Due Diligence Best Practices on Precious Metals Held in a Self-Directed IRA

Published on November 18, 2021

It seems fraud is everywhere these days; we’ve all gotten questionable email messages or have read news stories about employees embezzling or misusing corporate funds). Con artists are in no short supply and can be found in every industry, including financial services and wealth management. According to the Association of Certified Fraud Examiners (ACFE):

“In its broadest sense, the term fraud encompasses actions that are meant to deceive for financial or personal gain. It’s any intentional or deliberate act to deprive another of property or money by guile, deception or other unfair means.”

The ACFE sponsors International Fraud Awareness Week, which occurs this year during the week of November 14-20. The week is a global effort to minimize fraud’s impact on consumers by promoting anti-fraud awareness and education.

It isn’t only seniors being scammed by bad actors on the phone or internet; self-directed investors are also prey to fraudulent schemes that can wipe out their retirement savings. Precious metals—gold, silver, platinum, and palladium—are commodities that comprise a popular alternative asset class in self-directed IRAs, but these are among the investments that can expose uninformed investors to fraud. The Commodity Futures Trading Commission (CFTC) has a lot of valuable information about precious metals investments that all self-directed investors should heed.

Precious metals investment fraud

Anyone can invest in precious metals; most individuals with self-directed IRAs have their retirement plan purchase bullion bars or coins produced by government mints or private companies. Unlike other alternative assets, precious metals are tangible assets that must be held off-site in special third-party depositories (if you own metals in your IRA, you cannot store them in your home, for example).

Owners of self-directed retirement plans make all their own investment decisions and are responsible for conducting their full due diligence on any nontraditional investments they wish to include in their IRA. However, even the savviest of investors can fall for a fraudulent investment scheme.

As an administrator and custodian of self-directed IRAs, Next Generation shares the CFTC’s fraud warnings for investors who are including precious metals in their self-directed retirement plans:

• Always remember that precious metals transactions are regulated by the CFTC or the National Futures Association, and sellers need to be licensed or registered.
• Note that investors should avoid unsolicited investment offers—whether advertised on TV, radio or online, by cold calls by email or phone, or from any IRA administrator (self-directed IRA administrators are prohibited from making investment endorsements, offers, or solicitations).
• Beware of any sales pitches that promise guaranteed returns, or of anyone posing as a metals dealer or merchant who claims, “you can’t go wrong with me” or tries to rush you into an investment decision.
• Never give anyone you do not know your personal information that can lead to identity theft or hacking into your accounts.
• Research your depository, where your metals will be stored (it should be certified or regulated in some way). Know where that storage facility is located and include this information in your instructions to your IRA administrator that will execute the transaction.
• You should be able to verify the metals dealer’s licensure and location.
• Check all transaction documentation and your account statements for accuracy regarding these investments.

Be on the alert for fraud!

You can contact the CFTC at 866.366.2382 or the National Futures Association to check a broker’s registration status, business background, and disciplinary history. If you suspect fraudulent activity or believe you have been defrauded, call the CFTC or file a tip or complaint.

If you have questions about how investments in precious metals work in a self-directed IRA, or want more information about the many options and benefits of self-direction as a retirement wealth-building strategy, our team is available by email at NewAccounts@NextGenerationTrust.com or by phone at 888.857.8058. Alternatively, you may schedule a complimentary education session with one of our representatives to learn more about self-directed IRAs and the nontraditional investments these plans allow.