The thought of self-directing your individual retirement account can be scary to some people. Especially if you’re someone whose portfolio has been building up for decades through your employer’s program. There may have been little involvement required of you. And you may not have needed to understand the role of a Custodian, Administrator or Facilitator.
These days, though, more and more companies want their employees to take responsibility for their own investments through the employer’s 401(k) plan. The newer generations are much more comfortable with that scenario. In fact, many prefer to have complete direction over their IRAs though a self-directed checkbook IRA.
Even if you’re from the “old school,” though, you can also achieve that comfort level. It starts with gaining knowledge of the process and the players involved.
Custodians, Administrators and Facilitators: What’s the Difference?
Let’s start by examining Custodians, Facilitators and Administrators and what sets each apart
The role of a Custodian
By law, any IRA must be officially held by a Custodian. The Custodian may be approved and directly regulated by the IRS or affiliated with a bank or trust company. In that case, the Custodian is regulated by the state Banking Commissioner and/or Comptroller of the Currency and FDIC.
The role of an IRS-approved Custodian is to take direction from you, the owner of the self-directed IRA, and execute investments on your behalf. The Custodian may handle formation and maintenance paperwork as well as your money.
A Custodian will act upon your wishes as long as those requests are legal and administratively feasible. In some cases, however, your request could be rejected.
Among some of the reasons for rejection:
- You fail to provide complete and accurate documents.
- Your transaction involves any disqualified persons.
- You seem hazy on the rules governing your intended transaction. (For instance, being unfamiliar with laws governing a foreign investment you may be contemplating.)
The Custodian is not responsible for determining whether your planned investment is a “good” or “bad” one. Nor is the Custodian responsible for researching the background of the individuals or entities promoting the investment. Due diligence is your responsibility.
The role of an Administrator
An Administrator, likewise, may handle formation and maintenance documentation for your IRA. The Administrator also can move funds from account to account and choose where to place your funds while you wait to make an investment.
However, unlike a Custodian, an Administrator has little to no regulation or oversight. Nor is the Administrator subject to routine audits, state-mandated capital requirements, etc. Be aware of the risk that such lack of oversight presents! Without the same authority as a Custodian, an Administrator must outsource custodial services to a third-party approved Custodian.
The role of a Facilitator
A Facilitator generally provides advice and consulting. The Facilitator often can serve as a “one-stop shop,” helping file paperwork, serving as liaison between you and the Custodian and educating you on the process of rolling over your retirement funds to a self-directed account.
As with any investment you are contemplating, it is up to you to do your own due diligence. In addition, it is advised that you seek the counsel of your own CPA or attorney who can evaluate your unique goals and circumstances and advise you on the most appropriate course of action for you.
We can help
Once you determine that rolling over your retirement account is in your best interests, we can help. Investment Resource of AZ, LLC is your Arizona rollover specialist. Our team has successfully rolled over millions of dollars in IRA funds for clients, educating them, streamlining the process and supervising each step of the way for them. Call us at 602-885-6122 or email firstname.lastname@example.org.