How to Find the Best Custodian For Your Self-Directed IRA

Estimated reading time: 3 minutes(Last Updated On: October 22, 2012)

As the popularity of self-directed IRAs continue to grow, individuals who are interested in this type of retirement account quickly learn that there are many different custodians who offer these accounts.  Unfortunately, because most of these custodians are not quite as widely known as the banks, investment brokerages and other large financial institutions that tend to offer traditional IRA custodial services, it can sometimes be a challenge to find the best custodian for your self-directed IRA. Here are some tips to finding the custodian who can best serve your needs.

Experience and Focus. Concentrate your custodian search toward those who have significant experience in offering self-directed IRA custodial services, and who focus on those services. In addition, a financial institution that concentrates its efforts on providing those custodial services may be better able to fill your needs than a larger firm that offers a broad range of financial services but no focus on self-directed IRAs.

Ease of Account Setup. The process of setting up a self-directed IRA should be no more lengthy or burdensome than setting up an IRA with a traditional custodian. Quest Trust Company, for example, provides easily downloadable new account informational packages and forms on its website.

Fees. It’s important to take any potential custodian’s fee structure into consideration, but not to make low fees be the only factor you use in your decision. Expect to pay a quarterly or annual fee based on the size of your account, plus additional fees depending on the types of investments you make with your self-directed IRA.

Account Type Options. While most retirement savers will choose a traditional IRA format for their self-directed IRA, you may want the flexibility to consider other types. Look for a custodian that offers different types of IRAs. Remember that virtually any legal IRA structure can use a custodian who offers the self-directed features. Quest Trust Company, for example, offers self-directed custodial services for the Roth IRA, SIMPLE IRA, SEP IRA, and even other types of retirement and tax advantaged accounts such as the 401(k), health savings account (HSA) and Coverdell ESA.

Avoid Aggressive or Questionable Legal Interpretations. You might notice that one type of self-directed IRA not listed above is the so-called “checkbook control” or “LLC” self-directed IRA. While there are some self-directed IRA custodians who offer this type of account, the legal basis for checkbook control of IRAs is not well established. Since checkbook control over IRA assets arguably runs contrary to the other rules and regulations governing retirement accounts, trusting the tax-advantaged classification of your retirement funds to this type of account or custodian may present a significant risk.

Information and Education. Retirement account rules and regulations are always changing, so even the most experienced investors can benefit from a custodian who provides educational opportunities to their clients. Look for custodians who have educational materials on their website, and who provide in person or online seminars and educational opportunities as well.

After taking all of these factors into account you should be able to find the best custodian to help you set up and maintain your self-directed IRA.