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Self-Directed IRA Service Providers

Updated: Dec 5, 2022

Are They Helping or Harming Your Business?

Why it is Important to Know the Difference When Selecting an IRA Service Provider?

When selecting a Self-Directed IRA service provider to partner with your company, it is important to look past all the hype and focus on what is important – THE SECURITY OF YOUR CLIENTS FUNDS AND THE INTEGRITY OF YOUR BUSINESS.

In business, reputation is everything and it should always be a two-way street. So, when you are looking for another company to partner with, it is important that your business philosophies match. Like-minded levels of customer service and integrity make for a sustainable, long-term relationship.

In recent years, more and more people are seeking ways to take control of their retirement portfolio, which has led to Self-Directed IRA service providers popping up all over the place. If you Google search “Self-Directed IRA,” you’ll get over 1.6 million results ranging from education to various uninformed opinions on the “best” Self-Directed IRA service providers to work with that calendar year.

So, how do you filter out all the noise to find the IRA service provider that is the right fit for your company?

You must first understand the distinction between custodian, administrator, and facilitator. While on the surface it may appear that these different entities follow the same IRS rules and provide the same level of service, but the truth is they DO NOT. These entities represent varying levels of service, expertise, and risk.

For a quick overview of the stark differences between these IRA service providers, review the chart below.

As you can see, there are many reasons why all roads lead back to a licensed custodian.

Why does a licensed custodian matter?

The most important component of any business relationship is trust. Licensed IRA custodians are the ONLY provider in this group that are regulated and authorized by the Internal Revenue Service (IRS). Since licensed IRA custodians are subject to regulatory oversight at the federal and state level, there is a significant level of comfort and trustworthiness that is not prevalent with the other providers. The priority of licensed custodians is to ensure compliance of the IRA accounts that they custody and of the investments between the IRAs and your business.

On the other hand, IRA administrators and facilitators work under a different set of rules due to their distinct lack of regulation. Their priority is simply to open accounts and turn a profit.

Licensed custodians provide the most comprehensive IRA services in-house, from account establishment to investment funding. This facilitates an environment for superior quality control and timeliness of services rendered.

Preferred Trust Company was established in 2007 because industry leaders recognized that there was a significant need for a Self-Directed IRA custodian that is run with a real estate state of mind. In real estate, time is money. This means that once the IRA account is open and funded, the investment can be processed in as little as 24 hours.

Administrators and facilitators are not licensed to custody cash or investments, which means their only essential function is to be an intermediary between the client and a partner licensed custodian. When you are only working with the middleman, this significantly diminishes the quality of the service you will receive and increases the time it takes to fund your business.

I have heard many horror stories about other service providers. From multiple weeks or even months to process investments, confusion or missing paperwork, failure to process interest or principal payments, and the list goes on. Companies and clients should be able to trust their custodian to do their job without additional handholding.

Before we leave this topic, we need to discuss Custodial Fees, but we'll save that for next time.

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