[00:00:00] Speaker A: You're listening to the preferred way, a retirement podcast brought to you by preferred trust company, the preferred custodian for all alternative investments.
[00:00:10] Speaker B: All right, welcome to the preferred way. This is a special edition where we're actually going to be talking about why investment sponsors work with custodians. Today you're going to be joined with Jordan. Hi, Jordan. How are you?
[00:00:23] Speaker C: I'm doing good, Kerry. How are you?
[00:00:24] Speaker B: I'm doing wonderful. So, you know, you and I spend a decent amount of time talking with investment sponsors and why they would want to work with a custodian. Why do they?
[00:00:37] Speaker C: Honestly, it gives them another way to raise investor capital. So rather than using cash, they can also tap into self directed iras and they either are going to get capital they wouldn't have gotten beforehand or they're adding an additional revenue source.
[00:00:50] Speaker B: Yeah, I don't know anybody that's out there that's an investment sponsor that's not raising capital. Do you?
[00:00:56] Speaker C: No. Unless they don't have a project.
[00:00:59] Speaker B: Unless they don't have a project. And we do hear that from time to time, they're in between one raise or another raise.
And even in those times, they're still prospecting. They're still prospecting. They're still trying to find individuals. So why would they want to work with us, though?
Yes, we all want to raise more capital. Right. And I don't know that any investment sponsor would say, I don't want to raise capital, but why would you want to integrate a custodian into that? What's the point?
[00:01:25] Speaker C: The main grab, I would think, from it is captured capital IRA funds. Once they're there, if it's a good product, they typically go back to reinvest more money.
[00:01:34] Speaker B: True.
[00:01:34] Speaker C: Because with cash, as you know, it walks out the door as soon as you start to get some interest payments in and you have to chase that money down. For iras, it's always going to go back to the custodian and it's held with.
[00:01:45] Speaker B: Yeah. So with the IRA, say I call somebody and I'm going through my normal process with them. I'm an investment sponsor and I'm going to talk about my product. Right. We're all going to market ourselves. And then the next natural question is you're asking them how much they want to invest and how do I integrate into that, an IRA?
[00:02:08] Speaker C: You just have to ask the one additional question. If they have an IRA or if they want to use a retirement account to make the investment, sometimes they may be short on cash to meet your minimum investment amount. And they may have that capital sitting in a retirement account either with a trial schwab, TD Ameritrade, or they may have an old 401K that they forgot about that they want to roll into a retirement account.
[00:02:28] Speaker B: And is it okay for them to ask, like, are they in thinking about it from an investment sponsors perspective? Like, I know my routine. My routine is I market my product.
I send out the docs to the investors. I collect the cash that's coming in, whether they're investing with a business account or cash or joint account or maybe it's a trust. And now all of a sudden, I'm incorporating this additional question of, do you have a retirement account? Can I ask that?
[00:03:00] Speaker C: Yeah.
[00:03:01] Speaker B: I don't have to have a special license to do that.
[00:03:03] Speaker C: No, because you're not giving them any investment advice. If you were to be telling them you need to use an x amount of dollars from your retirement account, you know, that's stepping into Ravis or type of. Yeah, but if you're just strictly asking the question of where they want to pull their funds from, you're just asking the question.
[00:03:21] Speaker B: Yeah.
[00:03:21] Speaker C: Their choice, how they invest it, if they choose to invest it with that product, you know, it's. Yeah, it's up to them.
[00:03:27] Speaker B: And it can be scary. It can be right, because it's something that you've, you probably have not done. It's not part of your process. But it's one question, just one.
[00:03:36] Speaker C: And if you're partnering with a company like preferred trust, you have our team as well. We're the experts with the self directed iras. Send them to us. If you don't want to get into the weeds about what kind of account they should open, how to transfer the funds, don't do it.
[00:03:48] Speaker B: Can I transfer the funds?
[00:03:50] Speaker C: Just you use your console page. That is provided to you. Let us handle it. We'll talk to them. We'll do the onboarding. We'll make sure they have the funds available and we'll work through the processes with them. You don't have to be an expert in iras to ask the question as an investment sponsor.
