How To Monetize The Self Directed Ira Opportunity Final

PRESENTED BY

IRON HORSE MANAGEMENT, LLC

WITH GUEST SPEAKERSLAURIE BACHELDER, PRINCIPAL OF FREEDOM WEALTH ADVISORS, LLC

AND FRANK BRIDGES, FOUNDER OF

HERITAGE DESIGN LAW GROUP LLC

How RIAs can Monetize the Self-Directed IRA

Opportunity

© Iron Horse Management, LLC www.Iron-Horse-Mgmt.com

All written material(s) provided by Iron Horse Management, LLC, Freedom Wealth Advisors, LLC and Heritage Design Law Group, is/are for informational purposes only. It is not intended and may not be relied upon as direct actionable opinion, guidance, or advice on any legal, tax or investment matter(s). Any strategies discussed, including examples using actual investments, are strictly for illustrative purposes and are not to be construed as an endorsement, recommendation, or solicitation to buy or sell any investment. © All rights reserved. Any reproduction, modification, or use of these materials without the prior written consent of Iron Horse Management, LLC, Freedom Wealth Advisors or Heritage Design Law Group, is strictly prohibited. Any authorized use by third party(ies) may not be construed to imply Iron Horse Management, LLC, Freedom Wealth Advisors, LLC or Heritage Design Law Group, has endorsed or recommended the third party(ies). Iron Horse Management, LLC, Freedom Wealth Advisors, LLC and Heritage Design Law Group is only responsible for its own written content and verbal representations made by its legal representatives. Any and all oral commentary and any non-related materials disseminated by third party(ies) is solely the responsibility of those third party(ies).

Our Objective with this Webinar

Current size of the marketplace

Trends and the opportunity available to Financial Advisors

How to eliminate the drain on resources for the small to medium size advisory firm and still win

We will identify how to add this service to your business model to attract new HNW clientele


RIA Market Continues to Grow

From 2008 through 2011, RIAs’ holdings of retail investor assets grew by nearly 50%, to over $1.3 trillion

Dually-registered advisors (RIA and independent broker-dealer) enjoyed even faster growth, increasing assets by more than 140%, to $883 billion

By contrast, total retail channel assets grew by 28.5%, to $22.4 trillion

According to Cerulli report (Oct. 2012)© Iron Horse Management, LLC www.Iron-Horse-Mgmt.com

Size of the Retirement Market

Retirement Market is over $18.5 Trillion

IRA Market is $5.1 Trillion

Retirement Assets by Type – IRAs represent the largest segment of the US Retirement Market

ICI Retirement market stats as of 6/30/2012


Why advisors are not jumping for this opportunity?

Highly technical aspects of the law and rule that surround Self-Directed IRAs such as:

Prohibited TransactionsSelf-Dealing issuesDOL interpretations of the codePlan asset rules Ongoing potential for the client to create a

PTLiquidity and Valuation issues


Our First Speaker Today

Laurie Bachelder, PrincipalFreedom Wealth Advisors, LLC

Portland, ME.

RIA firm with an extensive background with alternative or non-traditional assets held within retirement plans.



Brief History of IRA

1974-Congress created Employee Retirement Income Security Act (ERISA)

•Created IRAs to supplement Social Security

•IRA was intended to be a self directed retirement account.

Types of retirement accounts that can be ‘Self Directed’

SEP IRA

401(k)/ProfitSharing

403(b) 457 Plans

HSA

Simple IRADefined Benefit

Plans

Self-Directed

Traditional IRA


Characteristics of a Self Directed Retirement Account

All rules and regulations including contributions limits, distributions, tax treatment, etc are the same as retirement accounts that invest in traditional investments.

The major difference for a self directed retirement account is the custodian.


What can a Self-Directed Retirement Account invest in?

