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Building Wealth Through Self-Directed Investments With Jason DeBono

March 4, 2021

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GDNI 142 | Self-Directed Investments

 

Self-direction is key to building your wealth. Do you know that NuView Trust gives you the freedom to self-direct your investments for your retirement plan? NuView Trust‘s President, Jason DeBono, joins Jamie Bateman on today’s show to discuss the power of self-directed investments and how you can maximize your growth with NuView Trust. Tune in to their conversation to discover a whole new world of investment options and find out what benefits NuView Trust offers you!

Listen to the podcast here:

Building Wealth Through Self-Directed Investments With Jason DeBono

I’m joined by Jason DeBono, from NuView Trust. We’re going to get into some of what Jason’s background is and what his company offers. Jason, how are you doing?

I’m doing well. Thanks for having me.

Why don’t we dive right into your background? Why don’t you to tell us a little bit about your personal history and how you got to where you are now?

Self-direction, for me, started several years ago, certainly more by accident than by design. I was a student at UCF here in Central Florida and I was wrapping up looking for some internship/job experiences. I was getting to the end of college and I stumbled upon an internship expo and a handful of companies and I interviewed with NuView. It was the reaction from my dad that caused me to go, “This is a good opportunity.” When I talked to my dad before the interview, he told me, “You can’t do this. It’s not allowed.” I’ve asked my advisor about buying real estate in IRA and they told me, “You couldn’t.”

The interview was more of a presentation for me and a learning opportunity. When I called my dad and said, “This company does this. This is why you haven’t heard of it.” He said, “I wish I knew about this several years ago.” It was nice to hear my dad. My dad’s a typical Baby Boomer. He’s not rich. He’s been self-employed. He worked his tail off his whole life, but he’s always invested into real estate, loans and other things outside of what he did day-to-day. When he learned he could do what he’s already doing to earn money and get out of the rat race of the stock market, he jumped all over it. I took the job namely because I like the opportunity after seeing it through the lens of my dad. Here we are several years later.

Where are you several years later? What do things look right now?

When I started, NuView was three years old, as a company 2.5. We had about $60 million in assets. We’ve grown to $1.5 billion in assets. We have two different divisions in the company. Everything that we do gives clients choice. Every one of our accounts, every dollar of the $1.5 billion is self-directed. We don’t provide investment advice or recommend or endorse or approve investments. It’s testimony to the fact that we have a great team, but it’s even more testimony to the fact that the marketplace and people like you, Jamie, and the readers are all going, “There’s got to be a better way to do this,” especially with where the market is right now. The market is at an all-time high and while everyone’s happy about it, there’s not many people that go, “This makes sense.” We’re taking the profits, but it doesn’t make any logical sense.

The stock market seems a little bit out of touch with reality. It’s disconnected from the economy. I’m not giving investment advice either. I’m not completely anti-stock market myself, but I agree. It feels frothy. I love the topic of taking control of your personal finances and your wealth. My wife and I have self-directed accounts. I’m all about alternative investments and taking control of those of your future, as opposed to having somebody babysit your funds over here and hope and pray that it does well. Your company can play a large role in that a strategy. You had mentioned that you personally have done some note investing and some different investing that may tie into NuView as well. How have you used alternative investing in your own personal investment portfolio?

I was a college kid when I started. I was learning, but I didn’t have any money. The only place that I was putting money was my 401(k). I understood the tax power. We can talk about that here in a bit about what that means from a tax standpoint, but I was putting money away. I was living vicariously through customers. I was watching them do these deals. The more and more people I talked to that did notes, the more and more I realized while real estate is great, and I do invest in real estate and it’s a great investment, there’s something to be said about passively collecting a check every single month with security. When I didn’t have much money in my account, I started doing small partials with other people that I knew where we buy fractional interest 2%, 5%. I kept doing that. As I was adding money, I was buying more. They’d pay off and I’d combine. It has served me well. I’ve done some different things with the money over the years, but I would say probably 80% of the investments I’ve made in my own accounts over the last several years have all been notes.

