It is fair to say that any of us, regardless of what we do for a living, need and should be compensated for our livelihood. This goes for any facilitator, administrator or custodian of self-directed IRA and 401K accounts. In many cases, not only is a client paying for the services rendered, but also the expertise of the individual or firm providing the service.
However, with the plethora of individuals/firms providing services in the arena of self-directed IRA and 401K accounts, there are some unique differences in the amount of fees charged for these services. Please note that this article is not intended to call into question what fee structures are being utilized, but to educate individuals on some salient points related to these fee structures.
First, as a reminder, there are practical differences in services rendered by facilitators, administrators and custodians which may significantly justify a particular fee structure. One must determine if the level of services warrants certain fees.
For the buying public, I recently investigated the fees of two administrator companies to determine the costs associated with establishing a self-directed IRA or 401K. In fairness, the information provided herein was confirmed with both companies. Note: an interesting point. Both of the companies, while not personally establishing a SD 401K, will “farm it out” to a third party and prefer not to do 401K plans accordingly.
To draw a conclusion, one must understand the hypothetical parameters utilized in comparing costs and fees, etc. For this article, the following hypotheticals were used:
$500,000 — amount to be transferred from a “traditional” custodian to the new company (administrator).
Investments Owned by the IRA/401K — 4 (two real estate holdings and 2 mutual funds).
Assets Held — All 4 assets were held for the year and then sold at the end of the plan year.
$50,000 — amount in liquid, money market account within the IRA/401K.
Company A
Account Set Up Fee (Initial Fee) $ 50.00
Investment Transaction Fees $ 800.00 ($100.00 per asset transaction, both purchase and sale)
Annual Account Maintenance Fee $ 1,000.00
Minimum Total First Year Fees $ 1,850.00
Company B
Account Set Up Fee (Initial Fee) $ 50.00
Investment Transaction Fees