Financial security in retirement is everyone’s joyful finale. This takes a lot of planning and saving up until the time comes when you can already leave the hustle and bustle and reap what you sow. While you undergo preparation, there are few things to take note of – the choice of a self-directed retirement plan, the team to work with to ensure your savings will be maximized, and the fees that go along with the plans. Bernard Reisz, the principal advisor of 401kCheckbook.com and AgentFinancial.com, teaches us how to determine if the fee structure is average or too high and how to find professional and qualified people to work with. He also gives sound advice on how you can deploy your money in IRA or 401(k) to real estate.
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Watch the episode here:
Navigating The Self-Directed Retirement Space with Bernard Reisz
Our guest is Bernard Reisz. Thanks for being on the show again, Bernard.
Whitney, thanks for having me again. I love doing these shows. I’m looking forward to this episode.
Bernard, what’s the topic that we’re focusing on? Let’s jump right in.
It’s a unique topic. Let’s talk about navigating this space. You want to get into this space. Who are the players? How do you navigate it? How do you get from the conceptual to executing? What should you be aware of and how do you optimize?
It’s good information that we need to know.
Within this self-directed space, there are lots of different players and lots of ways to go about it. You’ve got to first determine if you want to go QRP based or IRA based. If you’re going to do that, who are you going to work with and what structure do you want? Let’s talk for a moment about the roles that you need to be filled and who is positioned to provide that service. There are those that provide the plan. It’s important to note that they’re not focused on giving you advice and to a great extent providing the plan, although it may or may not with some helpful info or unhelpful info. It is never a tax advisory service. If you’re working with the pure custodian route, it’s important to understand that a custodian is not going to give you tax advice.
They’re very cognizant of that. Likewise, if you work with what’s called a customized provider, they’re not either providing tax advice. There’s a risk that comes with that because if they don’t provide tax advice, the fine print will always say that you’re on the hook for the tax stuff. How can you know that you’re getting good info? Who do you work with? Is working with a custodian going to give you a greater level of assurance? Working with a provider that charges four times as much as others, does that mean that they’re better or providing a higher level of assurance or compliance support? The answer to that is certainly no. How do you know who to work with? How do you navigate this space?
I’ll share an anecdote that I find amusing. As a CPA, I get calls from people that have plans and they’re looking for assistance. We haven’t been the ones to provide them with the plans, but they need help. Somebody calls me up and says, “Bernard, I’ve got a referral to you. You’re an expert, you’re a specialist and a CPA dealing with these retirement accounts, can you help me with this?” I explain to them that we didn’t set you up. You can certainly go to whoever set up your plan. They said, “He’s not a CPA.” You don’t technically have to be CPA for this. It’s helpful to have that background. At the very least, they should have a CPA on their team, even on their team or that they refer to.
This fellow says, “That’s very logical. I’ll get back to you.” He says, “Bernard, I spoke to him and he said, ‘My CPA just died.’” It’s dubious, to say the least. This fellow was shocked when he heard our pricing structure. He could have gotten the plan with us for about a third of the price that he paid. This advice would have been included. You’ve got to think about who you’re working with and give thought to that. The way we work with people is we’re committed to getting people into the right plan. Oftentimes, it’s not clear. There are lots of discussions, which one should it be?
QRP is preferable when you qualify. Sometimes there are lots of discussions that go into that or exploring and restructuring. Do you qualify? What we like to do is we’ve got like a very transparent fee structure. If somebody commits to working with us, then once they’re working with us, we’ve got an application from them, we’ll take them through whatever it takes to determine where they belong. Our philosophy is if you’ve accumulated a substantial chunk of money inside of IRAs or 401(k)s and you now want to deploy it within the real estate arena, you’ve got two options and you’ve got one non-option. You can do QRP 401(k) or IRA. The non-option is the distribution. You need one of those. You need guidance to know which one is going to be right for you. We’ve deliberately priced them so that our fee is the same. If we get an application, then we’ll talk to you, we’ll help you figure out and help you choose which is best for you.
At least then we’re not thinking, “I’ll take the cheaper route.”
Ultimately, the difference in cost one way or the other is absolutely nominal. With the IRA, there will be a separate custodian fee. If you work with our partner custodians, that fee is so negligible. It shouldn’t be a factor. You’ll have our flat fee to get set up. It’s a low fee. It’s super competitive. It’s almost a no brainer. There are minute differences, whether if you’re going to have a custodian fee, not a custodian fee, an LLC fee or non-LLC fee, you should focus on what’s going to be the optimal structure and it will help people sort that out. It will take them in the right direction. It’s important to note though that even for us, even though I am a CPA when we do this, we aren’t clear that we’re not providing tax advice. Tax advice does come with a high level of responsibility.
