Tips on Setting Up a Self Directed IRA – Due Diligence Team

Tips on Setting Up a Self Directed IRA – Due Diligence Team

Video Highlights

[0:23] Here’s how to set up your own self directed IRA!

[0:54] Make sure that your self directed IRA custodian fees match your investment goals.

[1:25] Make sure you have a good attorney who understands self directed IRA rules.

[1:57] You should also have an accountant who handles Roth IRA investments.

[2:27] What if you’re involved in real estate IRA investing?

[2:54] How should you handle precious metals?

[3:31] Understand how your investment broker or sponsor works for you!

[4:07] Financial advisor: The most important team member of all!

[4:40] You can avoid disaster by having a good financial advisor.

[5:19] Are all these people worth the money?

[5:48] Have any questions or comments about managing self directed IRA accounts?

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Avoid Possible Future Financial Calamity and Form Your Circle of Trust – a Team of Alternative Investment Specialists, an IRA Due Diligence Team

Doing your due diligence on your investments can mean the difference between investment success and financial disaster, so it’s essential to assemble a qualified, dedicated team of investment specialists that will work for you to determine whether a potential investment is in your best interest.

However doing all of that due diligence by yourself is overwhelming, there are a number people who have dedicated their lives to their profession, becoming specialists.

The question is, who to include in your circle of trust?

A team of investment specialists can help save you from investment disaster, such as Ponzi schemes and other investment disasters. There are many Bernie Madoff-types out there, hungry to find new victims. It’s always smarter to spend a few extra dollars up front to make sure an investment is legitimate and done correctly than to find out later that you’ve done something wrong or you’ve been swindled.

In short, when it comes to investment, an ounce of prevention can be worth a pound of cure and then some.

First, it’s important to understand precisely what due diligence means. So, what is due diligence relative to the world of investing? Simply stated, due diligence is the process of thorough, careful investigation into a potential investment. Through the due diligence, you should uncover any and all risks, along with potential benefits, which can then be weighed so you and your team can make an informed decision on whether a particular investment opportunity is right for you and your financial situation.

Did You Know?

Many investors erroneously believe that their IRA custodian conducts these due diligence investigations, but this is not necessarily true. The custodian is just one member of your due diligence team –circle of trust. As an Internal Revenue Service requirement, an IRA custodian is essentially a record keeper for your IRA account; the custodian is also responsible for tending to all of the IRS reporting for your IRA account. While it’s important to understand what an IRA custodian does, it’s also important to understand what is beyond their scope of responsibilities. When you are self directed, the IRA custodian is not required to perform any research on potential investments.

The responsibility for investigating and researching investments lies with you, the account holder. It’s your responsibility to develop your team of investment specialists, your circle of trusted advisers.

Self directing your IRA can be extremely rewarding, but it isn’t a guaranteed success. That’s why it’s important to have a solid team of experts on your side. Who are they and why are they important?

1. Self Directed IRA Custodian:

In order to invest in alternative assets, you need establish a self directed IRA with alternative IRA custodian, and standard arrangement just won’t do. An IRA custodian can provide you with valuable information on your IRA account; they can also be a wealth of information to assisting you in knowing which possible alternative investment options are prohibited and which are not.

There are a lot of custodians out there, but no two are the same. When looking for your custodian be sure they allow you to make the kinds of investments you had in mind. Just because they call themselves an self directed IRA custodian doesn’t necessarily mean they will allow you to invest as freely as the title suggests.

Call around. Ask questions. Don’t make a quick decision.

Self Directed IRA Custodian Fees

When shopping for a custodian you’ll also want to watch for fees. Some fee schedules can be confusing and have hidden fees. Again, call around. Ask questions. Keep in mind, if they fees are too high you will need to have larger returns on your investment to make the investment worthwhile.

See Self Directed IRA Custodian Fees

2. You, the IRA account holder:

When you are self directed, you play a central role in your success, because, after all, you are self directed. The first thing you should consider when you find an alternative investment that you would like to invest in is to gather information for both you and the rest of your Due Diligence Team. When you’re considering an opportunity, take some time to perform some research.

