If you consider investing in a Gold IRA, you should be careful when choosing a company. The main problem with Gold IRA investments is that there are many fraudulent companies. For example, Steve Starr, an RV dealer from Tampa Bay once became a victim of Spyker Telemarketer, a company which is now well-known for its scams. Starr invested $25,000 and didn’t receive any profit because the company just pocketed his money and was not going to invest it. When the company was declared guilty by Federal Court in 2010, it turned out that Spyker Telemarketer didn’t have any access to the precious metals market at all.
Starr was just one of many investors who want to invest in precious metals, wishing to add stable investments to their portfolio. However, the success of this idea directly depends on the chosen company, and there are many dealers who use various illegal and unethical techniques.
There are salespeople who prefer to upsell services, intentionally misleading their customers. All the customers are looking for good financial opportunities, but not all of them get what they are looking for. Just like any other kind of investment, precious metals investments are prone to fraudulent actions so you will certainly benefit from knowing main fraudulent techniques when making a decision. We at Gold IRA Companies decided to help you spot some common scams so that you can save your money and time.
Top 10 Gold IRA Scams
Access to Physical Gold
Many companies are looking for investors who are in control of their IRA but naive about investing. For example, such companies may offer numerous options that don’t actually provide value.
First, the salesman promotes the exaggerated benefits of investing in precious metals. They tell their customers about unrealistic prices and unbelievable appreciation. After this, they push investors to the transaction. Finally, investors realize that there are no documents that would prove their ownership. Companies may brag about their diverse portfolio without presenting any evidence.
Keep in mind that you have a right to view, organize, and recover your physical gold from the storage. To investigate scams of this kind, ask your custodian for legal documents: if these documents don’t mention your rights, it’s a scam.
There is a big difference between bullion coins and numismatic coins. Numismatic coins are collectible, and their value may be much higher than that of the base precious metal. This is a reason why scammers may try to convince you to invest in numismatic coins instead of the regular bullion coins. However, the truth is that numismatic coins cannot be stored in a precious metal IRA. Their liquidity is very low, so you should clearly understand the difference between these types of coins. Only bullion coins are eligible for deposition, while numismatic coins will be useful only if you want them to be a part of your collection.
There are also companies that make their customers believe that they are purchasing gold IRA while providing them only with gold certificates. Such certificates may be completely worthless, and when customers realize that there is no physical gold, it’s already too late. Such companies may not have the specified amount of gold at all.
To avoid scammers, make sure to investigate the form of your investment. Carefully read any contracts and learn more about your dealer before making a decision.
If you’re planning your retirement, we suggest that you create a diverse investment portfolio. There are many profit-driven dealers who may try to convince you to invest all your money in precious metals. Most often, their main argument is that otherwise, your assets will be at risk.
Precious metals indeed help you protect your money from economic insecurities but you should understand that these are long-term solutions. Such investments are valuable only if you can wait for decades. There are many other investment options that offer short-term benefits and may become an additional source of income.
Promoting offers that are too good to be real is another common type of scams. In this case, the whole scheme is quite simple: such scammers act the same way as people who make fake emails with offers, asking you to quickly invest money so that you won’t miss out on an opportunity. Such offers may look legit, and such emails may look like they were sent by a reputable company. Thus, we recommend that you don’t make spontaneous decisions, validate the credentials and identity of the sender, and check all the information. Check online reviews and ratings, and don’t fall for unrealistic offers.
Certification and Grading
Another common scam is various certification and grading services. Some dealers offer such services as a part of their sales pitch, telling investors that they may buy gold of low quality. Certification services are often overpriced and advertised as a necessary step to ensure the quality of gold. As a result, customers may pay up to $80 to grade a coin, while they can do it themselves for less than $10. There is also no need for certification if you’re buying new bullions (MS-70 condition). Do your research to learn more about the quality of gold and certification standards so that you can avoid such scams.
If you check the IRS guidelines, you will see that the IRA gold shouldn’t be stored at home. However, some companies may try to convince you that it’s a nice solution. The truth is that gold should only be stored in a depository of a custodian or trustee. If your dealer wants you to open an LLC and to use the name of the company as a custodian, keep in mind that it’s illegal.
A custodian is a treasury or financial institution that meets the IRS requirements. To become an IRS approved trustee, companies have to go through a long and complex application process. If you fail to follow the IRS rules, you can face a huge penalty, and your assets can be split.
To avoid such situations, make sure to research the company. We suggest that you choose only trusted IRS approved custodians. In this case, your gold will be safe.
Sometimes, dealers may try to convince you to borrow money from them in order to buy more gold. In this case, you will have to use the loan amount to pay for the gold upfront. After this, you’ll have to pay the loan amount back, while also paying the interest.
Such investments are called margin investments. Dealers may want you to believe that you will get great benefits in the long run, saying that if the return exceeds the interest rate, the leveraged account will be highly profitable. Sometimes, it may be true, especially if you’re an experienced investor who is perfectly familiar with the right approaches. However, if you’re a beginner and you cannot properly analyze all the details of such investments, such high-risk options may lead to significant losses with only a dealer actually getting profits from your investment.
Financial advisors may receive a commission every time they recommend their partnered dealers. Commissions from sales and fees provide them with a lot of money, while investors have to overpay 15-20% of the bullion price.
First, not all recommendations are scams. Advisors may recommend legit dealers, however, you should make sure that you don’t lose a part of your investments so that the advisor can receive their commission. Advisors can be very helpful, however, sometimes they may care only about their own interests, recommending bullion coins with higher commissions instead of suggesting options that are actually good for you.
To eliminate such scammers, contact bullion dealers directly. Such an approach will help you save money, however, you’ll still have to make sure the dealer has a partnership with an IRA custodian or trustee. Sometimes, partnerships also allow you to get a discounted annual price.
This is one of the most common types of IRA scams. If your dealer doesn’t inform you about all the fees in advance, we recommend that you look for other dealers. You don’t want to learn about fees after you’ve already invested your money.
Do your research and ask as many questions as you want. Your dealer should inform you about the company’s policies, ratings, fees, IRS licensing, storage, etc. Never choose companies that don’t have FDIC insurance or a license.
How to Avoid Gold IRA Scams
- Research companies. Visit online forums and search for reviews. You should know everything about a company’s ratings, commissions, and fees before you invest.
- Choose companies with a good track record and high ratings on Trustlink and BBB.
- Don’t be afraid to ask questions and see whether or not the dealer is willing to answer them.
- Find the information on a custodian and its depository.
- Invest in bullion coins and avoid numismatic coins.
- Ask for all the necessary legal documents and make sure that you have the right to access your gold or other precious metals.
- Before investing, clarify all the details regarding storage with your trustee.
- Don’t trust companies that offer overpriced certifications for new bullion coins.
- Be careful when you hear upselling pitches.
- Talk to your legal advisors before investing in a Gold IRA.
- Make sure your dealer is licensed or IRS approved.
- Don’t choose leverage accounts and don’t borrow money to purchase gold.
- Don’t trust dealers unless they have FDIC insurance.
- Keep in mind that diverse portfolios with multiple investment options are more profitable.
- Buy directly from dealers instead of involving financial advisors and brokers.
- Don’t make spontaneous decisions, even if a salesman says that you should invest right now.
- Don’t respond to suspicious emails with great offerings. Research the sender and make sure it’s a legit company.
Gold IRA scams are common in the industry of precious metals. Nevertheless, you can avoid scams if you carefully research any dealers and companies you’re working with. Trustworthy dealers always provide any necessary information and are clear about their policies.