Criteria to look for when selecting Self Directed IRA custodian

2 Replies

I am looking to move my old 401k funds to Self-directed IRA.

What are the criteria, I need to look for, when selecting the custodian for SDIRA ?

I looked at two of them Horizontrust.com and trustetc.com as examples. 

I am trying to understand the pros and cons of each of the custodians and how do I chose one over the other. 

I am looking expert opinion from the experts in this forum.

Thanks

--uday

@Udaya P.  

There are two business models in the self directed IRA realm.

Custodians, who will have the word trust in their name are processors and recordkeepers.  You will go through the custodian for all investment related transactions. This works OK for singular, passive transactions without a lot of activity.  The fee models and levels of customer service vary, so shop around and get recommendations.

Advisors and Facilitators create more sophisticated plans using a legal entity like an IRA owned LLC or a Solo 401k trust that give you checkbook control. These plans often come with more significant advisory guidance if you work with the right firm. Costs will be higher initially, but this approach can save you a lot of fees over the life of the plan, and can be much more suitable for time sensitive or transactionally intense investment portfolios.

Speak with more than one company of each type and you will learn who really knows what they are doing and provides good service.

Best of luck as you learn about this exciting opportunity!

Hello Uday,

I can say I'm an expert in the SDIRA world, but I can't say I'm unbiased. I work for Provident Trust Group, just so you're fully informed.

The first thing you should do when looking for a custodian is decide what type of account you want to open, and what type of assets you want to invest in. For example if you want to roll over 401k pre tax funds, you would obviously want to open a traditional IRA. I'm going to assume that you're planning on investing in real estate, but be sure to be a little more specific. Things like tax liens and deeds can have different cost associated with them than purchasing a rental property will.

Next find some reputable passive custodians and do some online research. Unfortunately the world of self directed retirement accounts is not what you would call well known (2-3% of all retirement funds) so the sample size is going to be fairly small. Once you narrow that down to a few companies you are interested in, send them an information request, or give them a call to discuss how they operate, what assets they will allow you to hold, and what their fee structure is like. For example some custodians will have tiered pricing based on account value and how many assets are held under custody. Fortunately Provident Trust Group has a flat annual fee, which makes my job pretty easy. The other fees you are going to want to ask about are transactional fees. What do checks, ACHs, and wires cost, because remember you're going to have all your expenses paid for by the IRA which means you need to request monies out, unless you're looking at doing an IRA LLC which is a completely different conversation.

Then all you have to do is decide what the best fit for your situation is.

Let me know if you have any other questions, I'm always happy to help.

Adam 

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