

What kind of training should staff members have?

As a knowledgeable investor, you want the people handling your self-directed accounts to be capable and committed to customer service. Service has multiple facets: knowledge, response time, the ability to adapt and resolve issues, and accurate documentation are essential.

Staff at The Entrust Group are tested regularly to ensure they are up to date on applicable rules and regulations.  We hold ourselves to high standards for accuracy, timeliness, and good old-fashioned friendliness.

Questions you should ask:

  • What professional designations do your staff hold?
  • Will I have a designated point of contact for my account?
  • Is there a process in place for filing complaints (or offering compliments) about your service?

And with all that said, feel free to head over to our About Us page to help fill out any last gaps in your knowledge regarding the best Self-Directed IRA Provider in the business (wink wink).

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