Trust companies and futures brokers

[J.P.]

Why do some futures brokers, such as Advantage Futures and AMP Futures, require a custodial account with a separate trust company for an IRA account while others, such as Interactive Brokers and TD Ameritrade do not?

The trustee for this separate custodial account does not even hold the money. So, if you want to change from, say, Advantage to AMP, you first need to have the trust company request a wire transfer from the old broker to the trust company. Then another wire needs to be sent from the trust company to the new broker. A process that is unnecessarily slow, and unnecessary period.

But what’s the point of this middleman?

I read the rationale for the existence of these custodial accounts on the trust companies’ sites but none of it seems relevant or necessary in this situation. (And, as an aside, they charge yearly and other fees.)

Can anyone name just one service or benefit that these trust companies provide to someone with an IRA at a futures broker? What am I missing here?

 

[Robert Morse]

I use Midland IRA for my self directed IRA. That way I can use my IRA like a regular account. My FCM is not an IRA custodian and won't take them directly. A hedge fund can't hold your IRA money or a real estate investment, but through Midland, they can. I need the middleman. I'm happy to provide my contact at Midland-privately if you email me- for you to call if you have more questions. She has been great and responds quickly to my requests. I tried another company first and nothing ever got done.

 

[Robert Morse]

BTW, I had my Roth IRA at TD first. I would never sell naked options or do ratios. It was impossible to trade. Now, I can trade easily. It is worth the fee that Midland charges me.

 

[MattZ]

@J.P. companies such as TD and/or IB are also broker dealers who have the ability to offer custodian services. Other companies such as FCMs that specialize only in futures only, must use an external custodian if you have an IRA account.

To answer your questions, outside custodians do not provide any additional benefits per se.
However, I can tell you from our company experience a number of reasons why customers have switched to independent custodians and other FCMs. Some have switched because high margins imposed on IRA accounts, some have switched to receive unfiltered data, change trading better software, and pricing.

I find that as traders grow their knowledge, they may require different execution and software that their current arrangement does not offer. So in essence, traders choose execution first and custodians after.

Lastly, FCMs such as AMP that we clear through, https://optimusfutures.com/Learn-More-About-AMP.php offer a number of data feeds and trading software. So you have the ability to choose and switch platforms with ease, while their back office assists our customers with switching from their current custodians. Personally, we like to deal with Midland IRA as an independent custodian.
We would be glad to help you in case you need to switch Custodians.

 

[J.P.]

I use Midland IRA for my self directed IRA. That way I can use my IRA like a regular account.

But WHY is it required that you use a middleman to use your IRA like a regular account. Surely you have the capability to do this without a middleman if it weren't required that you use one, no?

My FCM is not an IRA custodian and won't take them directly.

But why is this required of any FCM? What purpose does this rule serve? Why not just let the FCM have IRA accounts without a middleman?

I need the middleman.

You don't need a middleman; you are required to have one in this situation and I am trying to ascertain why.

But thanks, Robert, for your reply.

 

[J.P.]

To answer your questions, outside custodians do not provide any additional benefits per se.

And THAT is exactly my point. Why do these mandates that require a middleman exist?

 

[Robert Morse]

And THAT is exactly my point. Why do these mandates that require a middleman exist?

The brokers or FCMs that need this, don't offer whatever services the government requires to custody this accounts. I expect it is because of the cost, but I don't know what they are required to do and what that costs. I do it so I can trade under normal trading rules with Futures.

 

[MattZ]

And THAT is exactly my point. Why do these mandates that require a middleman exist?

You took my sentence out of context. When I said they don't offer any benefit it was in reference specifically to trading. However, only a custodian is allowed to tracks all your IRA’s activities, such as contributions, 401k rollovers, transfers, distributions, etc. FCMs and IBs do not offer this service. Therefore, middleman is necessary.

 

[comagnum]

i don't know of any broker besides TDA that allows futures trading in an IRA these days? Midland allows you to invest in a wide variety of things: futures, CTA managed funds, metals (stored in vault), real estate, etc. One of my brokers has me opening an account with Midland in order to be able to trade my Roth IRA.

 

[MattZ]

i don't know of any broker besides TDA that allows futures trading in an IRA these days? Midland allows you to invest in a wide variety of things: futures, CTA managed funds, metals (stored in vault), real estate, etc. One of my brokers has me opening an account with Midland in order to be able to trade my Roth IRA.

All of our FCMs allow IRA accounts: https://optimusfutures.com/Select-Futures-Clearing-Merchant.php