Custodians, Administrators, Facilitators and Promoters—Oh My!

By Elsie Dudukovich0 Comments

Whether you were an early adopter or are new to self-directed IRAs, there is no question the strategy is growing in popularity. You might be seeing more online ads for IRA facilitators or warnings about being careful when screening offers from self-directed IRA promoters. You may be hearing more about self-directed 401(k) and the use of terms such as ‘custodian’ and ‘administrator’ could seem to be almost interchangeable.

The fact is that the terms aren’t interchangeable. The two types of IRA providers offer different services and follow different guidelines. Equity Trust Company, for example, is an IRA custodian.  An IRA custodian must meet IRS requirements and is subject to regulatory oversight and audits.  By complying with these IRS requirements, a custodian is given authority to hold title to assets, investments, or other property, issue funds, hold clients’ money, and create a variety of clients’ accounts. 

While IRA administrators can produce statements and do basic reporting, they are not subject to the same regulatory requirements and oversight as a custodian.  This difference limits them from handling the same level of authority as a custodian.  An administrator needs to be affiliated with an IRA custodian in order to be permitted to hold assets or funds.  They can help you create an IRA account, but are unable to conduct transactions like a custodian.

If you move down the scale of authority and responsibility, you will find IRA promoters and facilitators.  If you’ve seen advertisements for self-directed IRA LLCs, then you have seen a facilitator.  A facilitator, sometimes also called an advisor or consultant, can provide advice and consulting services – often directing clients to establish an LLC within their self-directed IRA.  It’s important to note, a facilitator on its own does not have the capacity or authority of a custodian and is often associated with an IRA custodian to make up for this deficiency. 

An IRA promoter is an investment promoter who is looking to use IRA funds to establish an investment.  As with facilitators, promoters do not have the same regulatory oversight or authority to hold investments or move IRA funds as a custodian.  A promoter is simply that: promoting an investment.  As with all things related to investing, it is in a person’s best interest to perform due diligence to see if an opportunity is both sound in terms of financial goals and legitimacy.