The rules only specify what you CANNOT invest in (which assets are excluded or prohibited)

What You Can’t Invest in: Collectibles Life Insurance Stock of a Sub-chapter “S” corporation


What is Allowed

As long as the transaction is:

For Investment PurposeNot creating a prohibited transaction (with a

disqualified person) Then the list of possible asset types or eligible

investment structures is virtually limitless!*

*Limitations and restrictions apply per IRC 590


Some possibilities …….


Real Estate Property Foreclosures, Options, Pre-construction, Raw Land, Mobile Homes,

Public Storage Units, etc. Trust Deeds / Mortgage Notes Promissory Notes Privately held C-Corp Stock, LLC Membership, Limited

Partnership interests Private lending Raise Capital Horses Businesses Bus stop stations Sports team ………….Invest in what you know, your passion or core

competency!!!!

The Reality


Significant loss in retirement asset value over past several years

Unstable Economy

Fluctuations in the markets

Slow financial recovery…..………coupled with the break down of consumer confidence in corporate America, is leading investors to actively looking for ways to diversify their retirement accounts.

How Do Self-Directed IRA accounts Help?

Asset Allocation Permit far greater diversification than traditional

accounts. A portfolio comprised of only stocks, bonds and mutual

funds may not be enough to provide true diversification.

Allow investors to invest in what they know and understand!

Tax-deferred compound growth.


‘Self Directed’ does not mean ‘Self Supporting”Need for Expertise

Expert that has knowledge of the rules and regulations for non-traditional assets in a qualified account.

Expert to provide the review on the investment, initially and ongoing. Review and advise on Investment suitability, Investment

risk, investment structure and exit strategy.

Expert to provide monitoring and oversight on the investment.


COMBINING INVESTMENTS CLIENTS KNOW AND UNDERSTAND WITH THE ADVANTAGES OF AN IRA OR 401(K) –

NAMELY, TAX BENEFIT INVESTING – IS THE TRUE DEFINITION OF A SELF

DIRECTED RETIREMENT ACCOUNT, AND A POWERFUL INVESTMENT STRATEGY

AND A LOGICAL HEDGE AGAINST MARKET VOLATILITY

Words of Wisdom


Our Next Speaker

Frank Bridges, Founder of Heritage Design Law Group, LLC

Newton, MA

Key member of our national professional network ready and able to assist clients, CPAs, and lawyers nationwide.


Basic Concepts for Self-Directed IRA Advisors


TO MAKING A PRIVATE INVESTMENT IN LOCAL REAL ESTATE

Six Basic Steps to Start


Six Basic Steps

Phil’s IRA

Phil


Six Basic Steps

1. Choose a Custodian

Phil’s IRA

Phil

SDRA Custodian


Six Basic Steps


2. Open an Account


Six Basic Steps


2. Open an Account

3. Transfer Funds to Your New Account


Six Basic Steps


2. Open an Account



Six Basic Steps


2. Open an Account


4. Choose Your Investment


Six Basic Steps


2. Open an Account


4. Choose Your Investment

5. Structure Your Deal


Six Basic Steps


2. Open an Account3. Transfer Funds to

Your New Account4. Choose Your

Investment5. Structure Your

Deal6. Instruct the

Custodian to Make the Investment


Six Basic Steps


2. Open an Account3. Transfer Funds to

Your New Account4. Choose Your

Investment5. Structure Your

Deal6. Instruct the

Custodian to Make the Investment


What You Can Do


What You Can Do

1. Contribute up to the annual maximum2. Receive Qualified Distributions3. Make Rollovers to/from Qualified Plans4. Invest for Tax Free Returns5. Choose Your Custodian6. Designate Beneficiaries7. “Stretch Out” Distribution Planning8. Convert Traditional IRAs to Roth IRAs


What You Can’t Do

PROHIBITED TRANSACTIONS


Prohibited Transactions

Prohibited Transactions Thumbnail Guide

Any direct or indirect business transaction involving plan assets between one or more disqualified persons and a plan, and

Any direct or indirect personal benefit to one or more disqualified persons involving plan assets (other than qualified distributions).


