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Self-Directed IRA Scams – The Real Story

Self-Directed IRA scams

Recently, we ran across an article on WealthManagement.com about Self-Directed IRA scams. This article was entitled, “Enforcement Against Self-Directed IRA Scams Doubled in 2020.” Now, if you just looked at the title and skimmed through the story, you might fear for your retirement savings. However, a closer look shows the whole picture. In the following, we’ll break down the numbers and show why Self-Directed IRA investors should not be worried!

Key Points
  • Self-Directed IRAs are not at risk
  • Know the whole story when it comes to choosing a plan provider
  • Be wary of fraud, and do you due diligence

Self-Directed IRA Scams – The Numbers

The important numbers from this article are the number of state enforcement actions against Self-Directed IRA accounts. In fact, those actions did indeed double from 2019 to 2020. It went from 24 up to 53. You don’t need to be a math wizard to figure that out. It’s important to point out the numbers come from a North American Securities Administrators Association (NASAA) report (which you can download here).

Because of the COVID-19 pandemic, there was not a lot of face-to-face interactions between plan providers and potential clients. Sales pitches and account setups where done online or over the phone. This is the main reason we saw a spike in these enforcement actions.

With that being said, there were 53 actions against Self-Directed IRA plans. The NASAA report states there were 5,501 investigations initiated. If you do a little bit of math, you will see that SDIRAs made up less than one percent of the investigations.

If you were to happen upon this article and see that Self-Directed IRA scams doubled, you would seriously be worried. Once you delve into all the numbers, you will see that it’s simply a scare tactic.

The Real Story

Scams and fraud are everywhere, especially in the financial world. But to think Self-Directed IRAs are scary, is a false narrative. To be clear, there is no denying there are people out there looking to scam you. This is especially true of senior citizens. However, all you need to do is trust in the old adage – If something seems too good to be true, it probably is.

The article does mention the lack of fiduciary responsibility of the Self-Directed IRA custodian. There are regulations out there, however, a Self-Directed IRA custodian does not offer investment advice.

IRA Financial – An Example

We’ll use our company, IRA Financial, as an example. There are two arms of our company: IRA Financial Group, a plan administrator and IRA Financial Trust, a custodian. Each serve a different purpose. On the Group side, we administer your plan. You decide the type of plan you want, and we help get you set up. We also make sure you are within the rules set forth by the IRS.

On the other hand, the Trust company is a fiduciary that manages custodian-controlled accounts. If you choose to use IRA Financial Trust as custodian of your new plan, they hold onto your retirement funds and make investments based on your instructions.

We are not financial advisors or planners. So long as your investment choice does not violate the IRS prohibited transaction rules, you can invest it whatever you want. Any reputable Self-Directed IRA administrator or custodian will not push any investments on to you. In sum, the administrator maintains the plan, while the custodian holds onto your funds and makes the investments you choose.

Choosing the Right Self-Directed IRA Custodian

As with anything involving big, financial decisions (such as your retirement), you must do your homework. Your plan provider should not give you any type of investment advice. Here are some red flags you should be aware of, and if you hear any of them, you should run away:

  • Invest with us and we can triple your money in three months!
  • I know a great financial advisor you should get in touch with.
  • I heard about a new real estate project that is right around the corner.
  • There’s a new crypto ICO coming out that you should check out.

All of these are beyond the scope of what a plan provider should offer you. What is acceptable is them trying to fit you in the right type of retirement plan based on your particular needs. No investment advice should be given and the provider should only help keep your plan in good standing.

As part of your due diligence, read reviews about your potential provider or custodian. We have recently partnered with Trustpilot, a respected third-party review site, to collect our reviews. You can check out Google reviews, social media, and the Better Business Bureau. The more information you have about a company, the better decisions you can make.

Human score    Trustpilot Stars    number of reviews    Trustpilot Logo

Another thing to look for is if they are a member of RITA – the Retirement Industry Trust Association. You can find dozens of great Self-Directed IRA custodians, who will put your interests first. We are a member and are very privileged to be so.

Lastly, ask questions. Learn about the company you wish to do business with. Make sure you know the fee structure. Know about all the services they offer. Have a professional look at anything before you sign on. Take your time before deciding on the right company for you.


Are Self-Directed IRAs a scam? Absolutely not! Are there scammers looking to take advantage of you? Of course, they are everywhere. However, so long as you do your due diligence, and are well-informed about the administrator or custodian you wish to do business with, the chance of fraud is minimal.

Do not let a misleading headline, or an article that skews the data, make a decision for you. In this day and age, anyone can throw on a suit and show a fake Zoom background. You need to look past the facade and dig deeper to know just who you are doing business with. And, while we would love for you to become an IRA Financial client, we want to make sure you get what you need out of a Self-Directed IRA, no matter which respected provider you choose!


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