Top 5 Questions about Self-Directed IRA's

[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. [00:00:09] Speaker B: Welcome to another edition of the Preferred Way, the preferred Trust Company podcast. And once again, I'm here today with CEO Kerry Cook, and I need you to stick around to the end today because we have a little something extra for you at the end. So don't turn off. Hello. [00:00:26] Speaker C: Okay. I'm a little taken back, Chris, I have to be honest. Why are you wearing those flamingos? [00:00:33] Speaker B: I have my little flamingo ears, actually. I came in here not remembering I had them on to begin with, but we have preferred trust does. Every year we have company goals. We have goals, annual goals for the year, and then we have quarterly goals, and we meet. The entire company meets at the end of every quarter, the first Wednesday after the end of the quarter to see if we've reached our quarterly goals, to see how we're doing. Looking forward to those annual goals and the next quarter. And so this has a little something to do with that. So if you come to our next podcast, perhaps I'll share a little bit more about that. But that's why they're on today. I forgot to take them off. [00:01:11] Speaker C: Let's leave them on. They do look good, and actually, they're. [00:01:14] Speaker B: Not heavy, so they don't hurt or anything. [00:01:16] Speaker C: So I have to ask you your department's name. Why flamingos? [00:01:21] Speaker B: Oh, the fiduciary flamingos. Right. [00:01:24] Speaker C: Oh, that's not hard to say that. Say that ten times fast. [00:01:27] Speaker B: Fiduciary flamingo. Fiduciary. So we are a financial institution. We do have certain fiduciary requirements and expectations. So that's kind of how the flamingo came along. [00:01:39] Speaker C: Yeah. So, yeah, we definitely like to have fun here. We are a financial institution, but we do have to make sure that we are keeping it light. [00:01:48] Speaker B: Work hard, play hard. That's always what we say. Any employee will tell you that. So we'll give you the best all the time. And then when we relax, we relax. [00:01:57] Speaker C: Yeah. That's awesome. [00:01:58] Speaker B: Yeah. [00:01:59] Speaker C: Well, good. [00:02:00] Speaker B: So we're going to switch it up today a little bit, and Carrie's going to ask me some questions today. [00:02:05] Speaker C: Yes. [00:02:06] Speaker B: Yeah. [00:02:06] Speaker C: Yes. You take a lot on the front end, that's for sure. And we get so many questions from clients and from company partners, from investment sponsors that are out there looking for custodians. So we thought we'd take an opportunity to kind of address some of those. And since you're fielding them. [00:02:23] Speaker B: Okay. [00:02:23] Speaker C: I figured I might as well. Just keep lobbing them at you. [00:02:26] Speaker B: Okay, let's go. [00:02:27] Speaker C: Is that fair? [00:02:27] Speaker B: That's fair. [00:02:29] Speaker C: So the first one, how long does it take for my funds to move from one custodian to another? [00:02:36] Speaker B: Ah, that question. That. That question out in the bubble that we always get. So really it depends. We have transferred money as fast as 24 hours, and then other funds can take as long as two weeks. It's not up to us. We transact very quickly and initiate that transferred from your current custodian for you. But it's really up to them. Obviously, no financial institution likes to lose their clients or likes to lose money, so they are going to take their time on that. And they have processing times, obviously. But what we do on the preferred trust end is we make sure when the funds are sent or when the funds request is sent that we are continually following up. So every other day, we're calling, we're emailing, we're finding out where in the process they are. But we also encourage the clients, don't be afraid to call and find out, too. You are the IRA account owner. These are your funds, and we ask you to play a role in that as well. And sometimes they will talk to you a lot more easier than they will talk to us. If you're asking them to move your money, then they can't really tell you no, they're going to move a little bit faster. It can take anywhere from 24 hours to two weeks. But we move very fastly when requesting them. [00:03:56] Speaker C: And I'm gonna add a little something to that. As the CEO of the company, I want clients to know and investment sponsors to know that we do not get paid, we do not charge our fees until the funds arrive. [00:04:10] Speaker B: That's correct. We don't even open the account. [00:04:12] Speaker C: Exactly right. [00:04:12] Speaker