7 Point Checklist: Selecting a Self-Directed IRA Custodian

Essential Factors You Must Consider Before You Start Self-Directed Investing

You’ve decided to diversify and grow your IRA by investing in assets beyond stocks, bonds and bank CDs. But before you take control of your financial future and invest in market alternatives, you must find an IRA custodian that is truly self directed.

Not all IRA custodians will hold alternative assets and even among the ones that do, there are many differences. How do you make sense of all the differences? Don’t worry; this seven point checklist (essential for anyone interested in self-directed investing) will help you select the self-directed IRA custodian that is right for you.

1) Investigate what investment options are available to your IRA.

Most IRA custodians do not allow for investments outside of the stock market. Locate firms that offer truly self-directed IRAs that allow investments outside of the market, such as real estate, tax liens, promissory notes, private businesses, oil and gas, etc.

If you have a particular investment in mind, check with the self-directed IRA custodian in advance. Even among self-directed IRA custodians, some will limit investment options depending on their areas of expertise.

2) Research the custodian’s track record.

When contemplating any move with your IRA or any retirement plan, it is wise to ensure that the custodian handling your account has a proven track record. Find the answers to these questions:

• How many years have they been in business?
• How many employees do they have?
• Given the special nature of these types of investments, what is this main business focus?

3) Understand how the self-directed IRA custodian is regulated.

Any institution dealing with your retirement funds should be properly regulated through state and federal agencies. In most cases, custodians are subject to regulation similar to banking institutions.

Important: You should know whether the provider is a custodian (a highly regulated institution) or just an administrator (a less regulated institution).

Also ask a potential custodian these questions:

• Do they have an internal auditor?
• Do they have an external auditor?
• What type of insurance do they carry?

4) Any cash balances should be protected.

Find out how cash balances are protected at the custodian. Ideally, cash balances should be placed directly into an FDIC insured interest bearing account with protection up to $250,000.

5) The quality of service should match the pricing value.

The true value of doing business with a self-directed IRA custodian goes beyond what it costs to establish and maintain an account (though, those are important to know). It’s crucial when dealing with your retirement funds to ensure quality of service.

Compare the pricing schedules for different custodians and, in particular, pay attention to transaction costs for investments – this is often the biggest variable between custodians. Some custodians offer free transactions, others can charge up to $200 per transaction.

6) Ask for referrals from current clients.

Often the best indicator of the value of a self-directed IRA custodian is determining how happy the current clients are. Ask for referrals.

You may also wish to find out how many clients the custodian currently services. While the largest provider does not always dictate the best service, you’ll want to see how many other Americans are utilizing their service.

7) Research the experience of the staff.

At the end of the day you will be dealing with people at a self-directed IRA custodian. Ask about the qualifications of the staff. Find out how staff members are trained, the length of the training and their continuing education.

Also, take in to account your first experience with people at the custodian. When you call them for the first time, make a mental note to remember how that experience goes, as it’s a fairly good indicator of future interactions.

With this checklist as a guide, you can now make an informed decision when selecting a self-directed IRA custodian.