Understanding IRA Custodian Regulations: Licensing & Oversight

You must elect an IRA custodian to manage your IRA account. This is typically a bank or financial institution, but you may find a "non-bank custodian" if you choose. IRA custodians are subject to regulation dictating their licensing and how they extend their services.

Registered Custodians

A custodian must be licensed and regulated. You can ask a custodian how long it has been regulated and ask for the name of the regulating board if you are uncertain of this item. Registered custodians do not need to carry FDIC insurance; however, most clients would like to have their money insured. A custodian is subject to regular audits. Ask when your custodian was last audited to ensure this procedure is being followed.

Limits of a Custodian's Service

A custodian cannot offer actual advice on how you should invest your funds. They cannot attempt to sell you investment products. Instead, they are simply employed to execute the trades you wish to administer. You will need a separate IRA adviser, or fund manager, if you are looking for a party to actually select different investments for your retirement savings fund. A custodian is simply the puppet, someone else needs to pull the strings.