[00:04:05] Speaker B: And that's really key because that's scary. There's two factors in that that I look at, and I'm like, do I want to do this? One is making me ask, and I think the reason why that's scary is because you don't know what's going to come back at you. And nine times out of ten, it's probably going to be more questions because I think the vast majority of us do not realize that we can use our iras in investing in alternative assets. So let's talk about that for just a second, because let's say I ask the question. As an investment sponsor, I've decided to incorporate this into my sales pitch. I now have my reps asking the question, would you want to consider investing using an IRA or retirement account? And now that I've asked the question, naturally that person's going to say, I can do that, and you're going to have to say, yes, you can, and we work with somebody. Sounds like that's what you're telling me, is the best approach to utilize us as almost an ancillary department to your company.
[00:05:08] Speaker C: We want to integrate as much as we can into the processes of the investment sponsor. We don't want it to be an extra step where nobody wants to do it because it's, you know, we have to talk to this person and that person. We don't have a process. We try and streamline it so you don't have the issues. And so it's just as easy as clicking a button, filling in some information. Preferred trust handles everything else.
[00:05:28] Speaker B: Perfect. So the client comes over to preferred trust. So now is it a mutual client or is it still our client?
[00:05:34] Speaker C: It's still your client, but it's mutual once the account is open and funded, and it's always going to revert back and be coded to you guys. So within our own CRM, any account that comes over from you guys will be coded as investment sponsor XYZ. So that one, you know what clients we have mutual, and we know when we're talking to them who they're coming from and what investments they're making.
[00:05:57] Speaker B: Yeah, makes sense. So now I've got two pipelines going. I basically have a cash pipeline, which is my, you know, make the intro, fill out the documents, get the cash. I've got that pipeline from an investment sponsor, but now I've created this additional pipeline over here. How do I know what's in it?
[00:06:16] Speaker C: So we have really great reporting. So you can see leads and your accounts. So as far as leads go, as soon as they fill out that form and they're going to have a consultation with preferred trust, you'll see the process in that report up until the account is open and funded. Once the account is open and funded, the investment sponsor receives an account report where they're able to see anybody who has an account with them with preferred trust, as long as they have an interested party designation form on file, we allow you access to see whoever's in there, as well as how much money they have to invest that's sitting in cash.
[00:06:47] Speaker B: So when will I know how much.
[00:06:49] Speaker C: They have in their cash account? Yeah, as soon as the account is open and funded, we'll provide you an available amount to invest, and then you'll just have to take into consideration once they make the investment with you, are they going to use all of their funds to where there is zero cash left, or what is their investment plan? If they do have cash in the account, you'll be able to see how much cash is in there, and you'll also be able to see when they receive interest payments on their investment with you. You'll be able to see if they make any sort of contributions, take any distributions. So you'll have a notice in there of how much cash funds is liquid in their account.
[00:07:22] Speaker B: Okay. So from the reporting standpoint with cash clients, you know, it's super easy. I'm on the phone with them. I talk to them. They tell me they're going to invest 50,000. I earmark them for 50,000. I assume the cash is going to come in for 50 with an IRA account. If the client says to me they plan on investing $50,000, what's the likelihood that it's actually going to be $50,000?
[00:07:43] Speaker C: If they really want it to be the $50,000, they'll have to take into consideration. One, if their outgoing custodian has any fees to transfer out the account, if they're transferring their full account from a traditional investment to a self directed, they're probably going to have some closing costs for that account. So they're going to have to keep that into consideration.
[00:08:03] Speaker B: Okay.
[00:08:03] Speaker C: And then preferred trust also has fees associated with opening the account and minimum balance requirements. So at the end of the day, that 50,000 that they said that they had in their account may not actually be 50,000. With preferred trust, there are some fees that they can pay with a debit or credit card so that they have more money in their IRA balance.
Like when you're transferring money anywhere, you have to take into consideration what fees you're going to be charged.
[00:08:25] Speaker B: Absolutely. Absolutely. Now, when they move their retirement accounts over to preferred, are they moving their entire accounts or is it a portion?
How is that determined? Is that something you guys determine with the client? Like, are you giving them any advice?
From the custodial standpoint, we don't give any advice.
[00:08:45] Speaker C: We really have to figure out what the client's goal is and we also have to take into consideration, do they have any actual investments with the accounts that they have at their Charles Schwab TD Ameritrade. And if they are going to liquidate those investments into cash, if they're wanting to remove everything from the stock market, liquidate everything, move it all into cash to send a preferred trust, then that might just be their new strategy is to only invest in alternatives, but their strategy is their business. We're just here to help facilitate the transfer and opening of the accounts.
[00:09:13] Speaker B: Makes sense. And then from that standpoint, from the investment sponsor, we're used to facilitating tax documentations out to our cash clients.
