My Story: How I Learned About Self Directed IRAs

 

self directed ira

 

Self Directed IRAs are not a widely known or understood area in the investment community. The term is typically used to describe what an IRA is, an Individual Retirement Account, which is self-directed by the account owner. Most people know that this type of account can be used to invest in stocks bonds and mutual funds. What is not widely known is that this type of account can also be used to invest in real estate, tax liens, private mortgages, private businesses, medical equipment, horses, gold and silver coins, and more.

Most people who know me have been aware of my interest in investing in alternative assets with a self-directed IRA for many years. What they may not be aware of is how I learned about it.

I didn’t learn it from a TV commercial from a large mutual fund company or broker-dealer…

I didn’t learn about it from studying for my series 7, series 63, or series 65 license…

I didn’t learn about it from an article in the Wall Street Journal…

I actually learned about it from a client when I was working at Smith Barney.

It is not widely known that anyone with an IRA can use it to invest in alternative assets. It is not widely known because most financial firms have no incentive to talk about it. Their incentive is derived from making money via commissions and fees in the buying and selling of securities. Trillions of dollars are invested in publicly traded securities, so the incentive is large.

Self-directed – Education

self directed ira education

Back in 2004, when I was working at Smith Barney, a client called me to ask if I could help him use his IRA to invest in a private mortgage. At the time the 10-year Treasury note was yielding approximately 4% compared with about 2.5% today. He wanted to invest in a private mortgage which was yielding approximately 16%. I was shocked. Not only was I not aware that you could use your IRA to invest in assets which were not publicly traded securities, but I was also shocked about the 16% return the private mortgage was paying.1

Being the skeptic that I am, I told him that the rate sounded too good to be true and that I was not aware of the capability to invest outside the stock market or bond market. However, I was eager to learn more.

So I started my journey…

I asked him to give me all the information he had and I would look into it. I spent the next month researching self-directed IRAs and alternative investments. It was hard to find information pertaining to these two areas, but I managed to find a book published about self-directed IRAs called IRA Wealth: Revolutionary IRA Strategies for Real Estate Investment. Since then, there have been a few more books published about the topic, but this original book was instrumental in my education. I also managed to connect with Pensco Trust Company, one of the larger alternative asset custodians. They were instrumental in my education on the subject as well.

This felt like I found gold sitting in the offices of one of the large broker-dealers on wall street, and no one else could see it. I immediately spoke with my manager to see how I could capitalize on this gold mine of an opportunity. His response to me was not surprising… You can’t do that.

Huh? I had just read a whole book about the subject, so I persisted. Eventually, he relented and told me that it could be done, but it wasn’t allowed at the firm since they didn’t have a way to get compensated for it… unless I was one of the larger brokers in the company. Then they would figure out a way to make it happen. Apparently, size does matter.

Self-directed – Frustration

So I went back to my desk frustrated but decided that I would learn as much as I could about the subject and see what I could do to help out my client with his idea.

What I found was that in this crazy niche of investing in assets such as real estate, private mortgages, or tax liens, the opportunities were almost limitless. I was captivated.

Self-directed – Persistence

I started to attend real estate investor meetings with my client on a monthly basis. I not only learned about the best ways to invest in real estate, but I also met some interesting people… One of these people, Rajeev Kotyan, is my business partner today.

What I realized after a little more than a year of educating myself with alternative investments and self-directed IRAs is that I could not offer my clients some of the best opportunities, if I was stuck using only stocks bonds or mutual funds… So I left Smith Barney and started my own advisory firm.

That was the first step in the eventual evolution of my investing career to where I am today. While Innovative Advisory Group still invests in stocks, bonds, and mutual funds, my clients are not limited to just those investments. This allows my firm to provide the best and most suitable investments for each client without limiting them to just stocks, bonds, and mutual funds.

We created Innovative Advisory Group to provide advice for clients pertaining to both traditional and alternative investing outside and inside self-directed IRAs and 401ks. We understand the frustration and time it took to fully understand how to properly invest in alternative investments with a self-directed IRA. We have created an investing platform that allows our clients to invest in any asset allowed by the IRC inside their self-directed IRA.

This is an evolution in the wealth management industry.

Self-directed – Learn more…

If you want to learn more about Self-directed IRAs, subscribe to our email list and get this free report, 9 Common Mistakes Investors Make Using a Self Directed IRA.

self directed IRA Free Report

If you want to speak to me about how I can help you invest in alternative investments with your IRA or 401k, you can contact me. Whether you want help with a specific investment, or you are looking for investments outside the stock market, we can help.


Resources:

1. stock charts


About Innovative Advisory Group: Innovative Advisory Group, LLC (IAG), an independent Registered Investment Advisory Firm, is bringing innovation to the wealth management industry by combining both traditional and alternative investments. IAG is unique in that they have an extensive understanding of the regulatory and financial considerations involved with self-directed IRAs and other retirement accounts. IAG advises clients on traditional investments, such as stocks, bonds, and mutual funds, as well as advising clients on alternative investments. IAG has a value-oriented approach to investing, which integrates specialized investment experience with extensive resources.

For more information, you can visit www.innovativewealth.com 

About the author: Kirk Chisholm is a Wealth Manager and Principal at Innovative Advisory Group. His roles at IAG are co-chair of the Investment Committee and Head of the Traditional Investment Risk Management Group. His background and areas of focus are portfolio management and investment analysis in both the traditional and non-traditional investment markets. He received a BA degree in Economics from Trinity College in Hartford, CT.

Disclaimer: This article is intended solely for informational purposes only, and in no manner intended to solicit any product or service. The opinions in this article are exclusively of the author(s) and may or may not reflect all those who are employed, either directly or indirectly or affiliated with Innovative Advisory Group, LLC.