Why Do Traditional IRA Custodians or Brokerages Not Provide Service for Alternative Assets?

Traditional IRA custodians or brokerages may not service alternative assets for a variety of reasons. One reason is that managing and administering alternative assets can be more complex and time-consuming than managing traditional investments like stocks and bonds. This can increase the administrative burden and costs for the custodian or brokerage.

Another reason is that alternative assets can be riskier and more volatile than traditional investments. This means that there is a greater potential for losses, which can increase the custodian’s or brokerage’s liability and risk exposure. Additionally, some alternative assets may be more difficult to value accurately or may be subject to greater regulatory scrutiny.

Finally, traditional IRA custodians or brokerages may not have the expertise or infrastructure in place to handle alternative assets. For example, they may not have the specialized knowledge required to manage real estate or private equity investments.

For these reasons, traditional IRA custodians or brokerages may limit the types of investments that can be held in a traditional IRA. However, investors who are interested in holding alternative assets within an IRA may be able to do so by opening a self-directed IRA with a custodian that specializes in alternative asset management.

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