Questions Concerning Financial Risks Associated with Quest IRA as Administrator

Question: Mr. Long, I’ve reviewed the webinar on self directed IRAs. Simple but possibly offensive question, Quest IRA is the “trustee” similar to Charles Schwab… If you go out/defunct, what happens to my money/assets that you are administrating?

Answer: Actually, the question is not offensive at all. In fact, it shows that you are the type of person for whom a self-directed IRA works best – someone who is careful and does his homework before making an investment decision.

Our role is not as the trustee or custodian, but rather as the third party administrator, serving as the agent and nominee of the custodian, First Trust Company of Onaga (FTCO), a Kansas trust company. For over 30 years accountholders have trusted First Trust Company of Onaga (FTCO) as their custodian of Self-Directed Custodial Accounts.  FTCO serves as custodian for over 80,000 accounts with a market value in excess of $7 billion.  FTCO works extensively with IRA Administrators like us to provide superior service for Individual Retirement Accounts, Health Savings Accounts and Educational Savings Accounts.  I have attached a .pdf of the Kansas Secretary of State where you can find information on FTCO, as well as a Certificate of Good Standing for Quest IRA, Inc. for your reference.

So there is a significantly sized custodian who is backing us up and watching over what we do, as are their regulators indirectly through their examination of FTCO.  Additionally, we are required to have fidelity bond coverage and errors and omissions insurance.  Finally, our custodian requires us to have a Business Continuity Plan which includes not only disaster recovery planning but also succession planning in case of the death of the owner of the company (which is me).

We have been doing business now for 9 years, and have grown tremendously in assets and in number of accounts.  We have approximately 36 employees in 2 states, and we are growing all the time.  When you say “if you go defunct” please remember that your IRA assets are held separately at all times from our company assets, so if Quest IRA, Inc. goes defunct it does not mean that your assets disappear.  Instead, either the custodian or another administrator would come in and take over administration of your assets.

I certainly applaud your wish to do your due diligence before entrusting us with your hard earned retirement dollars.  I believe we have the strength and stability to operate successfully for many years to come, especially with FTCO as our custodian.  As has been seen from some of the turmoil of recent years, the size of the firm does not necessarily guarantee security, but I believe Quest IRA, Inc. is as steady of a company as there can be.

If we can help you with your self-directed IRA needs, please let us know.  I wish you happy holidays, and a healthy, happy and prosperous 2012!

Question: Thank you for the information Mr. Long. I’m very interested. What are the fees for everyone involved? Can financials be provided on First Trust Company of Onaga (FTCO). Saying their big doesn’t do anything for me. Cert of Good standing…. Ive got about 4 certs of good standing and only 1 company is worth buying lunch for. Is their SIPC type insurance for Trust companies?  The essence is I’ve got me + friends interested. I’ve got a plethora of deals I can do with this model.

Answer: I’m not sure I understand what you mean when you ask “What are the fees for everyone involved?”  I have attached our fee schedule and a 5305 for your reference.  

I don’t know that financials other than what is a matter of public record in the State of Kansas can be provided, but you are more than welcome to call both FTCO and the regulators in the State of Kansas for further information on FTCO.

There is not SIPC insurance for FTCO because it is a non-depository trust company and it does not sell securities.  Most self-directed IRA assets are not securities that would be covered by SIPC anyway.  Of course since the cash is kept in FDIC insured institutions it is covered at least up to the $250,000 limit, but once the money is invested it has no governmental protection.  This is of course true of any self-directed custodian or administrator.

I completely agree with you that just because a company is big (or small for that matter), that does not imply that it is more or less safe than any other company.  Perhaps the difference with a company like FTCO is that it is heavily regulated and is examined every year.  In fact, the group that FTCO belongs to does the vast majority of trust business in the State of Kansas, so the regulators are with them on a regular basis examining one of their trust companies.

Ultimately, it is the people involved that count most of all. I believe we have a great team which offers great service and great networking and education.  Certainly self-directed IRAs are not for everyone, but for those who truly understand the product and use it effectively, it can be one of the best ways to build your retirement wealth.

If we can assist you with your retirement account needs and those of your friends, please let us know.

Question: Thank you for the feedback. Please let me know when you have a Dallas presentation. I’m a bit challenged with an inability to participate in the management of the investments I invest in.  I’m in a position that I have to “buy myself a job” where I pay myself a salary as a manager from the business I invest in.

Answer: Ryan Kimura is our Dallas manager and Nathan Long is our General Manager here in Houston.  They will help you to know when events are upcoming in Dallas.  

As far as your desire to “buy yourself a job” I have a couple of thoughts.  First, you may want to investigate setting up what the IRS terms as a ROBS arrangement (Rollovers for Business Startups).  While the IRS has expressed some concerns about this set up, and you should definitely do your due diligence, many companies do offer this as a way to use your retirement dollars to invest in a business where you work.  Personally I understand the IRS’s concerns, but I have not studied the issue sufficiently to come to a conclusion about whether the setups that these companies offer deal with the issues raised by the IRS.  If you decide to pursue this course of action, definitely go with a company which is familiar with the IRS guidance and can explain to you what they have done to deal with those concerns. 

The second thought I have is that just because you cannot generally use your own retirement dollars to make money for yourself right now doesn’t in any way mean that you cannot use OPI – Other People’s IRA – to make money for yourself right now.  While you cannot use the IRAs of disqualified persons to benefit yourself right now, you can certainly use the IRAs of other people not in a disqualified relationship to you.

We look forward to seeing you at future events in the Dallas area.  Have a great holiday season, and I wish for you a happy, healthy and prosperous 2012!

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