What were first used centuries ago as mere means of exchange have today become a
part of one of the most treacherous means of investments. Yes, we have discussed
before that gold and silver have historically been proven as true stores of value and can
even provide healthy returns – that hasn’t changed, and it won’t change. But the
treachery that sometimes surrounds precious metals has more to do misinformation,
misconceptions and scams.
Investors generally purchase gold and silver as a form of self-insurance, and the best
way to achieve this is through non-qualified purchases that can be held by the
individual. However, qualified precious metal IRA accounts must be treated differently,
and the danger comes into the picture when advisors or clients trust people who tell
I have explained this in great detail with several of our contracted advisors and have
given counsel to others who are not contracted with National Gold Consultants. Several
precious metal companies have been endorsing “self-stored” precious metal IRAs and
exploiting the desire for independence amongst precious metal investors. BEWARE!
Succumbing to this sale could bring you and your client great legal and financial harm.
This is where you as a fiduciary need to step in!
The scam is easily sold when account holders are told that they do not have to rely on
the contracts of financial institutions, governments or any other third party to ensure that
their qualified products exist and are properly stored. Instead, these companies
eliminate this safeguard and offer a scheme to evade IRS rulings by preying on
investors’ craving to possess and govern their own precious metals. This proposition is
often enough to outweigh some investors’ good sense.
In short, the IRS requires IRA precious metals be stored by a third party. The dangerous
“solution” these companies offer is a plan to skirt this requirement by the IRS. These
companies help investors create a limited liability company (LLC), which these
companies claim will fill the role of the third party that the IRS demands. The LLC then
buys and holds the precious metal in the home or in a local safe deposit box and the
IRA holder (the client) “manages” the LLC. Therefore, this keeps everything “in-house”
for the client – both the precious metal and the risk.
The trouble stems from the IRS requirement that assets in your retirement account be
held by a third party. The IRS has already signaled that they view it as a lie to create an
LLC to grant control over assets which are supposed to kept by a true third party.
Kevin McKean, a Next Avenue contributor, wrote of the IRS’s response to these sales
pitches in his article, “Think Twice Before Opening a Gold or Silver IRA,” which was also
published by Forbes.
“Next Avenue asked the agency about these ads they were told, ‘The IRS cannot
comment on claims made by any particular IRA promoter, but the agency warns
taxpayers to be wary of anyone claiming that gold held in your IRA can be stored
at home or in a safety deposit box.’”
It’s not a matter of “if” but “when” the IRS penalizes and regulates these fraudulent
practices. Your clients will be held accountable for engaging in a prohibited transaction
and could easily find their accounts disqualified, with taxes and penalties due
immediately. They will then be faced with the option of paying the taxes and penalties or
defending the scam in court where I am sure they will not receive assistance from the
issuing company. Because though the company took a healthy fee for the account
establishment and a commission for the sale, they also disclaimed any responsibility in
the fine print.
Just days ago, the Industry Council on Tangible Assets issued an article titled, “The
Prohibition on Home Storage of Bullion Held in an IRA.” In the article they quoted the
IRS’s answer to the question:
Can I store my bullion in my home?
Gold and other bullion are “collectibles” under the IRA statutes, and the law discourages
the holding of collectibles in IRAs. There is an exception for certain highly refined bullion
provided it is in the physical possession of a bank or an IRS-approved nonbank trustee.
This rule also applies to an indirect acquisition, such as having an IRA-owned Limited
Liability Company (LLC) buy the bullion. IRA investments in other unconventional
assets, such as closely held companies and real estate, run the risk of disqualifying the
IRA because of the prohibited transaction rules against self-dealing.
To add insult to injury, these same companies are steering investors into collectible
proof type products which is just another rip-off. They market these coins as collectible
and worth substantially more but the truth is that the only thing substantial about them is
their price mark up. They do not perform better and they are exponentially harder to
The fact of the matter is that these are unregulated companies making the easiest and
most profitable sale possible. This is why we stress that our advisors be proactive in
letting their clients know that they have access to a licensed, regulated and fiduciary
company that can help them invest their hard-earned dollars into precious metals safely
and correctly – National Gold Consultants (NGC). Your clients are looking for other
places to invest because markets are screaming all-time highs and are soon to correct;
do not let them get hurt because you didn’t tell them you have NGC as an option as
NGC handles qualified accounts every day. We place your clients into the one product
that offers the best performance, liquidity and the least premium or mark up: the
Canadian Maple Leaf coin. There is no secret sauce when it comes to qualified precious
metal accounts. NGC strives to get the client the best bang for their buck in a fiduciary
manner. We are always available to establish new accounts as well as liquidate, and we
exclusively use GoldStar Trust Company and the Delaware Depository for storage
because of their inexpensive fees, superior reputations and excellent customer service.
There are plenty of great reasons to hold precious metals in an IRA, just be sure to do it
right with the right company. Please contact us if you have clients with “home-stored”
precious metal IRAs or if you have questions regarding this. We have teams that stay
current on the rules and regulations surrounding gold and silver investing and are here
to support you and your clients.