Interested in a Self-Directed IRA -Ask Your Advisor These Key Questions

Many of our clients come to a Self-Directed IRA relatively late in life, after they have been investing for a while.

Only after spending a number of years in the work force and saving and investing do they even discover that a Self-Directed IRA or other retirement account is even an option!

By that time, of course, many of them have saved up some significant assets in their more conventional retirement accounts – and they may have some comfortable relationships with advisors.

It’s important not to let those relationships become too comfortable, however. Any financial advisor worth his or her salt should be ready to answer some questions. The answers they give you may tell you that you have a terrific all around advisor, or they may tell you it’s time to scale back or change that relationship.

More often, we find that a financial advisor may be a fantastic stock and fund picker, but at this stage of your life you may need to diversify beyond stocks and mutual funds into different asset classes in which your advisor doesn’t have much expertise.

And that’s where the Self-Directed IRA concept comes in.

Next time you meet with your advisor, ask these questions:

  • If the S&P 500 falls by 40 percent next month, what happens to my portfolio?
  • If interest rates fall by 20 percent, what happens to my income?
  • If interest rates rise by 20 percent (say, from 5 to 6 percent), what happens to the value of my bonds?
  • What is my current allocation?
  • How are you compensated? How much is in commissions versus fees?
  • Have these funds you recommended to me outperformed their benchmark indexes?
  • Can you explain each of these funds to me and tell me why you chose this fun, rather than an index fund?
  • Am I paying 12-b-1 fees? If so, what do I get in return for those fees?
  • What is the total amount in fees, expenses and commissions I’ve paid out last year?
  • What aspects of financial planning are you best at?
  • Are you compensated differently for selling A-shares versus B-shares?
  • Can I see the sales loads? How are they calculated?
  • (For annuity salespeople) Can you tell me what the M & A fees are?
  • Can you tell me what the subaccount fees (in variable annuities) are, and compare them to similar mutual funds?
  • Why a variable annuity and not a mutual fund?
  • How much of this sales load do you earn, and how much goes to your broker/dealer?
  • What aspects of financial planning are you weakest at?
  • How does the cash sweep account work? Do I earn interest on uninvested money?
  • Do you or your company receive “soft dollar” money from mutual funds and other financial companies to promote them in 401(k)s?
  • Do you discount your AUM fees or commissions for larger accounts? What is the threshold?
  • Are my dividends being reinvested?
  • What is my exposure to unrealized capital gains taxes?
  • Do I pay more fees if I don’t convert to a Roth?
  • What financial designations, licenses and qualifications do you have?
  • Are you acting as a fiduciary?

These and other similar questions almost invariably spark a useful and valuable conversation – especially for clients. Most advisors do just fine – though many people find they are paying higher fees than thought they were. Or they discover that they will be much better off using a flat rate fee structure, such as the one we have at American IRA, LLC, rather than paying a 1-2 percent AUM fee or paying mutual fund expense ratios – especially on larger balances.

As always, we’re happy to take a look at your current strategy and speak with you about the exciting self-direction option. Though American IRA, LLC has offices in Charlotte and Asheville, North Carolina, we work with investors all over the country.

Call us today at 866-7500-IRA(472). Or visit our extensive online library at

We look forward to serving you.