[bctt tweet=”When you think about investing, you think about risk. ” via=”no”]
There are two things that people have to be aware of. One is our fees are reasonable. If somebody wants that level of liability for us to accept that, our fees are so low that we’re not going to accept responsibility for that. Our business model is also based on helping people make choices for themselves. In particular, within this arena, there’s gray. One of the key questions that we focus on is do you qualify for a QRP, Solo 401(k)? There are shades of gray there. We cannot take responsibility for that because we don’t know what the IRS would say. If you’ve got a business that you engage in full-time, we all know that as a business that qualifies for a 401(k).
If you set up an MLM business ten years ago and never did anything about it, we all know that doesn’t qualify. Between those two extremes, we can talk it through. We can give you context. Ultimately, it doesn’t matter what we think. What you want to know is what the IRS thinks. Nobody knows conclusively what the IRS would think. It’s what we call facts and circumstances. Everybody has got a different profile. When you think about investing, you think about risk. It’s the same thing here. It’s about your risk-adjusted return. We’re here to empower our clients, to arm them, equip them with the information and the tools, so they can make the best choices for themselves. If anybody is telling you, “You’ve got a part-time business. You set up an LLC, and you’re planning to set up an account with eBay. You’re going to figure out what you’re going to sell.”
If somebody tells you, “You’ve got a business. You can have a QRP,” you’ve got to be wary of that because nobody can provide those guarantees. If anybody does provide them those guarantees, you can be 110% certain that in the fine print, it says that they take no responsibility for any of the advice or any of the information they’ve given you. Within the space, when you fall into the gray areas, it’s about being armed with knowledge so that you can choose, you can be empowered and you are entitled to make those choices. We can’t make those choices for you. We can only try to do our best to point you to helpful information.
It’s another reason why we need a good CPA on our team. Tell me about that relationship, let’s say I was working with you, Bernard and I said, “I don’t understand all of this, Bernard, but my CPA has a good handle on it.” Can you set up a conference call and you all discuss some of this stuff if I want to get him in the loop?
We love talking to CPAs. We understand each other. This is a niche area of tax law. Let’s talk about dealing with CPAs in general. Tax code law and regulation is vast. There are things depending on what your CPA does, the things that they encounter every day, and you expect them to have the answers at the tip of their tongues instantaneously. If it’s something that they don’t specialize in and they have the answers instantaneously, that may not be a great sign. He may have the answer instantaneously. He may be a phenomenal CPA that makes sure to be educated about everything. Power to him if he is that CPA.
If he’s not that CPA and he’s answering questions off the cuff that he has not researched, that’s not a great sign. The best CPAs are the ones that know what to take a step back and say, “Let’s reassess this. What are the questions that we should be asking? What are the questions that we should be researching? Where do we go to get to the bottom of things? How do we get the answers?” The best CPAs, the best tax advisors are the ones that know when to ask questions and where to find the answers to those questions. They’re not the ones that always have an answer immediately.
It would comfort me a little more too when my CPA says, “Let me get back to you on that,” or “I’m going to ask somebody else in our office that’s an expert in that field or that deals with it a lot more than me.” They don’t feel or think that they have all the answers.
On that note, we love talking to CPAs. A lot of it integrates with what people are doing in those areas, especially the 401(k) side, where you have to be internally consistent. There are certain things that fall to the gray area. Everybody has those things. People think that they’re black and white. It’s very seldom are you a black and white unless you’ve got a W-2 and that’s it. Especially if you’re a real estate investor, there are certain things that you’re doing that are fallen into that gray zone. You want consistent treatment. If we tell you that flipping real estate qualifies you for a QRP, it may or may not qualify for QRP.
There are certain tax benefits to classifying it one way versus another depending on your overall tax strategy. If you call us up and we want to sell you a QRP, we’re like, “That qualifies.” If your CPA and your tax return are putting it on a Schedule E, you’re going to be internally inconsistent. That’s not going to work. You’ve got to have overall consistency. The way your tax account is going to classify on your tax return provided it falls in that gray area is going to drive whether or not we can give you a QRP. There’s gray. There’s compliance. You’ve got to do it right.
Once you’re in it, another thing you should be aware of is the fee structure to get into anything, not only in this space. You should be wary of something that purportedly provides long-term benefits. If the startup cost is exorbitantly high, you’ve got to be concerned, “Why are they charging me this huge fee up front for something that needs maintenance forever and ever?” You’ve got to be concerned that somehow perhaps on the other side of the application and once you’re set up, you’re not going to be ready. You’re going to be questioning, “Why would I pay that?” There is a need for ongoing support and you want to work with people that are committed to giving that to you.
To be perfectly frank, our annual maintenance is nominal because we’re focused on giving people control. Most of our investors are people that take control. We give them the tools, we give them support. We give them the education. If they want us to become their tax advisors or their CPAs, our super nominal annual fee does not make us your tax advisors. We’re focused on giving people the opportunity to get into this at a very competitive rate and get the support they need to manage their plan.