Prohibited Transactions

The Meaning of “Indirect”(One Man’s Opinion)

A transaction intended to circumvent the rules and achieve the same result (doing “indirectly” what you can’t do “directly”)

Includes an element of concealment or evasion

Not something that happens as an unintended collateral result


Why Be Good?

EXCISE TAXES UNDER §4975


Why Be Good?

Three Potential Disasters:1. 15% Excise Tax on the “Amount Involved” 2. 100% Excise Tax on “Amount Involved” for

Failure to Correct in the Taxable Period3. Disqualification of the IRA for Tax

Deferred Treatment


The Top Three Common Mistakes


Managing the Property

Top 3 Mistakes1. The Wrong Owner

Phil

What Can Phil Do?Decide Lease Terms?Prepare the Lease Document?Receive Rent Checks?Send Checks to Custodian?Collect Rents?Sweep Floors?Fix Toilets? © Iron Horse Management, LLC www.Iron-Horse-

Mgmt.com



Phil

What Can Phil Do?Decide Lease Terms OKPrepare the Lease DocumentReceive Rent ChecksSend Checks to CustodianCollect RentsSweep FloorsFix Toilets



Top 3 Mistakes1. The Wrong Entity

Phil

What Can Phil Do?Decide Lease Terms OKPrepare the Lease Document XReceive Rent ChecksSend Checks to CustodianCollect RentsSweep FloorsFix Toilets




Phil

What Can Phil Do?Decide Lease Terms OKPrepare the Lease Document XReceive Rent Checks OKSend Checks to CustodianCollect RentsSweep FloorsFix Toilets




Phil

What Can Phil Do?Decide Lease Terms OKPrepare the Lease Document XReceive Rent Checks OKSend Checks to Custodian OKCollect RentsSweep FloorsFix Toilets




Phil

What Can Phil Do?Decide Lease Terms OKPrepare the Lease Document XReceive Rent Checks OKSend Checks to Custodian OKCollect Rents XSweep FloorsFix Toilets



Top 3 Mistakes1. The Wrong Entity

Phil

What Can Phil Do?Decide Lease Terms OKPrepare the Lease Document XReceive Rent Checks OKSend Checks to Custodian OKCollect Rents XSweep Floors XFix Toilets




Phil

What Can Phil Do?Decide Lease Terms OKPrepare the Lease Document XReceive Rent Checks OKSend Checks to Custodian OKCollect Rents XSweep Floors XFix Toilets X

PropertyManager




Phil

PropertyManager

What Can the Manager Do?Decide Lease Terms OKPrepare the Lease Document OKReceive Rent Checks OKSend Checks to Custodian OKCollect Rents OKSweep Floors OKFix Toilets OK


Dealing with Disaster


Phil

What Can Phil Do?Pay expenses from his non-SDRA funds?




Phil

What Can Phil Do?Pay expenses from his non-SDRA funds? XGuarantee a loan from a bank?




Phil

What Can Phil Do?Pay expenses from his non-SDRA funds? XGuarantee a loan from a bank? XAdd more IRA funds to his SDRA?




Phil

What Can Phil Do?Pay expenses from his non-SDRA funds? XGuarantee a loan from a bank? XAdd more IRA funds to his SDRA?




Phil

What Can Phil Do?Pay expenses from his non-SDRA funds? XGuarantee a loan from a bank? XAdd more IRA funds to his SDRA? Ok




Phil

What Can Phil Do?Pay expenses from his non-SDRA funds? XGuarantee a loan from a bank? XAdd more IRA funds to his SDRA? OkLend money to his SDRA on an emergency basis?




Phil

What Can Phil Do?Pay expenses from his non-SDRA funds? XGuarantee a loan from a bank? XAdd more IRA funds to his SDRA? OkLend money to his SDRA on an emergency basis? OK?