GDNI 142 | Self-Directed Investments

Self-Directed Investments: You can hire people and pay them a fee to help you make money, just like you can pay an advisor in the stock market to help you make money.

 

This is not investment advice, but personally, debt investing doesn’t have any inherent tax benefits. Everything has downsides. Note investing doesn’t have the tax efficiency of traditional buy and hold real estate and you don’t get that depreciation. I like doing the same thing where it’s more of a buy first lien performing notes in my self-directed account or partials as well, more of that passive way to go, but also taking advantage of the tax benefits of the accounts. Whereas real estate, it can get a little bit tricky. I know people do it. I don’t personally do it. I’d prefer to own real estate outside of these types of accounts, but we can get into that. NuView now, you touched on it, where are you now and what’s the future look like for NuView as a business?

The future for self-direction is a lot like it’s been over the last several years even through the great recession in 2007 and beyond. People want alternatives. The only thing that’s changed in what we do is simply the attractiveness of various asset classes based on time. There was a period where gold was what everyone wanted. There was a period where it’s been real estate. There’s a period where it was private debt and private equity. We’re seeing cryptocurrency. That’s where the change has come from us. It’s a little bit more in terms of what people are interested in, but self-direction as a whole, thankfully, is continuing to grow and more and more consumers are realizing two key factors.

One is building wealth is something that’s their own responsibility and it doesn’t mean you can’t hire people to help you. I can hire people in the real estate world and in the private note world and pay them a fee to help me make money just like I can pay an advisor in the stock market to help me make money. They’re realizing that if they want to build wealth, they’ve got to do it themselves. The second thing is they’re realizing that there’s a lot of wealth and money to be made outside the stock market. With education available, with shows like this, the average consumer several years ago when I started had little opportunity to understand what self-direction is.

Now, you don’t have to go far. You don’t need to have to leave your house anymore to understand that self-direction is a tool and you can join groups and meetups and online stuff. Even pre-COVID, you could do all of these things and go get educated on being an investor. As that continues to play out, it’s not just the Millennials, but the Gen X, the Gen Y, whatever the next group behind it, the Reddit groups, the WallStreetBets, all of these groups are all realizing, “We’re going to take control and go make money.” While some of those ties into stocks, a lot of them are doing a lot more investing outside the market too. All of that is leading to an influx and people wanting to be in self-direction.

In the time that I’ve been in real estate and notes, I’ve seen a similar increase in the awareness and motivation to take control. The education is there, but it still does seem to be a small niche. I still think there are a lot of people that don’t even know what a self-directed account is. Why don’t you touch on, briefly, the type of accounts that NuView offers and the differences among those?

I’ll start at the top, which is self-direction is nothing more than picking your own investments. You can self-direct your account at Charles Schwab and TD, where a company like NuView offers its value. We don’t just allow you to self-direct. We allow you to self-direct into any asset class. Where Schwab says, “You can self-direct as long as it’s a stock bond or mutual fund.” NuView says, “You can self-direct into anything not prohibited.” There are few assets that are prohibited. Real estate, private debt and private equity, all of those things are permissible. As far as the types of accounts, there’s no difference between an account you could open a Schwab or an account you could open at NuView. The IRS sets what types of IRAs exists, what the contribution limits and what the rules are. What differs from Schwab to NuView is simply the ability to buy assets outside the publicly-traded space.

We referred to it as, Schwab helps you invest through Wall Street, NuView helps you invest through Main Street. If you look at the types of accounts, you have a traditional IRA and a Roth IRA. Both of those have a $6,500 contribution limit. Don’t quote me on these numbers. They change at the beginning of each year so I’m not certain if they’ve gone up at that. The major difference between a traditional and a Roth is one is pre-tax, which means you get a tax deduction to put the money in and you pay the tax when you withdraw it. The benefit of the Roth is you don’t get a tax deduction to put it in, but you can take it out tax-free. That’s a tax decision you have to understand. Both accounts offer tax advantage growth, meaning your investments aren’t taxed.

