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PENSCO Blog

Fresh alternative asset insights and the latest news on real estate and private equity investing.

Pioneering the Self-Directed IRA

  |  By Curtis Glovier

Born in 1974, the original Individual Retirement Account (IRA) offered American workers a tax incentive to save for retirement. But because IRAs were then only offered through banks and brokerage houses, investment choices were limited to stocks, bonds and mutual funds. It took almost 15 years before pioneering trust companies gave investors the opportunity to control their retirement strategies through diversification into alternative assets via self-directed IRAs.

I had the opportunity to catch up with PENSCO founder Tom Anderson, to talk more about PENSCO’s influence on the  historical significance of self-directed retirement plans holding alternative assets.

 

Q: What was your impetus for founding PENSCO in 1989?

A: We started PENSCO because I felt there was a need to facilitate investments in non-traditional assets like private equity, real estate, notes and other non-exchange traded assets and guide people through those complex transactions within qualified IRA accounts. The foundational element in establishing the company as a self-directed IRA custodian was a sharp focus on integrity – being honest with clients and doing the right thing.

Q. For people who want to create wealth by using their knowledge of investments outside of plain-vanilla stocks, bonds and mutual funds, self-directed IRAs can be a great fit. Can you share some stories about how that has helped PENSCO clients have a better retirement?

A. Recently I had a call from a PENSCO client in Florida – whom I hadn’t interacted with in about 10 years – and he said he just wanted to reach out and thank PENSCO for building his retirement. He shared that because of PENSCO, he was able to invest in rental property in his IRA account, over time adding to his portfolio. He said, “I’ve made plenty of money and I’m very, very happy.” That’s the reason PENSCO exists,  to help people grow their retirement accounts.

Q. Self-directed IRAs offer freedom and flexibility to invest in a wider array of assets and build wealth for retirement. Why do you think more people aren’t aware of this opportunity?

A. Most IRA or 401(k) accounts are with banks and large-brand custodian firms, whose platforms still only offer traditional investments. To offer investment options outside of stocks, bonds and mutual funds, a self-directed IRA custodian must make significant investments in sophisticated technology and electronic processing, have an in-depth understanding of compliance and regulatory issues around self-directed IRAs and be committed to continuous innovation. That’s what PENSCO does. And that’s why large broker-dealers often prefer to work with PENSCO to provide their clients with asset custody options that are beyond their scope.

Q. Those partnerships speak to the depth of trust that PENSCO has earned over time, right?

A. Yes, it speaks to PENSCO’s experience, expertise and focus on integrity. Today, large broker-dealers, registered investment advisors and institutional fund managers trust PENSCO to handle all aspects of SDIRA administration and guide their clients through complex transactions within qualified accounts.

Q. Can you speak to the ways that PENSCO has focused on trust and integrity as a business model for 30 years?

A. From advanced encryption and multiple authentication of log-in and transaction credentials to compliance with state and federal agency oversight, PENSCO makes sure to earn clients’ trust in every way and preserve their peace of mind. For PENSCO, integrity has always meant doing the right thing for every client – from guiding that client through the process of funding each IRA investment, reviewing each transaction to ensure proper custody of the asset, documenting IRA ownership for tax deferment and IRS reporting needs, and managing the extensive recordkeeping that is necessary to comply with required reporting by the IRS and to IRA owners.

Q. Over a 30-year period, PENSCO has come to lead in the industry. To what do you attribute that success?

A. PENSCO has been around for 30 years, so its customer-first focus is the gold standard of service in the business. That’s a primary reason why PENSCO has nearly 50,000 clients – they know they can trust the name because of the earned reputation for taking care of every client. That’s the secret to PENSCO’s success.

This Blog does not provide investment, tax, or legal advice nor does it evaluate, recommend or endorse any advisory firm or investment vehicle. Investments are not FDIC insured and are subject to risk, including the loss of principal.

PENSCO Trust Company performs the duties of an independent custodian of assets for self-directed individual and business retirement accounts and does not provide investment advice, sell investments or offer any tax or legal advice. Clients or potential clients are advised to perform their own due diligence in choosing any investment opportunity as well as selecting any professional to assist them with an investment opportunity. Alternative investments are not FDIC insured and are subject to risk, including loss of principal. PENSCO is indirectly affiliated with a registered broker dealer and with a licensed small business investment company through Opus Bank (“Opus Affiliates”). Other than the Opus Affiliates, PENSCO is not affiliated with any financial professional, investment, investment sponsor, or investment, tax or legal advisor.