From the custodial perspective, are the documentation, the tax documentation going to the client or the custodian?
[00:09:30] Speaker C: It goes to the custodian.
[00:09:32] Speaker B: Okay, so it comes into the custodian. So the client then has really entered into a tax sheltered retirement account. Their investment. That's very interesting, because from an investment sponsor standpoint, I'm now saving my clients from having to pay taxes exactly on their investment.
That could be huge. That could be a game changer.
Kind of make the investment sponsor a bit of a hero in this whole scenario.
[00:10:00] Speaker C: Especially if the clients do have a Roth where anything that they're making off of that investment is tax free. It's a no brainer, especially if you're in a higher tax bracket, rather than paying the taxes on your investment every year. Might as well throw it into an IRA if you have the option to.
[00:10:14] Speaker B: Very interesting. So from an investment sponsor standpoint, working with a custodian.
Let's talk about custodians in general.
Self directed custodians that allow you to invest in alternative assets. There's a few of us out there.
[00:10:31] Speaker C: There are.
[00:10:31] Speaker B: And we all work with investment sponsors differently, some better than others.
Some probably will give you the earth, the moon and the stars, or at least promise you all of these things that are going to happen. Right? And then there's reality. And, you know, one thing that I know that we pride ourselves in at Preferred trust is making sure that the client, your clients, because they are your clients.
We say this frequently. No one wakes up in the morning and says, oh, let me open a self directed IRA today because I think I'm going to go invest in an alternative. That's just not a natural progression of opening up a self directed IRA.
[00:11:13] Speaker C: It's like you like to call it. We're the necessary evil.
[00:11:15] Speaker B: Yeah, we kind of are. We're like that broker in the middle, right?
The IR's says that you have to work with a licensed custodian in order to hold custody of your assets in a retirement account. And we are licensed and regulated to do so as other custodians are as well. I think the difference, I find the biggest difference with preferred trust because we work with other custodians. We see the incoming custodial accounts, we see how accounts are held, we see talking with investment sponsors, the pros and the cons of working with custodians. And what would you say are the three biggest pros to working with preferred trust, maybe over another custodian?
[00:11:57] Speaker C: I would say that we have the mindset already on how investments need to be processed quickly. So we'll, once we have clients funds here and we have all of their documentation allowing us to transfer funds for their investment, we process that next business day. We also process incoming wires for their, their interest payments. Same or next business day.
[00:12:18] Speaker B: Yeah.
[00:12:18] Speaker C: So we keep in mind that one clients want to make sure they're getting their interest payments and they want it posted to their account. And we also don't want to make the investment sponsor wait for those funds either, because what if they're on a deadline for their fund or their project to be funded and they're just waiting for Joe Schmoe's.
[00:12:34] Speaker B: Absolutely.
[00:12:35] Speaker C: Funds, then they're going to have to kick Joe out, find someone else. And then Joe's upset. The investment sponsor is upset.
[00:12:40] Speaker B: Yeah. So we don't hold the funds hostage.
[00:12:42] Speaker C: We don't hold the funds hostage.
[00:12:43] Speaker B: And that's a huge one, especially for investment sponsors because typically they're waiting seven to ten days to receive those funds.
So we are next day.
[00:12:53] Speaker C: Exactly.
[00:12:54] Speaker B: So that's number one. What's the second?
[00:12:55] Speaker C: Number two, I would say is our hold times, our processing times still in general. I mean, if you call most other custodians, you're going to be waiting on hold an hour, two hour, you're on the phone, you get someone on the phone and all of a sudden you're hung up on whether it's by accident or not. Who knows? We experience that on the preferred trust side when we have to call for the outgoing transfers and if we're getting those hold times. Yeah, we wonder what.
[00:13:20] Speaker B: Certainly the clients are as well, right? Yes.
[00:13:22] Speaker C: So I would say that is another, that would be number two, is just the way we communicate with our clients, how quickly we can get turnaround to communicate with them. We're not going to keep them hanging and keep them waiting to get information.
[00:13:35] Speaker B: So we have cardinal rules.
[00:13:36] Speaker C: Yes.
[00:13:37] Speaker B: Preferred trust. Cardinal rule is it's super simple. We work together as a team. So you're not going to be assigned a person. We have cross trained departments, so if we're down a body or two in one department, another department picks up the pace.
There's no real downtime. All calls, all emails are responded to within a 30 minutes timeframe. That's huge.
