After 14 years in the self-directed IRA industry, I’ve gained insight into some of the major complaints and pain points self-directed IRA investors deal with. As an investor myself, I’m empathetic to these challenges— especially as someone who works behind the scenes to create excellent customer experiences. With my experience working in all aspects of self-directed IRAs and alternative investments, from marketing to business development, I’ve had the opportunity to learn from savvy self-directed IRA investors of all levels. After much research and discussion with our clients as to why they’ve moved their IRA to IRA Resources, here’s what I’ve found.
These are the top 3 things investors really hate about their previous custodians, in this order— directly from our clients:
#1 Lack of Knowledge
A financial institution whose staff lacks knowledge in processing transactions, understanding self-directed IRA rules, or IRS codes can cost you. This is the biggest client complaint across the board— custodians whose staff just doesn’t know their stuff. It’s very alarming to hear clients complaining, frustrated they’ve had to pay fees to the IRS because of a custodian error. Yes, sometimes mistakes do happen, and sometimes (though infrequently) these can be corrected. But you need to know where you went wrong to correct your mistake— if you don’t have the knowledge to know you’ve made a mistake, how can you correct the error? When talking to your custodian, focus on how well versed in self-directed IRAs the individuals you are talking to truly are, as these are usually the people handling your transactions. Assessing their level of expertise does not require any special powers— they either answer your questions knowledgeably or they don’t. You will know, especially if you have been self-directing your retirement for some time. Some key things to look for are: How often they need to escalate your inquiry to get you an answer? How long does that take— one day, two days? How fast do you get a response? When you speak to a manager, is that manager knowledgeable? I don’t blame clients for listing “lack of knowledge” as the #1 thing they hate about custodians, I would too.
#2 Phone Trees
"It’s nice to not have to wade through a computerized phone system or be put on hold by clericals that don’t know what you’re talking about; experiences we were glad to leave behind with our previous IRA custodians.”
I had to share this one because it so perfectly supports complaint #1— and honestly, who likes to be put on eternal hold? You could clearly hear the frustration from this client. It makes sense that, as an investor, you would want to talk to a human to make sure all your questions are answered fully and completely. After all, the company holds your hard-earned retirement savings— you should be able to reach a live person when needed.
I had a personal experience with a cable provider, one you may be familiar with. They had great marketing, they spent a lot of ad space talking about all the wonderful and personal services they offered. They regularly touted that their clients were their number one priority— but when I needed it, I could never get someone on the phone to answer a simple question. I was transferred from one person to the next, to different departments and different levels of support, because no one had the ability to provide an answer. They had different priorities— and none of them were providing me with knowledgeable assistance when needed.
Although the company offers many different services, not just cable, in the end it wasn’t a good fit. For one, I only really needed cable— their other services didn’t appeal to me and the bundles they offered only ended up costing me money I didn’t need to spend. I also wanted a personable experience (not some nameless phone tree), someone who would speak to me like I was more than just a number and a wallet. But most importantly, I wanted to be able to speak to a knowledgeable person who could help me when I had questions. I did transfer my account to another provider, one that is exclusively a cable provider— they know their space and can offer me exactly what I want and need, without all the expensive addons. This seems to be the issue with large custodians that offer too many services— when they’re spread too thin, no one benefits, especially not the clients.
To avoid these frustrations yourself, find out how your custodian handles client services before you open your account— and if these representatives are Certified IRA Services Professionals (CISP). It’s nice to get someone on the phone, but it’s no good if they don’t know what they’re talking about (and therefore can’t help you).
#3 Fees and Invoices
Sometimes custodians aren’t very transparent with how they charge their fees. Do you know what you are paying for, and how much? When funds leave your account, do you understand why? If you can’t get the details of your transactions or if it sounds too confusing— beware. A custodian should be transparent when it comes to fees, both when and how they are charged. Read the fine print on how these are handled— the fees associated with your account are usually administration and transaction fees, but you’ll want to make sure you know what you’re agreeing to pay beforehand.
I want to drive home how important it is to consider what fees you’re paying with your self-directed IRA— the wrong account or fee schedule can eat up your retirement savings as fast as you put them away. There have been many Ponzi schemes targeting retirement savings, with providers charging out the nose for additional fees or services without providing any added value. Maybe you’ve heard of the recent Home Depot class action lawsuit, with allegations of fund mismanagement and exorbitant plan fees, leading to losses of over $120 million for plan participants? Or Mark Malik— a 33-year old investment banker who eventually bilked investors out of over $100 million?
Though you can’t control scammers and mismanagement, you can keep yourself aware of your account activity and balance, which should help prevent massive fraud. Were the investors properly monitoring their IRA account activity? And if they were, did they understand the invoice or statement? When they called to inquire about the charges, was there a live, knowledgeable person to answer their questions?
Bad actors are going to find a way to scam people no matter what, but by monitoring your account and making well thought-out investment decisions, you can work on protecting yourself from the worst.
Getting your account opened with a self-directed IRA custodian you can trust is an essential step in saving for your retirement. Even if you’re already investing, it’s never too late to move your funds to a company that meets your needs. When talking to representatives, ask yourself— do they know what they’re talking about? Is it easy to get ahold of someone who can help me? Are they clear and transparent about their fees and how they charge? These are the types of questions that truly reveal how a company functions behind the scenes— the type of thing that can make or break a retirement account.
Do you have any questions about how to move your self-directed IRA to IRA Resources? Is there anything you’d like to ask about our fees or service? We’d love to help— request a free consultation and one of our Certified IRA Services Professionals (CISPs) will get back to you shortly.