Have you ever spoken to a Gold/Silver IRA company that tried to sell you coins in your IRA? This is a niche market but accounts for over $1 Billion in transactions per year. And with profit margins of up to 30-50% or more, it can be tough to find a reasonably priced reputable company. Because there are so many of these Gold/Silver IRA companies out there making so much money, they can insulate themselves from the competition. Google ad words associated with this topic are some of the highest cost search words money can buy. Due to the high margins, salespeople can make a high six or even into seven-figure incomes, attracting very talented tricksters.
The average investor doesn’t stand a chance when looking into most of these companies. Many of Gold IRA companies even pay well-known celebrities to be their spokespeople; you’ve probably heard of many of them. They advertise on cable news and radio stations. They have a knack for targeting older, conservative investors who fear losing their retirement to a financial crash. Not to say there is no possibility of a crash, and given the current times we are in, it looks more likely than ever. But is the Gold and Silver they want to sell you going to provide the protection you’re looking for, or is it going to put a massive amount of your hard-earned retirement money into their pockets?
8 RED FLAGS: If you start noticing any of this, RUN!
1. Cost / Fees: It’s all about the spread in the coins they are going to push you to buy. They will advertise ‘No Custodian fees for X years’ or ‘Get $5,000 back in free Silver’. These are all ways to avoid disclosing where they make their money, which is the margins on the coins. It is common for spreads these days to be 20-30% or more on coins. That means that if you do a $100,000 deal, they make $20-$30,000. Some even make more when selling ‘Exclusive coins.’
What do you think is a fair profit margin to make on a financial transaction?
2. EXCLUSIVE COINS: Many of the companies in this space have their own “Exclusive Coins.” They make deals with various mints for coins that only they will get. The most common mints that do this are the Canadian Mint, British Royal Mint, and Perth Mint. The mints are happy because they will contract to sell a specific amount of coins, which is what they are in business to do. They sell these coins for about the same price they would sell a common bullion coin like a Maple Leafs or Britannias. The Gold/Silver IRA companies then take these coins and mark them up 50-100-200% or more. Then claim that because they are unique, they will appreciate better and offer more tax benefits. Because no other company will be able to provide the same coin, it allows them to price them at whatever they want. NO COMPETITION IS VERY BAD FOR CONSUMERS! On top of overpaying for these coins, you are essentially stuck with selling them back to the same company because no other source will be interested in buying them for anything more than the spot price (melt value).
What if they go out of business or decide not to buy-back your metals?
3. LIMITED MINTAGE COINS: The sales pitch – “They only minted a small amount of these coins so they will outperform other, more recognized coins.” This one seems like it would make sense, but don’t be fooled. Outside of that company, there is rarely any secondary market for some random coin that the company had made. If there is a strong secondary market, you should easily be able to find the exact same coins from previous years selling for higher prices than what you are being offered for the same coin. Examples of limited mintage coins- Proof Coins, Exclusive Coins, Pre-33 U.S. Gold Coins (Not IRA eligible), Pre-1964 U.S. Silver Coins (Not IRA eligible), Various modern U.S. Coins. (Check prices from online retailers, not the U.S. Mint) Kitco, Apmex, and JM Bullion are good sources to check prices.
Do you want to bank your retirement savings on rare coins that you know nothing about?
4. COMMISSIONED SALESPEOPLE: It should be common knowledge that if you have to talk to a commission salesperson to do a transaction of any kind, you will pay more. Sometimes it’s acceptable as long as the cost is clearly outlined upfront. Where to especially look out for this is when making financial decisions, and someone is advising you who makes a commission. They are incentivized to sell the product that makes them the largest commission, which typically puts the investor in the worst position. This is a common problem in the Gold/Silver IRA space. If they sell you the lowest cost bars/coins, commonly known as bullion, the sales rep may make 1% or less of the total transaction. However, if they sell you Proof, Exclusive, Low Mintage, or Numismatic coins, they can make 10% or more of the total transaction.
Is this the kind of person you want to be taking investment advice from?
5. CALL FOR PRICING: When you go to the companies website and see pricing for some coins, but many other coins say ‘Call for Pricing’?? The call for pricing coins are the ones the salesperson is going to recommend you buy for the reasons outlined in this report. Of course, the real reason is They make more $$ selling those coins.
If they are so confident that is the best investment and are offering it at a competitive rate, they should be proud to display pricing at all times, right?
6. TAX-LOOPHOLE: To get you to buy “specialty coins” with high markups, they will justify the costs and reason to go with these coins because by buying them, you will lower your taxes when you take a distribution in-kind. They will say the coin is worth more than what will be reported on your 1099. This is rarely accurate, and if you have to overcome a 30% or higher spread, any additional tax savings will be lost to the profit margin on the coins.
Plus, do you really want to take on the IRS when they realize what you did?
7. YOUR IRA CUSTODIAN VALUE WHEN YOU GET YOUR STATEMENT IS NOT THE REAL VALUE: This comes into play after a purchase is made. It is tied to the tax-loophole angle. The pitch is basically this:
“Your statement is only going to show you the melt (spot) price of the metals, not the REAL value (wink, wink, this is how your taxes will be less). Call me to give you updates on the REAL value.”
Don’t you find it strange you never see the REAL value in writing anywhere?
8. REPURCHASE CLAIMS: When buying coins, most companies will claim it is easy to sell-back anytime you want and that they always buy-back. However, when it is time actually to sell, the story can change dramatically. Most of these companies have no interest in buying back the coins they recommended and will make-up all kinds of excuses that they can’t repurchase your coins at this time. A typical response is that their inventory is full, and they are not currently buying. Or that you haven’t held the coins for the recommended 3-5 years, and the price would be much less than the posted spreads in the client agreement. On top of that, even if you do get them to repurchase the coins, usually at a substantial loss, the time it takes to get the coins converted back to dollars at the custodian can be weeks to months. Keep in mind the gold and silver markets are open 24/7, and the ability to liquidate quickly is vital. Don’t you want to be in control of your investments 24/7?
Basic Questions when researching Gold IRA companies:
- Do they have a transparent pricing & fee schedule on the homepage of their website? This must not only include storage fees, but all fees paid over the spot price.
- When you call in, are you speaking with a commission salesperson?
- Are you able to cross-reference the price of the product they wish to sell you at multiple sources? The exact product, on multiple sites, not something similar.
- Can you check the values of your account anytime online? Or do you have to call in and take a sales reps word for it?
- Can you sell your investment anytime the market is open without having to speak to a live person?
- Is every claim the representative makes over the phone supported in writing?
It is essential to do your research on any investment you are considering. Countless companies are trying to take advantage of investors every day, especially when it comes to retirement accounts, which have $27 Trillion reasons to focus in this direction. Besides looking up a company’s reviews online, which can be faked or in many cases with Gold IRA customers, they have not yet figured out they were taken advantage of. You have to use your best judgment and make sure you understand and have verified what the company is offering. Don’t just take their word for it.