Top3 Mistakes1. The Wrong Owner

Phil

What Can Phil Do?Pay expenses from his non-SDRA funds? XGuarantee a loan from a bank? XAdd more IRA funds to his SDRA? OkLend money to his SDRA on an emergency basis? OK?Have the IRA borrow money from his sister?




Phil

What Can Phil Do?Pay expenses from his non-SDRA funds? XGuarantee a loan from a bank? XAdd more IRA funds to his SDRA? OkLend money to his SDRA on an emergency basis? OK?Have the IRA borrow money from his sister? OK




Phil

What Can Phil Do?Pay expenses from his non-SDRA funds? XGuarantee a loan from a bank? XAdd more IRA funds to his SDRA? OkLend money to his SDRA on an emergency basis? OK?Have the IRA borrow money from his sister? OKDid Phil instruct the custodian to buy liability insurance?

Tenant



Top 3 Mistakes1. The Wrong OwnerPhil

LLC

Tenant

PropertyManager

Custodian


Dealing with Disaster - OK!

Top 3 Mistakes1. The Wrong OwnerPhil

LLC

Tenant

PropertyManager

Custodian


Capital Conundrums

Top 3 Mistakes1. The Wrong Entity2. The Wrong Partner

Phil

LLC

Custodian

50%

50%

Simultaneous Funding


Capital Conundrums


Phil

LLC

Custodian

50%

50%Simultaneous Funding


Capital Conundrums


Phil

LLC

Custodian

50%

50%

Can the IRA add more capital?



Capital Conundrums


Phil

LLC

Custodian

50%

50%


Can Phil add more capital?



Capital Conundrums

Top 3 Mistakes1. Wrong Entity2. The Wrong Partner

Phil

LLC

Custodian

50%

50%



What if Phil can’t afford to buy the property himself?



Capital Conundrums


Phil

LLC

Custodian

50%

50%


Paul, Phil’s Brother


Capital Conundrums


Phil

LLC

Custodian

1/3

1/3

Paul

Mary

1/3


Capital Conundrums – OK!

Top 3 Mistakes1. Wrong Entity2. Wrong Partner

Phil

LLC

Custodian

1/3

1/3

Paul

Mary

1/3



Top 3 Mistakes1. Wrong Entity2. Wrong Partner3. Failing to Maintain

Phil

What Can Phil Do?Decide Lease Terms OKPrepare the Lease Document XReceive Rent Checks OKSend Checks to Custodian OKCollect Rents XSweep Floors XFix Toilets X

PropertyManager


Capital Conundrums

Top 3 Mistakes1. Wrong Entity2. Wrong Partner3. Failing to Maintain

Phil

LLC

Custodian

50%

50%



What if Phil can’t afford to buy the property himself?



The Role of the Custodian


The Role of the Custodian

Self-Directed Custodians are fiduciaries but do not provide investment evaluation or advice.

Custodians are often banks, subject to supervision by the banking regulators.

Banks have to avoid “risky” investments. Capital Cover Banking Requirements

Prohibited Transactions are “risky” investments.Custodian holds the investment f/b/o the IRA’s ownerCustodian reports account value to IRS annuallyCustodian reports distributions to IRS and account

holder


Monetizing the Opportunity

Current size of the marketplace – It is to large to ignore.

Capturing the opportunity – Data research and current trends have identified that client interest in alternative assets is not going away.


Finding the right partners can be game changing

How to eliminate the drain on resources for the small to medium size advisory firm and still win

Consider Outsourcing!


The Outsourcing Solution

Everything from assisting with your clients initial questions to the selection process for the appropriate special asset custodian can be outsourced.

Asset compliance review by a third party and ongoing compliance review.

You the advisor will not have to add staff or do the research – it can all be handled by reputable experienced professionals.


Thank you for attending this webinar

For more information you can contact any of the speakers at the email below.

Begin capturing your fair share of the retirement market today.

Michael P. [email protected]

Laurie Bachelder [email protected]

Frank [email protected]


mailto:[email protected]



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How To Monetize The Self Directed Ira Opportunity Final