#1: What Is the Cost?
Although cost should never be the only consideration when choosing an investment product, it is an important consideration. The fees you pay to your custodian will affect the yield that you earn on your investments. Although a higher yield is great, it might not be an important consideration if your principal earns a higher return at a lower yield.
Some custodian fees are based on assets under management. Others are based on the number of transactions you execute or your total assets under management (AUM). For many investors who use regular or automated contributions, fees based on assets under management is more beneficial.
When making a decision, make sure you know which fees apply to each custodian and how the custodian calculates the fee. Some custodians use a monthly fee while others prefer a percentage of assets under management. Some custodians charge based on transactions or you can execute a set number of transactions for free.
Be sure to choose a custodian with fees that align with your investment goals.
#2: Is the Custodian a Good Match With Your Investing Strategy?
While your custodian will play an important role in administering your IRA account, its day-to-day interaction with your fund should be minimal. At the end of the day, you will make all the investment decisions and you will be in charge of overseeing your investments.
If you’re looking for ways to become more actively involved in managing your money, you may want to consider using a financial advisor. That said, you may still want to work with a non-advisory custodian, such as Schwab, Fidelity, or Vanguard. As mentioned previously, these custodians have no investment advice in their business model and they are mainly known for low fees and high quality customer service.
#3: Does the Custodian Offer a Full Range of Accounts and Services?
Aside from the investment performance, the biggest complaint clients make about their IRA custodians is the total lack of options available to them.
Rates vary widely for similar investments and products. Some allow only a single choice in each asset class. Others allow multiple choices in some categories while excluding others.
Best IRA Custodian Tips: Do not choose a custodian based solely on the minimum you will receive or the rate. They can change from year to year, as these are market-driven. Reputation and service quality can often differ greatly.
Go beyond the minimum and base all custodian selections on the full array of investments offered (at a competitive price) and the quality of service.
#4: Can the Custodian Handle Complex Transactions?
The right custodian for your retirement accounts should have the complex transaction experience and infrastructure necessary to handle sophisticated transactions. Even if you’re not interested in that kind of complexity for your own accounts, you should choose a custodian you can trust to assist your children or clients if they’re taking a complex approach.
This is often a good point to point out that it’s important to choose a custodian that doesn’t have a conflict of interest. If, for example, the custodian is heavily invested in a given type of investment product, it may be biased toward it to the detriment of your portfolio. It’s also important to be sure that your custodian is aligned with your retirement goals. If you’re investing for growth, for example, and your custodian chooses a very conservative investment allocation, your returns could suffer over time.
#5: What About IRA Promotions?
Promotions are another popular way to choose an IRA. They can come in the form of a contest or sweepstakes.
The premise is pretty simple: all you have to do to enter is open a new IRA. As you can imagine, most of the promotions will encourage you to open multiple accounts. You’ll need to mail in a certain number of entry forms, or the chances of winning are increased if you open an account with a certain financial institution. And of course, if you win, there will be prizes, ranging from coupons to high-end electronics.
You will also have the opportunity to receive more information about IRAs and the financial institution that the promotion is hosted by. This is an excellent resource to teach you about retirement and how to pay for it.
One last thing to consider before you enter a promotion is the time frame. Most promotions will run for only a few weeks, and since many people enter them, you could easily miss out. Make sure there’s still time before you enter and make sure the deadline falls in your best time.
Tips on Making Fast Bucks
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Here are some ways you can go after some quick money.
Choosing the right IRA custodian is an important step in managing your IRA assets and you should be aware of several key factors when deciding who will do it for you. Our survey found:
- Identity theft concerns were the top reason why investors don’t trust their custodian with their retirement savings (64% of respondents), followed by worries that their accounts would be mishandled (41%).
- Almost one-third of investors state they have problems or concerns with service quality (29%) are dissatisfied with customer service (26%).
- Over one-third of investors say they don’t know if their custodian is meeting all the rules and regulations (40%) and if they are charged with a fiduciary duty (36%) to manage their IRA account.
- While investors are concerned about their custodian’s marketing claims and the fees they charge, they are confident that their custodian is addressing their security and privacy concerns.