Common Gold IRA Scams and Tips to stay away from them
When considering an investment in Gold IRA, there will always be those gold IRA scams. Steve Starr, a Tampa Bay-based RV dealer was going slow with his sales in 2008. That is when, Starr was approached by Spyker Telemarketer, a fraudulent investing company known for gold IRA scams. According to a story on CNBC, The company convinced Starr to invest $25000 in precious metals. Spyker also validated Starr’s investment to be profitable through misleading statements. Instead of investing the investor’s money, Spyker Telemarketer pocketed it. Federal Court declared the company guilty of the fraud in 2010. Without any access to the precious metals market, Spyker misled its clients. According to reports, it was contracting with a London-based company that was non-existent.
Like Starr, There are many investors, aiming to earn an increased value out of their savings. It is a fact that, Gold IRA is one of the most stable investments in a portfolio. However, there is no shortage of dealers who try to earn money out of the fact, through unethical techniques. These dirty practices can be a matter of concern and are also very common in the IRA investing market.
Some salespeople adapt pushy misleading techniques to upsell services, customers don’t need. Plenty of customers put money into an opportunity that they expected was something. But, the opportunity turned out to be completely different.
While It’s no surprise, that any kind of investment is prone to scams, being aware can be rewarding. Here are some common Gold Ira Scams as well as the strategies to stay away from them.
Examples of Gold IRA Scams:
Top 10 Gold IRA Scams
Gold Scam 1: No Access to Physical Gold
Companies scam investors, in control of their self-directed IRA, yet naive about investing. These gold IRA scams are about confusing potential clients with a bunch of options, with no value.
Firstly, the salesman pitches about investing in gold IRA or other precious metals. They will promote unrealistic offers with unbelievable prices, tremendous appreciation, and misleading trends. Later on, they will direct the investors throughout the investment transaction. Lastly, the investor comes to know that there is no legal document to back up their ownership. They may be content that their portfolio is diverse with gold IRA, but in reality, there is no evidence to support it.
To investigate such gold IRA scams, demand on legal documents from your custodian. You have the right to organize, view, and recover your gold from the storage. The documents should mention about your rights.
Gold IRA Scam 2: Promoting Numismatic Coins
Numismatic coins are different from regular bullion coins. These can be rare gold coins or another type of coins. They are collection items and have a high external value. Their value is above and beyond the base value of precious metal.
In this gold IRA scam, dealers will convince the customers to invest in numismatic coins over the bullion coins. The pushy upselling techniques to buy numismatic coins as they are rare or historic can have wrong motives.
Facts about Numismatic Coins
The fact is that numismatic coins are not eligible for storage in the precious metal IRA. They have an extremely low liquidity. This form of scam can also con the investors by giving a false assurance about their confiscation. The dealers lie that numismatic coins may not be seized by the government.
To protect yourself from such gold IRA scams, it is essential to understand the difference among coins. Only definite bullion coins are eligible for deposition. Analyzing the kind of coins before putting in money can save you from a high risk, or dead investment on numismatic coins.
Gold IRA Scam 3: Superficial representation of Gold IRAs
In this gold IRA scam, the company misleads the customer and manipulates them to believe that they are buying gold IRA, but in reality, they are only receiving gold certificates, which may not be worth the money. It’s in the later stages that the investors realize, that there is no physical gold. The company may not even possess the amount of gold issued in certificates.
To avoid such gold IRA scams, investigate about the form of your precious metal investment. It is essential to go through the written contracts and verify the dealer’s image before investing.
Gold IRA Scam 4: Putting all your eggs in one basket
It is advisable to diversify your investment portfolio when you are planning for your retirement. In this type of gold IRA scam, the profit-driven salesmen or company pushes and encourages you to convert most of your investments into gold or any other metal. They will come up with almost convincing scenarios to sell you on the idea that your assets are at risk unless they are converted to precious metal IRA.
Undoubtedly, precious metals act as a shield against economic insecurities, but they serve more value in the long-run or a decade. There are better investment options that will act as a source of your residual income and also have short-term benefits.
Gold IRA Scam 5: Unsolicited offers
One of the most common gold IRA scams is drawing people’s attention to an offer, too ideal to be real. These companies are no different from con artists who craft emails or letters in a way, that they look legit. Their sales pitch is their tool to convince you to believe what they want you to.
Even if the email is from a reputable company or an accredited seller, verify all the information and don’t fall for it till you validate its identity and credentials.
Avoid succumbing to the pressure to act quickly and verify’s company’s ratings and reviews. BBB, and have the most reliable rating system for all the dealers.
Video on How to handle Phone Scams
Gold IRA Scam 6: Pointless Certifications and Grading
Yet another scam tactic by some dealers is a gold grading or certification service. In this type of scam, the dealers promote certification as a part of their sales pitch, which takes advantage of the investor’s fear of buying lower quality gold.
In most cases, dealers offer overpriced certification services, which they advertise as a highly recommended measure to ensure proper grading. They would have the investor pay $50-$80 for certification of a coin which can they can do themselves in no more than $10. Another detail to note here is that there is no need to pay for certification services when you are buying new bullion in MS-70(Mint State 70) condition.
Doing a research about the condition of the gold and the standards of certification can keep you protected from such gold IRA scams.
