1. A Wealth Management Need
Opportunities in self-directed IRAs for high-net-worth individuals
By Michael P. Scott
M any community banks across the nation are taking a careful look at the balance of products and services they offer in today's financial services market.
As with most things in life, things change. The market space we all deal with changes continually, sometimes with little warning or obvious cause. One change we
are all well aware of is the current shift of "money in motion."
It's no surprise, the major market segment in the nation is the baby boomers who are retiring at a pace of over 10,000 per day, rolling retirement funds from
company sponsored plans to IRAs. The Investment Company Institute in Washington, D.C., reported that for the first time in history IRAs are now holding the
largest amount of personal financial assets, $4.7 trillion, over any other retirement product offered. At the end of 2010 there were in excess of $17.5 trillion in
retirement assets across the United States.
A unique role of IRAs is providing investors with the ability to make alternative investments in items other than traditional stocks and bonds. A recent survey by
Rydex Advisor Benchmarking Inc., a research and analysis firm in Rockville, Md., found that 55 percent of registered investment advisors expect to increase their
allocations in alternative investments by 25 percent over the next five years.
It's all about balance. Community banks hoping to capture a share of this ever-growing market may want to look at the option of offering their clients' self-directed
IRAs. In most communities the only resource for a bank custodian who will hold alternative assets is on the web. Considering the understandable discomfort many
financial consumers have for online services, community banks that offer self-directed IRAs in their local brick-and-mortar facilities have the opportunity to
establish create a highly demanded and profitable wealth management service niche.
With a self-directed IRA, the investor locates and makes all decisions on which asset to invest in, and the alternative investment options in what your community
banks' customer would be allowed to invest in would be almost unlimited. Common alternative asset investments include real estate, notes and private mortgages,
and private stock offerings. And our community bank would act as custodian only with these investments.
An interesting benefit of offering self-directed IRAs is the type of clients they attract. Typically interested parties are high net worth, sophisticated investors.
Attracting and developing working relationships with these clients can lead to opportunities for your bank beyond the money flowing to the self-direct IRAs.
These same clients will on occasion need assistance from a certified public accountant or lawyer in deciding which alternative asset investment to purchase. So
developing a professional team that is familiar with the special nuances of self-directed IRAs can provide an ongoing source of new investment and banking
business.
Michael P. Scott is principal of Iron Horse Management LLC, a wealth management consulting firm in Portsmouth, N.H., that, among other wealth management
programs, offers training programs on self-direct IRAs.
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