B: We can't open an account. Like I mentioned in the beginning, being a financial institution, there are just certain guidelines that we have to go by. And opening an account for something we don't have received, we don't have funds for. We don't do that. So we cannot get paid. We can't take a fee or anything like that until those funds arrive. [00:04:30] Speaker C: Exactly. So don't think that our staff is not following up, because we absolutely are. That's the only way that we make money. The second point that I want to make on that, just from, again, a CEO perspective, is that we make money on the cash that sits in accounts. And so if your previous custodian is kind of holding back, it's because that's how we make revenue. As a company, cash that's held and fees that we charge. So we are not unlike any other. [00:05:02] Speaker B: Correct. [00:05:02] Speaker C: So some of them may have a 30 day policy, a two week policy, a seven to ten day processing policy. There's reasons for that. We have to make sure that we can liquidate or become liquid enough to be able to support the distributions that are heading 100%. Okay. All right, so we're going to move on to the next question. [00:05:19] Speaker B: Question two. [00:05:20] Speaker C: Can I invest in digital currency? [00:05:23] Speaker B: Why, yes, you can. You absolutely, 100% can. In fact, preferred trust company was one of the first companies to allow digital currency investments in a self directed IRA. And not every custodian does. We all kind of make our own choices about what we feel, especially the risk that comes with it as a financial institution. So not every custodian does it, but we do. So you absolutely can. We pride ourselves in security of the digital currency. You can go directly through us, you can buy bitcoin, ethereum, litecoin. I mean, there's hundreds that you could buy. And the digital currency is stored uniquely to your IRA on a device that's only your own. So hard cold storage. We're not linking to anything. It's not a hot wallet. You have your own wallets assigned to your IRA for whatever type of digital currency you want to purchase. And that's. Yeah, the security end. I won't talk about much on it because we have to keep it secure. But 100% you can invest. And the really cool thing about investing with preferred trust is there is just a flat transaction fee to make the purchase. [00:06:34] Speaker C: So. [00:06:34] Speaker B: Dollar 200 flat. So we're not making any money off of your investment. [00:06:38] Speaker C: Yeah, it's awesome. [00:06:39] Speaker B: Yeah, it's awesome. So give us a call if you want to learn more. [00:06:42] Speaker C: Absolutely. So the other thing that we get a lot is I have an investor, they'll call and they'll say, I have an investor that wants to invest using an IRA, but I don't know what to do. How do I start this process? How does this work? [00:06:56] Speaker B: As an investment sponsor? [00:06:58] Speaker C: As an investment sponsor, I'm calling you because all of a sudden I have all these clients saying I want to invest using my IRA. [00:07:03] Speaker B: Untapped capital, y'all. [00:07:05] Speaker C: Absolutely. What do we do? [00:07:06] Speaker B: Yeah, well, I just don't think it says wide known. The client may not realize it or the client does realize it, but doesn't know if the investment sponsor allows it. So as long as they're on the same page, absolutely. We'll take a look at the investment. We'll ask for some documentation about the investment for a compliance standpoint for us to look at. Is it allowable inside the IR's? That's our job from an IR's standpoint, is to really look at the investments. What is it? Is it through an LLC, an LP? Is it a real estate investment? What's behind the investment? We kind of do our due diligence, and then we make that connection. And maybe you have more clients that want to use their IRA. Maybe it's not just that one. Maybe your cash investors have these retirement accounts that they can use that they aren't doing anything with, and we can kind of increase that and expand that for you. So there's definitely a bigger conversation to be had than just that one investor, I think. Absolutely. Give us a call. Because, yeah, we have this whole other side that can work with the investment sponsors to really see how they can raise additional capital for their funds for whatever deals they're doing. [00:08:17] Speaker C: Yeah, we like to call it captured capital. [00:08:19] Speaker B: Yeah, captured capital. Right. [00:08:21] Speaker C: Because, yeah, like cash as an investment sponsor, cash comes and goes as your investments