By AdaPia d’Errico, Patch of Lands, Patch of Lands investments are, by definition, alternative investments. Just because they are alternative doesn’t mean they are exotic, out of reach or unattainable through traditional means. Quite the contrary, especially if you are investing with your SDIRA. We asked James Jones from Kingdom Trust to explain how you can use your SDIRA to invest in Patch of Land loans, amongst other forms of alternative investments.
PoL: Can you explain why we need a Self-Directed IRA to invest retirement funds in Crowd funding Peer-2-Peer or Equity investments? Why can’t I use my E-Trade or Schwab IRA?
JJ: To begin, there are app. 50 million IRA’s in the US worth $6.5 Trillion. Of those, 98-99% of those IRA’s are held at traditional brokerage firms that invest in publicly traded securities such as stocks, bonds, mutual funds and ETF’s and do not allow their investors to invest in private securities. For privately securities or assets, one must utilize a trust company and custodian like Kingdom Trust to invest.
AdaPia d’Errico, Chief Marketing Officer of the real estate crowdfunding portal Patch of Land, will be speaking at the Social Enterprise and Crowdfunding Conference (SECFC14) on September 26, 2014 at Snowbird, Utah.
PoL:How are they different than IRA’s at brokerage firms?
JJ: The only difference is the private security asset class they invest in; otherwise they are the same in terms of contributions, distributions, rollovers and transfers. They are also available in the same types such as Traditional, ROTH, SEP’s, HSA’s and Coverdell’s.
Pol: Do you recommend investments such as Real Estate Crowd funding opportunities to your clients?
JJ: No, we are not a licensed security brokerage firm; we are a non-fiduciary trust company where our clients “self-direct” us to make investments on their behalf that they have selected and vetted.
PoL: So how would a portal or platform work with you?
JJ: Essentially, we are a third party provider of IRA’s where your clients and/or prospects would come to your site and select an investment. When given the option to use retirement funds, they begin a simple 3-step process: (1) Open an account (2) Transfer funds from the brokerage firm IRA (3) Direct us to make the investment to you.
PoL: What are your biggest challenges in this industry?
JJ: There are several. First and foremost is education and getting the word out that retirement funds can be used in alternative asset classes such as crowd funding, private equity and debt, real estate, tax lien certificates, promissory notes etc. Every day I am in the trenches explaining the role of Self-Directed IRA to investors, advisers, attorneys, CPA’s and the actual portals and platforms. Second of course is getting the portals and platforms to embrace, educate and promote to their investors that they can use Self-Directed IRA’s to get tax free or deferred returns. Lastly, we have to build trust and a good working relationship with the portals and platforms that we will make it a simple and easy process for their investors and offer a good user experience.
PoL: What have been your successes to date?
JJ: We have pioneered the use of Self-Directed IRA’s in crowd funding for the last 3 years, and as such have introduced the Crowd IRA with a $100 Annual Fee, technologically automated the cumbersome manual process to invest with a SDIRA and continued to provide live Client Services. These 3 issues are typically the sticking points in using a SDIRA. As a result, we are working with many of the top portals and platforms such as PatchofLand.
PoL: So why work with us at PatchofLand?
JJ: We look to connect a platform that offers investors a focus on experienced sponsors, find a greater range of opportunities more easily, offer a way to review projects in a consistent and transparent way and invest in shares of real estate offerings securely.
PoL: What can a portal do to ensure that investors have enough information to feel comfortable making an “alternative investment”?
JJ: Self-Directed IRA means that the IRA holder directs us, the Trustee and Custodian to make the investment on their behalf based upon their own due diligence. The more information and education the portal can provide to make a good decision is key because it is the investor who chooses where to place his or her money.
PoL: What is your vision for SDIRA’s in crowd funding?
JJ: It is the same as yours, and all of us in this industry that are so passionate about democratizing Wall Street for both start-up companies to get funded and create jobs for our country, and specifically give the average investor the ability to truly and properly diversify beyond the redundant over-allocated narrow focus of Wall Street into the broader non-correlated world of alternative assets that the wealthy have invested in for centuries. Real estate of course, is the #1 choice of asset class for millionaires, accredited investors, the wealthy and self-directed IRA investors.
I would be happy to answer any questions about the power of Self Directed IRA Investments in Crowdfunding, so please reach out to me!
Chief Marketing Officer
Patch of Land