How would I know if the fees are okay or that they’re not way too high, unless I’ve checked with numerous people that do the same thing you do? If I wanted to do that, how would you suggest that I find qualified people to work with?
[bctt tweet=”Unless you specialize in something, you’re probably not aware of all the factors.” via=”no”]
It’s not unique to this space. Two things, firstly, you’ve got to focus on value, not just cost. Whenever there are multiple providers, it’s inevitable that there’s going to be a cost component. You’ve got a question if somebody’s pricing is way out. Are they providing added value? You’ve got to think about what services do I need? See the pricing relative to what you’re going to get and figure out what you want to pay for. It’s not so much about the pure dollars and cents because say somebody is the lowest cost provider but they’re not providing any value, that’s not great. If somebody is the highest cost provider, but they’re providing great value, that could be good.
The challenge is that those things oftentimes don’t go hand in hand. Ironically, the folks that are perhaps super savvy at marketing and are charging exorbitant prices may not be providing you the greatest value. You want to be educated. It’s all about being an educated consumer. Try to get a handle on who is qualified, who has the background that leads you to believe that you are in good hands. When you deal with anything compliance-related regulations, there’s a world of unknown unknowns. You don’t know the Tax Code. You don’t know the Labor Code. You don’t know what the pitfalls are. We’ve got people saying, “I know it’s easy. I do this. I do that.” With tax particularly, people say, “Bernard, can you advise me on this?”
I tell them, “Send me your last year’s tax returns so I can review that.” They’re like, “I’m asking you a question. Why do you ask for last year’s tax return?” They don’t understand that the answer to that question or the reason why you would take one action, or another will be hidden in their prior year’s tax return. There are multiple factors to take into account. The takeaway is that unless you specialize in something, you’re probably not aware of all the factors. What we say you want to look for is somebody that’s got a background in something analytic. There are no hard and fast rules. There are no absolute rules. In general, they’re somebody who’s got an attorney background, a CPA background, or even perhaps a medical background. I’ve worked with people that have transitioned into finance from being a medical professional.
Maybe they’re retired and they realized, “I’ve got a practice for 30 years and now I’m going to retire. I’m going to transition, to helping other doctors navigate finances because doctors are notoriously poor at managing their finances.” Those are people that have a background in something analytic, something that required them to study something and become a substantive expert. Those are people that I tend to think you’re safer with. Somebody who’s got a background in selling life insurance, selling gold or something that doesn’t have that background, it’s not likely that they’re experts. They’ve transitioned from selling life insurance or gold to selling something else, but they’re not that substantive expert that you’re looking for.
I appreciate that, Bernard, and how you’re helping us make sure we have the right people on our team to help navigate these topics. Is there anything you want to leave us with? If not, tell the audience how they can get in touch with you.
I want to wish everybody to take those next steps. Get empowered and get educated. Know that you can take control of your finances. Never subordinate your judgment. Always do your due diligence but take action. Don’t be deterred by the hurdles that are there. Get in touch with good people. Get in touch with people that you’re comfortable working with, that have the right background, and take your finance finances to the next level. If your self-directed investing is part of your future, is that something that you may want to explore? If you’ve got money in IRAs or 401(k)s that you may want to deploy in real estate, we would love to assist you and help you get to where you want to go and empower you to do so. Check us out at 401KCheckbook.com. You can visit AgentFinancial.com as well. We look forward to hearing from you.
Thanks again, Bernard, for your time and your expertise. I appreciate you being on the show and doing a whole series laying out all these things that we all have questions about. I also hope the audience will go to Life Bridge Capital and connect with me. I’d like to have a phone call with you and discuss your investing goals as well. Also go to the Facebook group, The Real Estate Syndication Show, where we can all learn from experts like Bernard and grow our businesses together. If you are gaining value from the show, I hope you have shared it with your platform or with your network so other people can gain as well.
- Bernard Reisz
- Facebook group – The Real Estate Syndication Show
About Bernard Reisz
Bernard Reisz CPA, empowers individuals to optimize their finances, using proactive and innovative strategies. He provides an integrated approach to tax and financial planning for real estate pros, focusing on their unique profiles and opportunities.
Bernard is the founder of 401kCheckbook.com, which gives investors direct control of their tax-sheltered funds for real estate equity and debt opportunities using Checkbook Control IRAs, Solo 401(k)s, and Checkbook Life Insurance. He is also the founder of AgentFinancial.com, which provides tax and financial services to real estate professionals, including real estate agents and mortgage brokers.
Prior to founding ReSure, Bernard served as Director of CoMetrics Partners, managing an array of engagements involving financial consulting and due diligence. Bernard advised owners of closely-held middle-market companies on advanced tax mitigation strategies.