What to Know About IRA Custodians, Administrators, Facilitators, and Promoters 

What is an IRA custodian?

An IRA custodian must meet IRS requirements and is subject to regulatory oversight and audits. By complying with these IRS requirements, a custodian is given authority to hold title to assets, investments, or other property, issue funds, hold clients’ money, and create a variety of clients’ accounts.

Custodians play a vital role in the proper handling and safeguarding of IRA assets. Their primary responsibilities include maintaining records of account activities, processing transactions, and issuing funds as directed by the IRA holder. In addition, custodians complete their duties in compliance with IRS rules, such as properly documenting contributions and distributions.

[More: Questions to Ask a Custodian]

What is an IRA administrator?

While IRA administrators can produce statements and handle basic reporting, they are not subject to the same regulatory requirements and oversight as custodians. This difference limits them from holding the same level of authority. Administrators work primarily on the operational side of an IRA, helping ensure that contributions, rollovers, and other actions are accurately documented.

An administrator must be affiliated with an IRA custodian to hold assets or funds. They can assist in setting up your IRA and processing transactions but cannot directly manage or hold assets like a custodian. Administrators also handle essential services such as processing distributions, managing required minimum distributions (RMDs), and assisting with annual IRS filings.

If you move down the scale of authority and responsibility, you will find IRA promoters and facilitators

What is a facilitator?

If you’ve seen advertisements for self-directed IRA LLCs, then you have seen a facilitator. A facilitator, sometimes also called an advisor or consultant, provides advice and consulting services, often guiding clients through the process of establishing an LLC within their self-directed IRA. Facilitators typically assist investors with structuring their accounts for alternative investments, such as real estate or private equity.

It’s important to note that a facilitator, on its own, does not have the capacity or authority of a custodian. Facilitators cannot hold or manage IRA assets and do not carry the same regulatory responsibilities. They are often associated with an IRA custodian to help execute transactions in compliance with IRS regulations. Custodians, not facilitators, are the entities that process the necessary paperwork and hold title to the assets.

What is a promoter?

An IRA promoter is an investment promoter looking to use IRA funds to establish an investment. Like facilitators, promoters do not have the same regulatory oversight or authority as custodians to hold or manage investments or move IRA funds. Their role is primarily focused on marketing and promoting specific investment opportunities for self-directed IRAs.

A promoter is simply that: promoting an investment. They do not bear any responsibility for managing your IRA or acting in compliance with IRS regulations. As with all things related to investing, it is in a person’s best interest to perform due diligence to see if an opportunity is sound in terms of financial goals and legitimacy.

Choosing the right IRA custodian or administrator

Selecting the right IRA custodian or administrator is one of the most important decisions you’ll make for your self-directed IRA. A good custodian will provide peace of mind for your retirement funds.

When choosing a custodian or administrator, consider factors such as their experience with self-directed IRAs, the range of services they offer, and their fee structures. It’s also crucial to ensure they are reputable and have the appropriate regulatory oversight to protect your investments.

The right partner will simplify the process of managing your IRA which will help you work towards your financial goals. Take the time to research and choose wisely, as your custodian or administrator plays a pivotal role in the long-term success of your IRA.