The point that you made about real estate, it has inherent tax benefits that you give up in an IRA. That’s okay. If it’s a good deal, it’s a good deal but notes don’t have any inherent tax benefits. Owning them in an IRA is advantageous because if you have a note that pays you $1,000 a month and you have twelve months of income, that’s $1,200 you’ve got to get taxed on annually as short-term capital gains. Whereas in an IRA, that $1,200 can come in 100% tax-free no matter what type of account you have. You’re saving that tax and reinvesting that time and time. There’s some big value there.

If you’re self-employed there’s a SEP IRA, which gets you up to around $60,000, $63,000 of contributions, but I would encourage you to step over the SEP IRA if you’re self-employed into a Solo QRP or a solo 401(k) plan. It is the best type of retirement account. It gives you the maximum contributions. It has Roth component. It has a loan provision. It avoids a certain tax that may apply in IRAs that doesn’t apply in the QRP. There are lots of great benefits to it. If you are self-employed, that’s the plan to consider no matter what you do.

Two other types of plans that are interesting that most people either don’t know about or don’t know the real value they offer, and that’s a health savings account or an HSA. If you are on a high deductible health insurance program, this is crystal clear advice, go set up an HSA. We’re not in the business of it, but it’s the only plan that gives you a tax deduction when you put the money in and it comes out tax-free for qualifying medical expenses. The purpose of a high deductible insurance program is you’re going to be out of pocket for your insurance expenses, so why not start pre saving for that and taking advantage of the tax benefits? The part that most people don’t realize is that HSA rolls over year over year so you don’t lose it at the end of each year, and it can be self-directed. You can own a private note or a partial of a note inside an HSA.

Building wealth is your responsibility, but it doesn't mean you can't hire people to help you. Click To Tweet

I still work part-time for the federal government. I did the FSA for a few years there. I’m sure it’s gotten better, but it was chasing receipts and so much headache to maintain, and then you lose those funds at the end of the year. I discontinued use of it. Is the HSA available to pretty much anyone or how does that work?

The HSA is only available to those that have a high deductible health insurance program. It’s much different than an FSA, but an HSA work in theory the same way. A high deductible health insurance program is defined for an HSA standpoint, I believe it’s $1,200 minimum deductible annual and you’re 100% responsible for expenses up to your deductible. When I talk a little bit about why people should at least consider it, if you think about your car insurance, you probably have a $500 or $1,000 deductible, because you know that if you go and you bump into something that costs you $80. You’re just going to pay it yourself. It’s not worth going through insurance, but you raise your deductible to drop your premium, so you want to pay as little per month. You can do the same thing with health insurance.

It says, “I know that I get the sniffles and go to the doctor, it’s going to cost me $200.” Some people are so scared of that. If I’m saving $80 a month in my premium, that’s $1,000 a year. I could go to the doctor every quarter and spend $200 and still come up $200 ahead. If I don’t go to the doctor at all, then I come out way ahead, and God forbid, I do have something catastrophic. I lose a little bit, but I am protected. I’m going to have a minimum deductible that’s going to allow me to cover the expenses, so I don’t have to worry about being hospitalized and not being able to pay. I just have to pay my deductible.

In most cases, if you max out your HSA and use it after a couple of years of moderate to low use, you probably will never have a deductible issue unless you have constant, catastrophic, super high medical expenses. It’s a way to win the game. It’s like self-insurance. I could go on and on about the plan. I think you’re awesome. I have one. I own notes in mine. It’s been incredible but everyone’s health situation is different. That’s the part that I can’t speak to, but I encourage everyone, every year you should look at the numbers. If it’s $50 cheaper, maybe it’s not worth it. You could save $400 a month piping it in an HSA. I’ve seen some staggering discounts. A great plan can be fully self-directed.

We spoke about the education plans. Can you touch on those a little bit?

The ESA is like an HSA. An HSA is a special purpose tax advantage savings vehicle for health. Whereas an ESA is a special purpose tax advantage savings vehicle for education. It works like a Roth. It only has a $2,000 limit on it annually, but you can add $2,000 year over year, and it can be fully self-directed. My approach and I’ll give you exactly the thought process that we went through. If we go into a 529, we can put more money in it, but its state-sponsored and it goes into stocks. If we put in money into college prepay, we’re assuming that they are going college, which we’re not necessarily saying he should or shouldn’t. We’re also assuming that we want to pre-buy a certain amount of university and we’re prepaying that expense. It’s expensive. It was $52,000 to prepay for four years.

