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A self-directed IRA custodian is unlike the traditional IRA custodians that dominate the industry. Traditional custodians usually operate within the confines of narrow plan documents that restrict the types of investments that are allowed, and are sometimes liberal with the application of fees in order to keep investors on track. For long-term, buy-and-hold investors, this strategy can work out well but for others it can be stifling.
A self-directed IRA custodian, to the contrary, usually works within a much more open plan document that allows the investor the freedom to invest in everything allowed by the law. A self-directed IRA custodian acts more as an advisor. You do not have to involve the custodian in every investment decision. Sometimes your custodian and your advisor are different entities that work together to offer investors truly self-directed accounts.
NAFEP out of Salt Lake City, Utah, for example, has created plan documents that they can offer to their clients for truly self-directed IRAs which can be custodied with Trust Administration Services Corporation. You do not have to custody your IRA with them but it can save you time over trying to find another custodian. Such relationships are relatively common to the industry and your main concern should be the reputations of the companies involved and their fee structures.
Fees and Self-Directed IRA Custodians
Custodians and advisors are permitted to charge whatever fees they want and however often they want. All they have to do is publish their fee structure in a manner that ensures you see it and do not understand it. The more complex a fee structure, the less likely you are getting the best deal. When looking at different self-directed IRA advisors, ask about annual fees, transaction fees, management fees, set-up fees, and any other fees. Understand the fee structure before making your decision.
Written By Scott Janko, The National Association of Financial and Estate Planning (NAFEP)
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