turn. But with IRA funds, clients are receiving that income back into their IRA. [00:08:32] Speaker B: Correct. [00:08:32] Speaker C: It pays off. It goes back into the IRA. It's easier to recapture that from an IRA than it is from cash. [00:08:39] Speaker B: Yeah. Because really, yeah. When you have an IRA, you're really not taking those funds out and doing something else with it. It's used for your retirement. Absolutely. And so unless you're above age 59 and a half, you know you're going to get penalty for taking the funds out. So really, you know, you need to be doing something with it, just leaving it in cash uninvested, you know, turning that over into another investment or additional investments. Yeah. Captured capital 100%. [00:09:07] Speaker C: Absolutely. So if you're an investment sponsor out there and you're looking for a custodian to work with, give us a call. We can certainly help you raise more capital with your clients by utilizing an IRA as an option to invest. [00:09:19] Speaker B: And it's easy, like, it's not a hard process. I think that sometimes that's why investment sponsors kind of step back and go, well, I don't want to go through all of that. Cash is very easy. It's a lot of work. It's a lot of work. [00:09:28] Speaker C: A lot of money. [00:09:29] Speaker B: Right. The work is on our end. Let us do the work. We've made it very fast and efficient, and we help the client 100%. We don't leave that on you. You do the investment. Let us handle the retirement account. So we certainly, in today's day and age, can make it a lot quicker than, I think, what was years ago, and what people thought was a really arduous, difficult process, very streamlined. [00:09:55] Speaker C: Are you saying to me as an investment sponsor, that I could pretty much add an entire department for free by utilizing preferred trust? Because you're going to process and make sure that those funds are moved. So are you building a pipeline for me, basically, if I make the ask? [00:10:14] Speaker B: But that's what we do. I mean, remember, everyone, nobody wakes up in the morning thinking to themselves, God, I really want to open a self directed IRA. That's not how it happens. What you're thinking about is the investments. How can I better my retirement? What can I invest in? And so then you're looking for those investments, and when you find that being able to fund that investment, that option of doing it through your retirement account is huge. So we, you know, that's what we do. That's our specialty. We know how to open the accounts, transfer the funds, make the investments. So, yeah, we're taking that off of the investment sponsor. They shouldn't be worried about that. That's not their job. We can help market to your clients, too. Like ask your clients. Have you ever asked them before? Hey, have you ever thought about investing with a self directed IRA rather than cash? I think your investor base. I think that's a untapped. Yeah, untapped capital. You've got that base already there. So ask them that simple question. [00:11:10] Speaker C: Absolutely. [00:11:11] Speaker B: Yeah. So, yeah, we'll do it all for you. You don't have to do anything. And we'll keep you informed along the process. You won't be having to ask the questions. We'll give that information to you and let you know exactly what's going on with those investors. [00:11:23] Speaker C: That's really cool. [00:11:24] Speaker B: Yeah. [00:11:24] Speaker C: All right, so how will you help me decide what investments I should choose? [00:11:32] Speaker B: So you're the client opening an IRA. You gotta make those investments. So that's one thing. I think sometimes the waters get muddy around that, because the clients that do open a self directed IRA sometimes don't realize that they are 100% in control. So we are not licensed to give financial advice, recommend investments. We don't have any investments. We don't sell investments, so that you have to find on your own. You have to go out there and figure that out. So we do get that question very often. Well, now my account's open. It's ready to go. I'm ready to go. What do I do? Well, you got to find that investment. So a lot of times finding that investment first, then getting that account ready to go is super important because we can't do anything with it for you. It's just going to sit in cash until you make that decision. So, yeah, you gotta be. [00:12:21] Speaker C: Yeah. So let's talk, let's break that down just a little bit more. [00:12:24] Speaker B: Yep. [00:12:24] Speaker C: So I need, you're telling me I need to move my funds from one custodian to another custodian, right. Because