Last Updated on September 29, 2020
IRA Financial’s Adam Bergman discusses the purpose of the IRA custodian and how to choose the right one for you.
In This Podcast
The IRS rules state that you must have a custodian for your IRA. The custodian is in charge of maintaining the plan. However, not all custodians are the same. Depending on what you want to invest in, what type of options you want and the frequency you wish to invest, will determine the type of custodian you want (and the kind of IRA you need).
Most financial institutions offer IRAs, including banks and trust companies. However, not all of them offer the types of asset choices many investors are seeking, specifically alternative or non-traditional investments. These include real estate, precious metals, tax liens and Bitcoin. Why? Because traditional financial institutions make money by offering your products and holding onto your funds. For example, they don’t make money when you invest in real estate, especially when all of your IRA funds are invested in a property. Therefore, they limit it you to a set menu of products.
Obviously, if you are just interested in stocks, bonds and mutual funds, any IRA custodian will work. However, if you want to branch out and diversify your holdings, you need to look elsewhere. Essentially, you need a passive custodian. Passive custodians only make money setting up and maintaining the plan. They will never force unwanted investments on you and won’t restrict the type of assets you can invest in. Of course, even passive custodians differ from one to another. If the custodian deems an investment too risky, it may not be allowed. If you want the broadest investment menu, you need to look further. IRA Financial Trust, for example, will never tell you what you can and cannot invest in. It’s your money, invest it the way you see fit. Of course, we want you to be successful! But, we don’t compute the risk/reward of our clients’ investment choices. It’s up to them to do their homework.
We, and other companies like us, are simply there to maintain the plan, keep it IRA compliant and ensure all documents are completed and filed in a timely manner. IRA Financial offers two types of IRA services – Custodian Controlled and Checkbook Control. The former gives you less freedom, since we, as the custodian, are directed to invest funds on your behalf. The latter gives you complete control of your funds. With a Checkbook Control Self-Directed IRA, all investment decisions are yours alone. You are control of the IRA funds and you simply write a check to make an investment. You never need custodial consent.
In the end, it’s your choice what type of IRA custodian you need. You should work with a financial advisor to decide what types of investments you are comfortable with. Then, you can decide on the right type of custodian. The beauty of the IRA is that you are in control of where to open it!
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Join us next episode as Mr. Bergman discusses the Checkbook Control IRA and why it’s important to have control of your IRA funds, especially when you are investing in alternative assets.