If we're not able to get the call immediately when it's coming in, trust me, you will be responded to quickly. That level of customer service, from an investment sponsor standpoint, we need to meet them at their level and that's super, super important. So that's number two. And I know it goes without saying, all of us want to say we have the best customer service out there.
Read our reviews. Our clients are very happy. They're not paid actors.
These are the experiences that they're having. So that is very important. What do you think the third one is? From an investment sponsor standpoint, what am I going to get at Preferred trust that I'm not going to get in another custodian when I work with you?
[00:14:41] Speaker C: I would say transparency. So transparency in the sense of the reporting that we provide, you have access to the director of operations at any given time? She's not. She's probably the easiest person to get a hold of, I would think so. You just. You have options to get to the root of your problem quickly.
[00:14:59] Speaker B: Yeah.
[00:14:59] Speaker C: And we're not trying to hide anything from the investment sponsors. We're not going to hold the funds hostage. We're not going to not give you an update on your client's account unless they specifically say not to talk to you about your account. Then obviously we're going to go by what the client says. But we don't want it to be a guessing game. We want to be as open as possible. We want you to have access to the training materials, the videos, the any other collateral necessary. We want you to have it. We're not trying to keep it a secret. Obviously we have our trade secrets, that it's exclusive if you're a partner with us. But in general, we don't want to keep things close to our trust.
[00:15:32] Speaker B: Absolutely. And reporting is huge because we talked about this just a few minutes ago about these two pipelines. You've got your cash pipeline and now all of a sudden you're creating this IRA or retirement plan pipeline and you need to know what's in it.
[00:15:46] Speaker C: Exactly.
[00:15:46] Speaker B: From an investment sponsor standpoint, we have to plan for the future. What are we going to be able to fund? When are we going to be able to fund it. In order to do that, we need to know what's going on. So from the reporting standpoint, how much information will the investment sponsor be able to see?
As we're going through the process of helping them build this pipeline, they'll be.
[00:16:06] Speaker C: Able to see the client and lead process from a to z. So they'll know if the client is transferring in more funds. If we're waiting on docs, if we've sent them out their investment documents and they were waiting for them to sign them, yeah. So a lot of times that is the main thing you're waiting to see when you're gonna get those funds. Your client is telling you that they signed the docs, but on our end, we haven't received them. So you go into the portal, you can see, okay, the docs were sent out two days ago, still waiting back. Their follow up is gonna be tomorrow morning.
[00:16:32] Speaker B: Absolutely.
[00:16:33] Speaker C: You'll be able to see all of it. So if you want to call us and ask for clarification, you're more than welcome to, but a lot of times you won't have to. And the greatest part is you get access to it. Twenty four seven. And it's real time updated. So say at 1045, one of our reps talks to your client. 1046 happens. The notes are updated. You can see it instantly.
[00:16:51] Speaker B: That's awesome. Okay, so I know where my pipeline's coming from. So, transparency, I might even go out on a women's day. That's probably the strongest aspect of all of this, because as an investment sponsor, you're looking to raise more capital. And in order to raise more capital, you have to think outside of the box and get outside of the box that you've been in for who knows how long. And so, cash, from an economic standpoint, it runs out. You get a lot of it invested in investments, and you stop thinking about this little IRA that's sitting over here. Old 401K. Dust that thing off the shelf. Ask the question from an investment sponsor standpoint and get your secondary pipeline going so that you can move into 2025 and be ready to go. Right. I mean, it's a huge opportunity that's wasted if investment sponsors don't consider it.
[00:17:46] Speaker C: And your clients are already coming to you or to the investment sponsor looking to diversify their portfolio, whether it's their cash portfolio or if it's their retirement.
[00:17:54] Speaker B: Portfolio, they don't even know.
[00:17:55] Speaker C: Right? So if they know that all of they do have assets from their retirement in a Charles Schwab and they know about the alternative because they're contacting you. Why not add that extra layer of diversification to their portfolio, if you can.
[00:18:07] Speaker B: With tax sheltered either tax deferred or tax free income? So that is absolutely amazing. Well, wonderful. I mean, no reason why an investment sponsor would want to work with preferred trust.
[00:18:18] Speaker C: I don't think so.
[00:18:19] Speaker B: Sounds great.
Thank you for joining us today. If you liked what you heard, subscribe to our channel. Our channel has a ton of information that you can delve into to learn more about self directed custodians, iras in general, and anything company partner related.
[00:18:37] Speaker A: Thanks for joining us for another episode where retirement savers meet alternative investments. Can't wait for the next episode. To learn more, visit our
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