I’m thinking, “$52,000 over eighteen years, I could go invest that money even in 8% or 10% notes,” which from what I’ve historically been doing is conservative. We’re talking about $400,000 or $500,000 over eighteen years. It doesn’t make sense for me to do that. We chose the ESA and looked at it this way, $2,000 a year, $36,000 plus all the earnings so maybe it’s $50,000, $60,000, $80,000 depending on how well it does. That’s enough to go figure out what he wants to do from an education standpoint. If he wants to get on vacation, if he wants to use it on trade, if he wants you to have certificates or whatever it is, it pretty much all qualifies. It can be fully self-directed. I currently own a note where I own about half of it in my 401(k), a quarter of it in my HSA and a quarter of it in the ESA.

With our kids personally, we put a good chunk in their 529s because that’s what you do. It’s set up for us initially, but then we’ve personally, my wife and I, had been funding those for quite some time. Now, surprisingly, I didn’t predict the pandemic would hit. We put my daughter in private school. It’s not a cheap private school. We did pull out the $10,000 that you can do now from the 529 without any penalty, I would like to be able to pull out more. She’s in 8th grade in a private school now. My son likely will need more support sooner rather than later. I don’t see either of them going to an Ivy League school. The point is you can’t predict what’s going to happen. What you’re talking about, you have more control, and you have more options. I’m locked in. I could pay the penalty and get out of it. I’m regretting the 529 thing.

You bring up a great point on the ESA, which is it doesn’t have to be for college. If you’ve used an HSA, and I’m not beating you up for not doing it but using your example to hopefully help the readers to understand how this works. In a pandemic, if you decided that you wanted to put your child in private school, you could pay for that out of the ESA. It may not just be a pandemic. I’ll use the example of my son. I don’t know what he’s going to do. He loves to play soccer, but maybe one day he wants to pursue that and wants to go to college and try to get a scholarship. It may be worthwhile for us to put him into a school that has a soccer program sooner so he can benefit from that, use his ESA to cover the cost if we couldn’t afford to do it otherwise, where he may not need all the money for college, because he may be able to get a full ride scholarship. Who knows what will happen? It’s all wishful thinking thing but it’s still something that the ESA gives you more flexibility in the grand scheme of things. For the readers, you can have an ESA and still put money in a 529.

What other accounts do you deal with in the world you live in?

That’s it. We could get into some more unique stuff, but that’s the 90%, 95% of the stuff that the readers are going to come across in their lifetimes.

GDNI 142 | Self-Directed Investments

Self-Directed Investments: There’s a lot of wealth and money to be made outside the stock market.

 

We touched on the pandemic and there was also an election congressionally and presidential as well. For the most part, it seems like the industry has been unaffected, but how has 2020 affected NuView or the industry as a whole?

Let’s start with the pandemic because the pandemic and the election have two completely different behavioral changes from a customer standpoint. From a pandemic standpoint, there was about a three-month law in everything. It had to do with two things because the first was shock and awe around the pandemic as a whole. What does it mean? It was uncertainty, the world was shutting down. States were shutting down. Depending on where you live, it may have happened sooner or later, but it was like, “Don’t leave your house.”

When that happens, everyone is in an old pattern. No one’s moving and doing anything. The second thing that you had that played into that was you had the market take a significant drop in March of 2020. When stuff like that happens, nobody knows what to do. Nobody wants to sell. We have some people that sold out, moved out and said, “That’s it. I’m done with the market. Let me get into something else.” Outside of that three-month law, which for everybody, we all live through it, even as if we were employed, we all felt it.

We’re at pre-pandemic levels, as we say, all of the activities, transactions, due accounts, processing, everything that we do across the board is that pre-pandemic levels. It has been for quite some time. What we’ve seen is people getting back out into the marketplace. People see opportunity. People are less fearful of the economic risks than they were now than they may have been several years ago. You’re seeing all of that play out. The stock market is giving people some sense of hope. The real estate market here in Florida is going crazy. It’s probably not any different outside the US as people realize, “We have money to invest. Let’s go put it to work.”

