Self Directed IRA Administrator
A self-directed IRA advisor, or administrator, is not like a traditional IRA custodian. A traditional IRA custodian tells you what sorts of investments are open to you according to his or her company's plan document. Traditional plan documents usually exclude entire classes of possible investments in favor of a few that require the least administration on their part. This is not mean or slanderous, it is simply the truth.
The first generation of plan documents were written right after the ERISA laws established the IRA. Major financial institutions with a stake in how investors invested wrote those documents in a way that favored their business models. Subsequent plan documents simply followed their lead rather than starting from scratch. This is why so many people think of IRAs as ponderous, slow-moving but highly tax-favorable accounts.
In contrast to traditional IRA custodians who tell you what you cannot do, self-directed IRA advisors tell you what is legal and help you plan a strategy. A self-directed IRA advisor is not a nanny, however, so you had better be prepared to do your due diligence. That is what "self-directed" means. You do not have a restrictive plan document and only a handful of available options to keep you in line.
Why Checkbook Control Is Important
When potential investments are time-sensitive, such as most real estate deals on hot properties, you do not have the time to run your plan by a custodian to get their authorization and get them to act. With checkbook control over your self-directed IRA, you have the ability to take quick action when quick action is required. This is why due diligence is so important--because you have direct access to your account, which can be dangerous with some investors.
Written By Scott Janko, The National Association of Financial and Estate Planning (NAFEP)
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