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Have you recently retired or changed employers? Have you been thinking about rolling over your inactive 401k, 403B or pension plan to an IRA… because you’ll have a much greater selection of investments?
Well, choosing the “right” custodian is imperative… because they’re responsible for reporting the value of your account to the IRS every year.
I’ve worked with dozens of custodian over the last 30 years. And I can attest to the fact that they’re not all created equal.
In fact, I have heard 1000’s of nightmarish stories. Everything from custodians being impossible to get a hold of… to inaccurate 1099’s sent to the IRS. There is even a custodian that has sent inflated 1099’s to the IRS for several years in a row now.
To help you avoid these catastrophes I created the following: “7 Things to Consider When Choosing a New IRA Custodian”.
1. How long has the custodian been in business? New is never good when selecting a custodian. You should check with the US trademark search tool to see when the brand name was established. Also, check to see when their online presence was created using the Wayback machine. I would not consider a custodian with anything less than a 6 year track record.
2. Can you get a hold of them? Call your prospective custodian at 4 PM their local time and see if they get back to you the same day. Better yet, do they have a live person answering the phone? A responsive custodian is important and should be a top priority for any investor. If they can’t get back to you within 24 to 48 hours there are better options.
3. What are people saying about them? Check the custodians’ reviews. And remember… anything more than 1 negative review for every 12 positive is a red flag.
4. Are you in control of your account? Do you want a brokerage firm authorized to make investment decisions on your behalf? Full-service firms may seek to gain control of your decisions through a power of attorney. A Self Directed account requires you to authorize every buy or sell transaction.
5. Do you know what asset class you want to invest in? Many of the larger traditional brokerage firms have very limited investment options. Self Directed custodians may allow you to invest in real estate, gold, silver or even bitcoin.
6. How long do transactions take? I once helped a client with a rollover, it took her 4 days to open the account initially and 90 days to close it. The client thought that they may have been delaying in the hopes that the account holders would die before they had to release the funds. Although I did not agree, I must say that 90 days was excessive.
7. What are you going to pay? It’s always important to see their fee schedule. Some firms charge giant transaction fees. In fact, I once discovered a custodian that charged 8% of the account’s value just to close it. The deceptive notification was in small print buried at the bottom of the fee schedule.
If you still haven’t found the perfect custodian… feel free to call my Fort Worth office at 214-736-8358 and I can point you in the right direction in a few minutes or less.