Shifting gears to the election, elections are always interesting. I’m the first person to say it doesn’t matter who’s in office. The world’s not going to change enough. We, the people, still hold the power. Whether you liked or disliked the current or previous administration, it doesn’t matter. Why people freak out over it going in and coming out is beyond me. It’s okay to have an opinion and a preference but suggest that we’re going to be taxed to death in this administration or that we gave too much stuff away to the previous, it doesn’t matter.

We had Dave Van Horn. He’s a big player in the note space and real estate and on BiggerPockets. He mentioned, “Tell me what the rules are and I’ll figure out a way to win.” He’s been doing it for a long time. He’s been successful. Don’t freak out about all these changes. Have your game plan, your business model and adjust accordingly. You can win in all political environments.

It’s been proven over time. If you go back and look at the history, we’ve had left right, left, right and center. It doesn’t matter. We’ve all thrived in different ways. No one knows what legislation can come out if they’ll change stuff. There have been discussions about caps on Roths. For the several years I’ve been doing this, Congress, in both sides of the aisle, have done nothing, but make it more accessible for Roths and IRAs, raising the limit and adding more options to plan. Not to say they can’t do a 180 on that, but at least to date, they’ve been more open about it and giving people that. All of those are positives. I know a lot of people in the real estate market think there may be some tax changes. Some of the 1031 exchange and some of the more favorable tax things, they may come after some of that from a tax standpoint for certain net worth or for certain numbers of activities. If they do any of those things, it makes the IRA more attractive because it means that you use the built-in tax benefits of an IRA for your deals regardless of what happens outside of IRAs.

You wouldn’t mind it if the 1031 exchange went away.

I wouldn’t mind it, candidly because I own real estate. I think it’s a fantastic tool. I’m all about tax incentive for people to do the right thing. I understand why it’s attractive for them to look at it. If you look at the world and say there’s a wealth gap, I’m not saying it’s bad, I’m a capitalist at heart, but I understand why people look at this wealth gap and say, “The wealthy are the ones using the 1031s.” Will it crash the real estate market? No. People will figure out how to sell their real estate and take their profit net tax, not their profit gross tax. It matters, but it won’t change people’s lives in the grand scheme of things unless we’re talking big numbers.

We have note investors who prefer to use checkbook-controlled IRAs and different accounts. How does that compare with the custodial view on things or administration?

NuView is a full-service custodian. We can service what we refer to as three different ways to engage in your investments. Self-direction, as a whole, is about investing into unique assets and picking them yourself. That doesn’t change. How you structure that does change. I share that full service, not to make a pitch for NuView, but so that people understand I am as neutral as they come. People that tell you the checkbook is the best way probably sell checkbook LLCs. People that tell you you’ve got to do it through an IRA self-directed directly are probably custodians that only offer that. There’s also a solo QRP I mentioned that adds checkbook control.

There are three ways to do it. One is to direct it through the custodian. In notes, because they’re passive, it’s an easy thing to do, and it does make sense. Generally, if you’re buying existing notes, you don’t have a time constraint. If you send them the money now or tomorrow, you’re buying the note. It’s mailbox money. Somebody’s got to collect the check and post it against the account. If there’s not many moving parts, it does make great sense to do it directly through your custodian just like NuView. You can say, “NuView buy me that note.” Within a day or two, we’d buy it. Again, no love lost because it doesn’t matter.

We book your deposit each month as they’re mailed to us and you’re hands off. You’re going to pay us a fee for that, but you’re also not going to have to be responsible to collect the checks, go to the bank or mobile deposit and keep track of them. That model starts to look less attractive if you’re negotiating stuff that needs money immediately. If there’s a lot of moving parts, real estate especially has more moving parts and rental properties. That’s when checkbook control starts to look attractive, but keep in mind that no matter what, even if you check book control, you still need a custodian.

