Is Your IRA Custodian Helping or Harming Your Retirement Goals?


Is Your IRA Custodian Helping or Harming Your Retirement Goals?

As a savvy investor, you recognized that Trust Deeds investments with Ignite Funding are a great vehicle to elevate your retirement savings strategy. However, let us ask you one important question – has the process to invest with your retirement account been as easy as investing with cash?

For over a decade, Ignite Funding has been working with Self-Directed IRA custodians to fund client investments, so it is safe to say that at some point in time we have worked with them all. However, if you look at our references, you will notice that it is a very short list compared to what’s currently out there. The reason?

Not all Self-Directed IRA custodians are created equal, affirms Misty Bethany, Ignite Funding’s Chief Compliance Officer. “We do not work with any custodians that would cause us to lower our standards for quality of service, and neither should clients.”

If you have only worked with one Self-Directed IRA custodian, you might not know any different. Review the two scenarios below to help you determine if your custodian is more of a hindrance than a help to meeting your retirement goals.

Scenario 1: You Constantly Miss Out on Investment Opportunities

At Ignite Funding, investment opportunities are filled on a first come first serve basis by investors. This means that if you see an investment that you want to participate in, there’s availability, and you can get your investment paperwork and funds submitted on time, you should be able to invest in it – no ifs, ands, or buts. Unfortunately, this is not always the case for SDIRA investors.

As you may already be aware, SDIRA custodians can be notoriously slow to process investment paperwork and send client’s qualified funds to finance investments. Often, it can take weeks, even multiple months before Ignite Funding receives client’s qualified funds.

“This unnecessary lag in processing time mostly stems from confusion and disorganization by the custodian,” says Ms. Bethany. “When we submit investment direction forms, we get a different response almost every time – ‘they misplaced it and need it resent’, ‘you didn’t complete the right form’ even though that was the correct one a week ago, ‘they don’t fund these types of investments’ even though this is their client’s 3rd, 4th, or 10th Trust Deed investment. Eventually the client gets reeled in and wastes their time straightening things out, and by then the investment may no longer be available.”

To remain competitive in the lending industry, Ignite Funding cannot afford to wait months to finance a loan. Unfortunately, this results in many SDIRA investors missing out on investment opportunities.

For example, when Ignite Funding is funding a loan prior to closing, clients can have as little as a matter of days to get everything submitted. Most SDIRA custodians cannot perform under these time restraints, and clients will therefore have to forego these opportunities. Another example is when a SDIRA investor is placed on an assignment position post-closing and it takes too long for a custodian to get around to sending funds, the position will be forfeited to a client that can finance as soon as possible.

Scenario 2: You Experience Weeks or Months of Interest Downtime

When it takes your SDIRA custodian weeks or months to fund your investments, that is time your retirement funds are not earning interest. When your SDIRA custodian takes weeks or months to process your investment pay-offs, that is additional time you are waiting to reinvest your retirement funds that are not earning interest. When your SDIRA custodian takes weeks or months to process your interest payments, you are losing the ability to compound tax-deferred or tax-free interest in your retirement account.

“When you look at the bottom-line, SDIRA clients are not earning the annualized 10% to 12% returns that they deserve on these investments,” states Lori Agar, Ignite Funding’s Controller. “It’s disappointing to see this trend considering how much effort Ignite Funding staff and the clients put in to make these investments happen.”

Buyer Beware: If you are working with a certain custodian because they offer lower fees, take a look at what you are “saving” versus what you are sacrificing in quality of service. Do the “savings” exceed what you are losing in returns due to increased interest downtime caused by the custodian? Probably not…

It is important to keep in mind that per IRS regulations, SDIRA custodians cannot earn a commission from their client’s investments. This means that their main source of revenue - to run their business and provide clients with the ability to build their retirement future’s - is through their administrative fees.

What can you do stop the cycle of frustration?

If you find yourself having to handhold your IRA custodian throughout the entire investment process, it is not too late to consider making a switch. There are better options out there!

For example, Ignite Funding’s affiliate company*, Preferred Trust Company, was established in 2007 because industry leaders recognized that there was a significant need for a SD-IRA custodian that is run with a real estate state of mind.

“When we work with Preferred Trust Company, all investment related transactions – fundings, interest payments, pay-offs – are processed within 24 hours of receipt,” confirms Ms. Bethany. “This makes it so much easier for clients to keep their retirement funds working for them with no additional effort.”

If you have any further questions about the quality of service you deserve from a SDIRA custodian and where to find it, give your Investment Representative a call today!

* Preferred Trust Company is separately operated and regulated as a licensed IRA custodian.

By Stephanie on Jul 14, 2022 8:00:00 AM | | | 0 Comments