one is traditional investing. [00:12:32] Speaker B: Right. [00:12:33] Speaker C: And one is alternative investing. [00:12:35] Speaker B: Correct. [00:12:35] Speaker C: So you're saying that preferred trust holds these alternative investments. [00:12:39] Speaker B: Correct. [00:12:39] Speaker C: You also said nobody wakes up in the morning and says hi to self directed Ira today. Nobody says that. So if nobody's saying that yet, I know that on the traditional side, I'm kind of losing my shorts a little bit. Do you help me find these alternatives? [00:12:58] Speaker B: Well, what's kind of interesting about preferred trust is we do have what we call an investment community. So once your account is open and funded, you can go on our investment community, the first thing we do is educate you about what you can invest in. So from an IR's standpoint, what's allowable in an IRA, what can I invest in? Well, we all know stocks, bonds and mutual funds. That's over here, right in this bucket now over here for the diversification is everything else, right. It's probably easier to tell clients what they can't invest in than what they can, right? And there are very few things. Collectibles is something you can't invest in. So artwork, rugs, things like that. Alcohol, can't track your consumption of alcohol. [00:13:41] Speaker C: Darn. [00:13:41] Speaker B: And s corpse. Otherwise you're really the sky's the limit. We have clients that have become very, very creative. So yeah, that alternative investment space. So we have a lot of clients that have been successful in the alternatives. And so they kind of tell us, hey, I've had, and we can see it, we can see the returns coming back into their account. So that investment community kind of encompasses the companies that our clients have had success with, that our clients feel comfortable with, that they've reinvested with numerous times, can use that to kind of do your own due diligence, ask your questions. It's a guide on to what you can and can't invest in. And some options. People say, oh, I want to invest in real estate. There's just so many avenues of real estate. And so we give some of those examples of different types of real estate investments. [00:14:33] Speaker C: Yeah, yeah. Client successes are shared with us. [00:14:36] Speaker B: That's right. [00:14:36] Speaker C: I mean, that's what our investment community is all about. 100%, which is very different than other custodians. You know, I secret shop from time to time. I'm sure they do as well. And it used to be front facing, but I think what's happened is so many other custodians were just listing every single investment sponsor they could to make it appear as if they work with all of them. [00:14:57] Speaker B: Right. [00:14:58] Speaker C: And they very well may. But that's. That's a little misleading. Yeah, maybe misleading in the sense that, you know, that that is not successes. That is, here's the thousands of companies that you could work with. [00:15:12] Speaker B: Well, you can google that. Yeah, that's really easy. [00:15:14] Speaker C: And so, you know, please just make sure that you do your due diligence, whether you're looking on our investment community or whether you're looking on another custodian's platform. Just do your due diligence. [00:15:23] Speaker B: There's no guarantee. [00:15:24] Speaker C: Yeah, always risks involved with investments. And then this last one, because I think this is really important. And unfortunately, we see this a lot when it comes to precious metals. Investing clients will say to us, do I need to invest my. And move, move, first of all, my entire retirement account from big box Schwab TD ameritrade over to you to invest? Or can it be a portion? And I mentioned the precious metals because unfortunately, we see a lot of that. So give me some sort of idea of why is that happening? Why are those questions being posed of us? And is there some elder abuse involved there? [00:16:05] Speaker B: So I think the most important piece of that question that you asked to begin with is the answer is no, you don't have to move 100% of your account. So let's say you have $100,000 over at TD Meritrade, and you don't have to move all 100,000. You can take a couple thousand and move it over and get started with your investments. See how you do, see if you feel comfortable with it. And later on, you definitely can invest more. You can move more over. Thank goodness the IR's says transferring from one IRA to another. That there's no limit to that necessarily. But I think it is important. If you are going to move your entire account, you do need to be careful. Liquidity