What you need the custodian for is to custody of the LLC, not the individual assets of the LLC. That’s what you’re doing. If you were to buy five notes through NuView, NuView would custody five notes. If you set up the LLC, NuView custodies the LLC, and then the LLC holds the five notes. You will save some fees potentially, but you are now responsible to cut the checks, collect the checks, keep track and make sure that you have a fair market value tabulation at the end of the year and that you’re keeping accurate records, because if the IRS comes in and says, “What’s going on in the LLC?” It’s up to you. We only custody the LLC. We don’t custody the assets and manage the LLC.

Self-direction is a tool. Click To Tweet

There is some compliance benefit to not doing it that way.

It’s less work. It’s like mowing the grass. It’s not hard. You could do it. We’re going to probably do it better than you will. A landscaping company is probably going to do it better than you will at the end of the day, but it is like mowing the grass. If you want to save the $100 a month and mow it yourself, go for it, but you got to get out and mow it. You got to go do it and that’s work and what’s your time worth. For customers that need it, it makes great sense. The problem I have with the LLC model is it’s been oversold by companies that peddle these LLCs saying, “You have to.”

What a lot of people don’t realize is, one, you’re taking on work. Like mowing your own grass, don’t tell me you’re saving money to mow your grass, you’re not. You’re trading your time for money and you believe that’s an adequate trade based on our fees and the level of work involved. The second thing that no one likes to talk about is the LLCs have an annual filing fee in the state of the domicile. California is over $500 a year. It’s expensive. It depends on what your goal is. For passive investments, it doesn’t make a lot of sense unless you’re holding lots of these. Even then, the fees probably aren’t going to save you much when it’s all said and done compared to the work responsibility. All of that said, I’m a proponent of the LLC in the right place. The last way to do it, the third way is through a solo QRP that has built-in checkbook control. This is the best of both worlds. You get all the benefits of the solo QRP, higher contribution limits, Roth contributions, loan provisions, avoiding the UBIT tax, but in addition to that, a qualified account has built-in checkbook control.

You can go and open your own bank account without an LLC. The 401(k) QRP is a trust. You go to the bank, open up an account for the trust. You write your own checks, keep records of everything, but without the LLC. You have the same ability and opportunity. You do have to keep track of stuff, but you don’t have to go through the headache of the LLC, which is expensive to set up depending on where you go and potentially expensive to maintain. Direct it through us. It’s great for passive, no problems at all, set up a checkbook LLC, and we can custody it and you can go do your own thing inside the LLC, just follow the rules. The last thing is to use the solo QRP and use its checkbook control built-in component. If you qualify, that’s the best.

I didn’t even realize about the third option. That’s interesting. You mentioned following the rules, can we briefly touch on what is prohibited with these accounts? Whether that’s a particular asset class, I know self-dealing can be an issue. Can you touch on what we can’t do through NuView?

I refer to this as the toddler provision. For those of you with kids or with toddlers, you’ll understand this, which is, you don’t tell kids at that age, what to do. You’re constantly telling them what not to do. Don’t touch that. Don’t eat that don’t climb on that. The idea is if I tell them all the things not to do, then they’ll understand everything else is fair game. The IRS rules are the same way. Maybe you could say they’re treating us like toddlers, but they can’t create a list of what we could do. You can’t tell your kids “Do this, do this.” The list is too long. Instead, we focus on what you can’t do. There are only two asset classes you can’t buy, life insurance and collectibles.

The second piece has to do with self-dealing. What they’re concerned about is it’s a tax advantage account. These things are beneficial from a tax standpoint. What they want to do is put a fence around certain people and say, “We don’t want people committing tax evasion by selling assets they currently own to their IRA.” Think about it. I buy a property for $1 million. I sell it to my IRA for $1,000. I get $1 million write-off on my personal tax return, and now my IRA has $1,000 asset that is going to make $1 million tax-free. You get the idea, because of that, the IRS doesn’t allow your IRA in any way to do business with you or your spouse, your parents and grandparents, children and grandchildren, and then the spouse is in businesses of any of those parties by extension.

