Choosing a Custodian For Your Self Directed IRA?

Estimated reading time: 3 minutes(Last Updated On: January 14, 2020)

A self directed IRA puts you in the driver’s seat. It allows you to invest in what you know best and opens up many more investment opportunities. However, you don’t go it alone. When you set up a self directed IRA you establish it with a custodian or a financial institution. Someone needs to be the custodian for the account. Choosing your custodian is an important task.

What is a Custodian?

A custodian is essentially the person or entity who facilitates the transactions. They are an essential element of your IRA. According to IRS regulations, “all IRAs must be held by a custodial entity such as a bank, credit union, trust company or an entity that is licensed and regulated by the IRS as a ‘non-bank custodian’.”

Custodians charge small annual administrative fees for administering your IRA. They may also charge transaction or paperwork fees. It’s important to know that there is a difference between a custodian and a promoter.

Some self directed promotion agencies are often limited by what they can offer. They also don’t meet the regulations required to hold title to assets, investments and property, and issue funds. They must have ties to a custodian who can make these transactions for you. It’s another middleman that adds time, paperwork, and fees to each transaction you want to make.

When you’re searching for a custodian make sure it’s an actual custodian or administrator and not merely a promoter.

How Do You Know If A Custodian Is Right For You?

There are a few things you want to compare when seeking your Self Directed IRA custodian:

  • Experience – How long have they been in business? Are they experienced in Self Directed IRAs? Look for third party endorsements, achievements and performance awards.
  • Access – How easy is it for you to get in touch with your custodian? How fast can you process a transaction and make an investment? How are accounts managed? Is there an online account management system? How are investments processed? There are essentially two types of custodians; active and passive. An active custodian often provides investment advice and may offer investment products. A passive custodian doesn’t give advice or sell products.
  • Investment Choices/options – Do they offer the type of investment knowledge and resources that you need or are interested in? For example, some Self Directed IRA custodians may not offer certain investment types. Make sure you choose one with a broad range of opportunities.
  • Knowledge – Do they provide ongoing education? Can you contact them with specific questions? Who answers your questions and what are their qualifications?
  • Fees – Finally, compare providers by their fees. It’s important to find a custodian who is transparent about their fees and provides full disclosure. Ask if there are any hidden fees, administrative fees, or costs for uninvested cash.  Ask if you’ll be charged for each transaction or on the value of your account. Ask about billing cycles and request a list of all potential fees.

Wrapping Up

Choosing your Self Directed IRA custodian is perhaps the most important decision you will make with respect to your account. You can always roll your account over to a new custodian, but it’s a good idea to avoid that because you’ll lose time and pay fees for the process. Quest Trust Company is one of the top ranked self directed IRA custodians in the country. We would be happy to show you our process, demonstrate our experience and compare our fees to any other custodian. Talk to a Quest Trust Company professional advisor today.