in alternative investments is not as easy as it is if you're invested in the stock market. I mean, that's just the way it is. It's not a push a button, right? It's not a push a button, exactly. So if you do need liquidity, it's going to take a little bit of time. And so looking at it from, you know, somebody who's in that RMD age required minimum distribution by IR's standards. They're in that, you know, 73 age range, and they know they're going to have to take money out of their account. Do you want to invest it 100% in anything, you know, and lock it up? And then when you get ready to take a minimum distribution, the money's not there, and then you could face tax penalty. You don't want to do that. It's important. I think another piece and a caveat to that is to have a conversation with your CPA or your tax specialist. Right. So that they can kind of guide you through that. That's one thing that preferred trust company we don't do. We're not tax specialists. We can't give tax advice. But there's a big element of having retirement accounts that have that tax portion attached to it. So having that conversation is important. Yeah. You don't. And having all of your eggs in one basket, that's one of the things that we, I think is important. We provide a lot of education on. Diversification is key. We talk about that. So leaving some money in the stock market, it's not a bad thing, necessarily, you know, diversifying across all types of alternatives and. Yeah, exactly. [00:18:14] Speaker C: Absolutely. [00:18:14] Speaker B: So when you're, when you're thinking about that, you know, I think sometimes we, we hear these sales pitches late at night, these infomercials and things like that, we've all gotten sucked in at one time or another and bought something online that maybe you thought later on, whoops, maybe I shouldn't have done that. But when you're doing it with your retirement account, that's a big deal. And so I think maybe doing a little bit more due diligence on that end. Right, exactly. [00:18:43] Speaker C: Ask family members what they think. [00:18:46] Speaker B: Look at other companies in that industry or in that sector to find out what's going on a little bit there. You mentioned precious metals. We do see that a lot. We see people come in, you know, they've talked to a precious metals company and perhaps been convinced that, you know, if they don't buy all their precious metals today, Armageddon. Yes. Right. Money's going to be lost out the window. You're going to be, you know, in deep trouble. Yeah. And then, you know, you have these rush investments that are made, and then six months later they're like, why? I need money. I need, I need some cash. I have to take my requirement. I'm just, I don't know what to do. And then they're kind of stuck, so. Definitely. And like we said, we can't give you advice. We're not financial advisors. We're not investment advisors, but ask the questions, and it's okay to ask your financial advisor about that. A lot of them out there work with self directed custodians for that alternative investment piece. So asking them and having that conversation is a good thing to be doing. [00:19:47] Speaker C: Absolutely. [00:19:48] Speaker B: So, yeah, the answer is, you know, short. You don't have to. You never have to. Don't let anyone tell you you must take all of your money now. Yes. That is. That is far from the truth. [00:19:58] Speaker C: There's an overarching theme that's happened today. [00:20:01] Speaker B: Yeah. [00:20:01] Speaker C: In this podcast. It takes a team. [00:20:03] Speaker B: It does take a team. [00:20:04] Speaker C: It takes a team. Due diligence takes a team. Look at the investments that you're investing in. Ask the people around you. You know, call us. [00:20:12] Speaker B: Ask us questions. [00:20:13] Speaker C: Ask us questions. You know, if we can help in that process, we certainly will help in that process. So it takes an army. [00:20:21] Speaker B: It does. [00:20:21] Speaker C: It takes an army. [00:20:22] Speaker B: Well, thanks. Well, thank you so much. [00:20:24] Speaker C: I appreciate it. [00:20:25] Speaker B: We appreciate you being here today. And then, okay, I always tell them, you gotta, like, you gotta subscribe, right? And share the podcast with others. And then if you'll select this link right here, it's a link to our faqs page where you'll get more information about what we just talked about. Thanks so much. [00:20:45] Speaker A: Thanks for joining us for another episode where retirement savers meet, alternative investment. Can't wait for the next episode. To learn more, visit our [email protected].