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Why it is Important to Know the Difference When Selecting an IRA Service Provider?

When selecting a Self-Directed IRA service provider it is important to look through all the hype out there and focus on what is important – THE SECURITY OF YOUR FUNDS. In recent years more and more people are seeking ways to take more control of their retirement portfolio, which has led to IRA service providers popping up all over the place. So, what does this mean to you? If you Google “Self-Directed IRA,” you’ll get over 1.6 million results ranging from advice and education, to “How to get started today!” While it may appear on the surface that all of these companies follow the same IRA rules and provide the same service, the truth is they do not. Knowing the distinctions between them can have an impact on the security of your retirement portfolio and/or put restrictions on your investment choices.

How do you decide which Self-Directed IRA company is right for you? You must first understand the distinction between custodian, administrator, and facilitator. These entities represent varying levels of service, expertise and risk. See the chart for an overview.

Custodian-Administrator-Facilitator Chart-1.jpg

All roads lead back to a custodian. The most important component is that an IRA custodian is the only entity in this group that is regulated and authorized by the Internal Revenue Service (IRS) to act as an IRA custodian. Because custodians are subject to regulatory oversight at the federal and state level, there is comfort and trustworthiness that is not there with the other entities. In addition, an IRA custodian provides the most comprehensive IRA services from cradle to grave.

IRA administrators and facilitators on the other hand work under a different set of IRA rules. Since they are not able to custody cash or investments, their only essential act is as intermediaries between the client and a partner custodian. Administrators, as their name describes are able to process paperwork and provide other administrative functions, while facilitators most often specialize in helping clients set up single member LLCs and C Corporation IRAs (commonly referred to as a Checkbook IRA or LLCs).

Why do these differences matter? With no oversight or annual examination to worry about, administrators and facilitators can afford to be liberal in terms of accepting investments. This leaves IRA account owners open to unknowingly engaging in a prohibited transaction. If later caught by the IRS, these transactions can lead to a disqualification of the entire IRA and potentially expensive tax repercussions. And since many of these companies align themselves with investment sponsors, their priority is to sell you something that they will make money on, rather than facilitate a compliant investment strategy that is right for you.

We want to assure you that when you select Preferred Trust as your IRA Custodian the security of your funds is our top priority. We are a custodian, not just an administrator or facilitator. We strive to be the best in our industry, constantly training our staff to go beyond customer service to provide a customer experience. As a member of national professional trade associations, Preferred Trust stays up-to-date with the latest changes to IRS regulations that may impact your Self-Directed IRA.

We know that you have a choice when selecting an IRA service provider. As a Custodian, Preferred Trust provides a quality product. Our customer service experience is the cherry on top. We want you to enjoy your experience with us, if there is anything we can do to improve at any step of your Self-Directed IRA process, please don’t hesitate to reach out through our client services line at 888.990.7892 option 1 or by email at or through the live chat feature on our website at