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January 29, 2014 at 12:15 PM
IRAs may be set directly with any mutual fund company. Such direct business usually enjoys low custodial fees (some are as low as $10 yearly), but, when rebalancing, there are trading charges and, if funds are replaced or repositioned there are often sales charges.
When dealing with IRAs, most advisors:
* May set up an IRA with an advisory or brokerage account on the trading platform used by his or her broker-dealer/advisory firm, but, again, when there is rebalancing, there are trading charges to consider, and custodial charges are likely to be higher than with direct business.
* May do REIT business with a custodial trust company. If an advisor uses this approach and the trust company goes berserk, increasing fees geometrically (as one I used did, after it was acquired by another firm, costing customers and me dearly), one may wind up with charges that subtract a significant portion of account performance. And, of course, the REIT is likely to be illiquid and it may be expensive or impossible to exit until there is a liquidity event.
* May set up a crazy real-estate “self-directed” IRA; if so don’t let a relative of the IRA owner use the property and check the unaffiliated tax rules re unincorporated business tax (UBT). In other words, make sure everything about the self-directed IRA complies with all rules and that any required UBT taxes are paid.
* Or, if an advisor has, say, $10 thousand or more in the IRA in question, one might use the set it and forget it model. While it would still need to be reviewed periodically, changes may be made internally without charges to the customer. How could this be done? By contacting Sammons, a company that has built an exceptional IRA product, one that rebalances for free and has low costs.