Gold IRA Scam 7: Recommending Home Storage without incomplete information
When a company tries to convince you that you can store your gold IRA at home, be suspicious. In the IRS guidelines, it is explicitly mentioned that the IRA gold can not be stored in the owners home. It can only be stored in a depository that is maintained by a trustee or a custodian. If the dealer is persuading you to open an LLC and have your company’s name as the custodian, it is illegal.
The IRS requires the custodian to be a financial institution or a treasury complying with IRS guidelines. There are multiple steps and a detailed application process for being an IRS approved trustee. Failure to follow the IRS rules and paying taxes can lead to a splitting of your assets and also into a huge penalty.
Like all the other steps, it is essential to do research in finding a trusted custodian, approved by IRS. You can not fully trust the custodian for your investment decisions but, an alert custodian with a track record can help you spot scams and keep your gold safe.
Gold IRA Scam 8: Borrow money to invest with Leverage account
In this type of scam, the dealer convinces the investor to borrow money from him, to buy additional gold on top of the cash investment. Here, the investor pays the price for gold upfront using the loan amount.
Later on, the customer then pays back loan amount the dealer in regular installments, along with the interest. Such investment is known as Margin investment, wherein customer owns a huge amount of gold without paying the full price.
The customer is led to believe that he will earn a huge return on the gold assets in the long run, compared to what he is paying for the loan interest. The dealer manipulates the customer to believe that if the return is higher than the rate of interest, the leverage account can prove to be a huge win.
Reasons to stay away from Leverage Accounts
This can be potentially true if your investment makes money and if you are educated about the right techniques. But if you are a new investor and are not aware of how the market work, and if the account, loan, and investments details are not carefully analyzed, the surmounting high fees and interest can put you at a huge loss.
If a dealer recommends such a high-risk option just to earn more money on the monthly interest, he clearly does not care about your best interests, and it’s time to move away.
Gold IRA 9: Paying for the broker’s commission
In this type of scam, the financial advisors receive commissions on the sale of precious metals when they recommend clients to their partnered bullion dealers. The advisors earn a large amount of money from the fees plus sale commissions but, the investor ends up paying a large sum of money, sometimes in the range of 15-20% above the spot price.
While the advisor’s recommendations for the bullion may be legit, it is also important to not lose a significant portion of your investment for their commissions. With such dependence on the financial advisors, there is a possibility for them to recommend opportunities that favor their personal interests. For instance, they may recommend a bullion coin that has a higher commission markup rather than looking out for the customers best interest.
How to avoid this scam
You can avoid such gold IRA scams by eliminating the middlemen such as brokers and advisors.
Going directly to the bullion dealers can be much more reliable and economic. However, you will have to find out a bullion dealer that has a direct partnership with an IRA trustee or custodian. It becomes simple to streamline the process of directly depositing the gold to the IRA. The partnership may also help you negotiate for a discounted annual pricing.
Gold IRA 10: Hidden Fees
If the dealer does not disclose all the fees that you will be charged upfront and later on, you should be cautious and look for other options. Most gold ira scams take advantage of hiding the fee structure in the earlier stages and introducing them at a late stage when the customer has already invested his time and money.
To stay away from such scams, do your homework and don’t hesitate in asking questions before investing. You have the right to know about the company’s ratings, IRS licensing, policies, storage, fees and any other areas related to the investment. Do not trust company that is not licensed or does not have FDIC insurance.
Tips to Avoid Gold IRA Scams:
Gold IRA Tips –
- Look for a company with a great track record, reputation, testimonials and high ratings on BBB, or Trustlink.
- Do your homework by researching company reviews and forums. Find out about their fees, commissions and other charges and if there are valid reasons for the charges.
- Don’t be hesitant in asking as many questions you may have. It is essential to find out if the dealer answers your doubts and has a reliable customer service.
- Ask for legal documents with accurate information, validating your right to access your gold and other precious metals. Ask the dealer to provide every detail in writing.
- Find out about the depository, a custodian will be utilizing to store your gold.
- Discuss and verify all the conditions of storing your gold IRA with your trustee before investing.
- Stay away from numismatic coins and focus on investing in bullion coins. Numismatic values have a low appreciation and liquidity value.
- Be cautious of the pushy upselling sales pitches.
- Don’t a trust a dealer who tries to convince you to pay a high price for unnecessary certifications for a brand new bullion coin in MS- 70 condition.
- Consult your legal advisors before making a decision about gold IRA investing.
- It is important for your dealer and custodian to have the IRS approval or licenses.
- Do not trust dealers without FDIC insurance for your precious metals.
- Say no to leverage accounts and borrowing money for a large sum investment
- Having a diverse portfolio with multiple investment options can provide you the best returns in the short and long run. Don’t convert your entire portfolio into one kind of investment.
- Avoid involving brokers and financial advisors for buying gold IRA. Buying directly from the dealer can offer the best deals.
- Don’t respond to unsolicited emails, offering too good to be real promotions. It is important to verify the company sending out that email and also if it’s legit.
- Don’t take hasty decisions if a salesman pressurizes you to take actions.
To conclude, gold IRA scams are extremely common practices in the precious metal industry. Focus on your homework on the investment strategy you plan to secure your retirement assets. There are multiple dealers who can be relied upon and won’t hesitate in providing transparency to their customers in this process.
Here’s something to start you off the right way; a comprehensive and 100% free gold kit!