The Internet is an easy source of valuable information. If you are investing in a business or a limited partnership, then learn about the company. Find out how long have they been in business. Find out if they a member of the Better Business Bureau. If so, are they in good standing? Check out and find online reviews. Talk to people involved in the investment and use your best judgment. If it sounds too good to be true, it probably is… If you’re investing in a security, then find out if the company is licensed to sell securities with their respective state. This is a good starting point for your due diligence.

3. CPA or Tax Professional:

Always consult a CPA or another tax professional who can provide you with information on tax implications and to ensure that the investment doesn’t violate any prohibited transaction rules. In fact, a knowledgeable tax professional can provide you with helpful information on IRS’ rules concerning disqualified parties and self-dealing, so you can avoid any potentially problematic investments.

An accountant that truly understands self directed IRA’s is valuable beyond measure. Especially if you are planning on have unique investments like a single member LLC or if you’re planning on having debt in your IRA it’s wise to have someone who understands the reporting that may, or may not, be needed.

4. Self Directed IRA Lawyer

Always ask your attorney to review any, and all, documents before you sign!

This is true in the investment world and beyond. In the case of your investments, a qualified attorney can spot any potentially problematic language in a contract that can be detrimental to your investment.

An attorney is always a good addition to your team. Especially if you are creating a single member LLC. It is wise to have a professional create the LLC documents for you. Not only is it a good idea to have your attorney create the documents, but also to give you some advice once your IRA has purchased the membership units to the LLC.

5. Fee-Based Financial Planner:

It’s important to have a good financial advisor who you can sit down with and discuss your long term plans and how each investment fits into those plans. Many times bad investments can be avoided just by running the paperwork by an objective third party who can take a step back and see the possible pitfalls of each investment. As investors we can sometimes be blind to a bad investment because all we see is the potential to make a quick buck–that’s when we make mistakes.

Beware of selecting your financial adviser. By selecting a fee-based financial planner, one who  does not make any sort of commission, the fee-based structure ensures your financial planner is objective, as there is no incentive for them to recommend a certain course of action. The financial planner can provide recommendations on how the investment works with your short-term and long-term financial plan. We recommend consulting the National Association of Personal Financial Advisors if you’re seeking a qualified professional. Visit

6. Investment Broker, or Sponsor

If you are dealing with some sort of special investment, you might be working with what’s called an investment broker or an investment sponsor. Be sure you understand the inner workings of the deal so you aren’t blindly sending money without understanding how it will bring you a return. Also, be sure you understand how the broker is making his cut and what his place in the deal is. If he’s helping you out of the goodness of his heart and it seems too good to be true, it probably is.

7. Precious Metals Broker

If you are planning on buying precious metals for your IRA, it would be beneficial to look around for an honest metals broker. Someone you trust.

When buying precious metals in your IRA you want to trust every hand touches your gold or silver throughout the process.

Finding a precious metals broker you trust will save hours and hours of stress.

8. Assembling an IRA Due Diligence Team for Real Estate

Real Estate Agent

If your potential investment involves real estate, it’s wise to consult a realtor who specializes in investment properties. They can be a helpful ally, who can guide you through the process. Specifically, you’ll need a broker when determining the fair market value of your property, either to report for taxes or when you decide to sell the property. Keeping a good real estate broker on your team will save headaches down the road.

Title Company

In the case of real estate investments, you can also benefit from consulting with a title company. Title insurance will provide you with peace of mind, so you won’t need to worry about any unexpected financial dings due to the discovery of lien against the property.

Peace of Mind

To create your perfect team it may cost a few hundred dollars, but it’s a small price to pay to have your ducks in a row. To have peace of mind knowing that you’ll be taken care of in your later years is worth much more than a few extra hundred dollars in your pocket now. Take the time and spend the money, a solid team behind you and your investments is worth every penny.



Joshua Geary has been working with since 2005 establishing their online marketing and brand presence. He is a prolific writer, blogger and online marketing strategist. He has written a number of financial articles that have been published in prominent article directories, including the news blog. While enjoying reading, blogging and swimming in his leisure time, he truly enjoys time with his wife Tiffany and 2 dogs.

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