The golden rule with scams is simple: if there’s money to be made, there will be scams built around that money-making system. One of the most popular ways to make money is through investment management. There are a lot of investors in the market looking to increase the value of their hard-earned money. However, When you have such a large market, there will always be a minority of service providers who will be trying to make money in a quick and dirty way. Instead of providing the real value to their clients, these people would make investment recommendations that will cost quite a bit of money. This is especially problematic because of the growth in self-directed IRAs. This should not be a surprise. Whenever you give people a lot of options regarding IRA investment opportunities, many of them will get turned on to sales people who will promise all sorts of investment opportunities that will fail to materialize. In many cases, people who are trying to manage their self-directed IRAs end up investing in opportunities that they thought was something but turned to be completely opposite. This is definitely the case with gold IRA scams. Here are some of the forms of IRA scams take as well as the ways to protect yourself from it.
As mentioned by the United State's government (Investor Alert: Self-Directed IRAs and the Risk of Fraud), the reason why these rip offs are so prevalent is because of the rise of self-directed IRAs. This trend is actually a function of the weak economy. When people are jumping from job to job due to economic uncertainties, they are left with 401(k) that they have to roll over. The last thing you would want is having several 401(k)s that are not unified. For the sake of clarity and maximizing control, people would use 401(k) rollover accounts to set their investments into a larger account. This usually takes the form of self-directed IRA. Simple enough, right? Well, this is where the problem begins. Since the individual IRA owner is in full control, such owners and investors are hit by all sorts of investment opportunities that may not make much sense. These scams try to take advantage of whatever confusion or ignorance some investors may have about precious metals and other investment options for their self-directed IRAs. These people can be the victims of the following scams.
First, the sellers of gold IRA scams will get self-directed IRA owners excited about investing in gold. They rattle off crazy appreciation patterns and historical prices. Slick offers get would-be investors excited about the upside value of gold and other precious metals. These slick offers focus on hype instead of actual value patterns. Next, they would send these individuals materials instructing them to buy gold. Then, they will find out that the actual transaction history was deceptive only after converting their IRAs to gold ones. They may have thought that their self-directed IRAs diversified into gold or other precious metals but in reality, they are not holding any legal paperwork that would entitle them to gold and other precious metals. This is the typical way how gold IRA scams work. It’s shell game.
In other cases, gold IRA scams use a bait-and-switch approach. You might think that you are getting physical gold but you might be actually getting gold certificates. You only find out when it comes to the time to cash out such certificates. You find out too late that they are not really worth much money. In some cases, there might even be doubt if the issuing company had enough gold to cover the certificates they issue. How do you prevent these problems? Keep reading below.
Self-directed IRA programs need custodians that are normally companies that track all self-directed IRA actions and provide a home for accounts. Pick a custodian that will give you information regarding possible shady movements are in your account. At the very least, trust is built through accountability and clear account tracking.
The right self-directed IRA custodians know all about IRA scams. They have a track record of steering their clients away from such scams. Moreover, they track suspicious activities. Either way, pick a custodian with the right track record of the customer protection. However, you cannot rely on your custodian fully. Remember, their job is to basically make sure that your account has a home. Technically speaking, unless they are on legal notice, they don’t have the responsibility to dissuade you from certain investment. Still, good custodians will be on the lookout for gold IRA scams and other bum investments.
If out of the blue, you get an email letter asking you to devote some of your IRA to gold, be suspicious. It’s one thing to get an email from a trusted company, while it is another to get an email or a letter from a company you don’t know. Be very careful of unsolicited offers of gold sales. Many people who suffered from gold IRA scams fell for emails or letters that sounded too good to be true. Again, the rule is simple. If it is too good to be true, it probably is. Know the difference between hype and ‘puffery.’
If you are truly interested in converting some of your IRAs to gold IRA, then you need to deal with accredited gold sellers. These sellers have a lot to lose if they get involved in gold IRA scams. Deal only with the respected names in the industry. When you devote a certain portion of your IRA into a gold diversification strategy, you will do well when dealing with an accredited gold seller. This people will be at a greater disadvantage in getting you involved in scams than unaccredited gold sellers. Hence, they would value their brand and long-term business rather than any short-term gain they might get from scams. Be on the lookout for accredited gold sellers to help you diversify your portfolio.