SOURCE: Broad Financial

Broad Financial

November 12, 2012 12:27 ET

The Battle of Self Directed Retirement Platforms Sees Older Companies Turning to Scare Tactics

Broad Financial Tracks Marketing Changes

MONSEY, NY--(Marketwire - Nov 12, 2012) -  Self-directed IRAs command a small but steady percentage of American retirement funds. Traditionally the self-directed process involves a specialized custodian holding the funds and executing the transactions as per the instructions of the account holder. However, in the past few years, a model known as Checkbook Control has been gaining popularity. In this model the account holder is able to make transactions directly without custodial involvement. As Checkbook Control has started staking a larger percentage of the market, older custodian-based models have turned to scare tactics in an effort to secure their position.

One of the most prominent salvos from the custodian side is a whitepaper titled "10 Myths About Checkbook IRAs Exposed." This glossy PDF is available from Equity Trust Company and alerts readers that using a Checkbook IRA "could be illegal." The paper lists the possible repercussions of Checkbook Control including tax penalties, invalidation of the IRA account, lost paperwork, and the inevitable IRS audit. It concludes with an offer to help out those who now want to switch out of their Checkbook IRA.

The custodian claims are not causing a significant reaction amongst Checkbook Control providers. Mervyn Klein is President of Broad Financial, a company specializing in Checkbook IRAs. He feels that this is the last gasp from a dying part of the industry. "Custodian based models are eventually going to follow stock brokers as an unnecessary service. Investors are beginning to understand that paying a custodian to execute a simple transaction is a waste of time and money." He adds that Broad Financial has a point-by-point rebuttal to the "10 Myths" whitepaper, but usually clients don't request it. "Some investors want a little extra reassurance, but the vast majority of our clients recognize propaganda when they see it."

The war is by no means over. The purveyors of the custodian model still control a significant majority of the self-directed market. However, the Checkbook providers point to a key statistic as a harbinger of the end of the custodian model. Recent media coverage has highlighted that retirement concerns are affecting Generation X at a younger age than the previous generation. Broad Financial knew that this was happening because of their own drastic increase in Gen X applicants. Over the past year, Broad has seen a staggering three-fold increase from applicants in the 34-44 year old age range. Daniel Gleich, Broad's COO, sees this as a deciding shift in demographics. "Gen X investors tend to be more technically savvy and more willing to take control of their finances. This is a trend that will continue to increase as the next generation of investors begins to seriously consider retirement."

The battle lines have been set, and only time will tell if economy and convenience will be able to trump the status quo.

Contact Information

  • Broad Financial
    Daniel Sentell
    Director of Communications
    845.352.3000