How Do IRA Custodians Make Money?

Your answer depends on your investment preferences; for traditional investments, online brokers or robo-advisors might be best.

If you want to invest in alternative assets, search for custodians that specialize in self-directed IRAs. These firms usually possess larger staffs capable of handling the manual transactions necessary for investments such as real estate, cryptocurrency and private placement securities.


Custodian fees can range from a flat fee to transaction fees, making the selection of an appropriate custodian an important decision. When looking for one, consider their fees relative to the assets you intend to invest in; for example if investing in real estate or alternative asset classes requires finding an individual familiar with such investments.

Search online resources or consult a financial advisor or an investing professional for advice when comparing custodial fees.

Not only should you look into fees, but you should also research whether a custodian is licensed and registered with the SEC or your state regulatory body, offers no-load mutual funds and has representatives certified as Certified IRA Services Professionals (CISP), an impressive mark that proves they’ve taken an intensive course to understand retirement accounts – this indicates they’re experts in their industry and should provide peace of mind.


IRA custodians make their money through traditional investments like stocks and mutual funds as well as fees related to administering self-directed retirement accounts, which allow investors to use their retirement account money on alternative assets like real estate, private equity investments, precious metals or privately held businesses.

Choose an IRA custodian who offers investment options you understand, as well as their fees. Inquire about annual account maintenance fees, load charges (charged by mutual funds) and trade commissions. Furthermore, inquire into fees charged for alternative asset record keeping requirements or whether there are charges associated with wiring money to your IRA account.

Be mindful that IRA custodians do not conduct due diligence on investments before adding them to your IRA account, making it your responsibility to perform these checks yourself and avoid fraudsters who attempt to exploit this lack of responsibility by selling fake investments through custodial roles.


As a third party, an IRA custodian cannot provide investment advice or recommendations; their sole function is the safekeeping of your IRA assets – holding investments securely except precious metals which must be stored at a depository specializing in that field. As the investor, you should conduct due diligence on investments such as real estate and private equity to understand any tax implications they may bring about.

Trust companies must undergo routine audits to ensure they adhere to the policies and procedures written into their written policies and procedures documents, while IRA custodians must also abide by any government reporting obligations, such as filing the annual Form 5500 form.

One of the main issues we hear from clients is lack of industry knowledge from previous custodians. When selecting a custodian, make sure they can explain fees clearly and offer transparency regarding costs involved with managing an IRA.


As you research potential custodians, be mindful of any fees they charge, such as annual account maintenance fees and loads (charged by mutual funds) or trade commissions. Furthermore, make sure the specialists available online or over the phone can answer your inquiries effectively and quickly.

Most self-directed IRA custodians make money by charging an initial setup fee and an ongoing management fee based on your chosen investments. Some providers may also charge an annual fee to create an IRA LLC for checkbook control of real estate investments while some may charge additional transaction fees.

Most reputable custodians take care in screening investments, but fraudsters may use legitimate IRA custodians to sell fraudulent assets. Therefore, it is wise to research a custodian’s background and history before investing; additionally you should find out if they belong to the Securities Investor Protection Corporation and whether or not they offer SIPC insurance policies.

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