You can invest alongside. For example, I could buy a note from you tomorrow, Jamie, where my 401(k) buys 50%, my son’s ESA buys 25%, and my HSA buys 25%, because each of those are clearly tied to the money that each account had. I bought it from you, who’s an unrelated party, and all of the income is going to be split in the same pro rata. It’s no different than all three accounts owning shares of Microsoft, individually titled. What I couldn’t do, Jamie, is I couldn’t buy the note in my 401(k) from you or buy it personally from you and then turn around and sell it to my individual accounts, because at that point, I’m in control of the price. The IRS says, “We’re not going to police it. We’re just not going to allow it.” Steer clear of family members, stay passive in your IRA and keep that major tax benefit intact. It’s too important to risk.

Briefly, you said, stay passive. I know you’re not an attorney or represent the IRS, but what might be considered running a business or not being passive in an account like this? For example, I saw this in our Facebook group or it might’ve been a different group, selling partials from the IRA from someone’s self-directed IRA so the IRA would be selling a bunch of partials. I mentioned, you might want to be careful at some point if this is no longer passive. Where’s that line. Do you have any insight into that?

As of now, it’s a mythological line. I don’t say that to be tried. I say that because there is not one case that anyone in my several years has ever put in front of me ever that shows an IRA being in trouble for running a business. I’ve never seen it. Self-dealing and running a business are two completely different things. Self-dealing, there are plenty of cases of people getting in trouble. It’s crystal clear, Jamie’s IRA sold something to Jamie. There’s no issue. The reason that people are concerned about running a business in an IRA is you’re not going to lose your IRA by doing it, but the IRS could assess a business tax to the IRA for becoming a business. Where’s that line again? I don’t know.

It’s so difficult to put a number on it. It’s like buying stocks. If my IRA goes and buys 100 stocks, is that a business? What if I sell them all the next day? Is that a business? There’s no right answer. You have the same risk of running a business, for example, day trading in an IRA in the stock market as you do in the note market. Here’s where I think it gets to. If it’s crystal clear that this has taken over your day-to-day full-time, this is what you do when you route everything through your IRA, you probably could look at that and say, “This may be a business.” If you’re doing this outside the IRA, inside the IRA, and you’re simply active, they can’t penalize you for being an active investor.

I know the IRS has certain guidelines with becoming, for example, a real estate professional, where if you’re spending 40 hours a week flipping houses or selling real estate, you’re a professional and you can get that which has certain benefits to it. Maybe people should look at it in that sense, but that’s helpful. For those of us who don’t meditate on this stuff all day long, it’s like, “There are a few things that I know I can’t do.” Some asset classes and some relationships that you can’t deal with, and then also the self-dealing and then separately the business thing.

In general, even though you went into the weeds there, which was helpful, it sounds like that’s 5% of everything is what you can’t do. There’s a huge world of what you can do with these accounts. I don’t want to focus on what you can’t do because there’s so much opportunity here. Speaking of the opportunity, we briefly touched on the fact that more people are aware of this self-direction in general than several years ago, but any idea what the numbers look from a what percent of accounts are self-directed versus not?

GDNI 142 | Self-Directed Investments

Self-Directed Investments: Self-direction is nothing more than picking your own investments.

 

I will start by saying this number is not pulled out of there, but it’s also not fully scientific. Most of the companies in this business are private. We have industry groups. We know all of our competitors. We’re all friendly and we have some general numbers. Also, there’s some overlap. Some of the assets at Schwab, Fidelity and TD are alternative. They may not be as alternative as a one-off partial note, but they may be $1 billion note fund. There are a lot of these big investments that do exist for some high-net-worth investors through advisory firms. The number that we hear is it’s north of 5%, probably south of 15%, depending on what you consider an alternative. If it’s packaged up and sold at the advisory level, some people say, “It’s not an alternative. It’s an alternative asset, but it’s not a one-off deal. We don’t count it.” Others say, “No, if it’s not publicly traded, it’s private, whether it’s $1 billion fund or $1 million fund, it’s still the same idea.” They would include it. That number probably starts to get closer to 15%.

Even if we’re talking 10%, rough numbers, that’s still a small number. I’m sure we wouldn’t ever get to 100%. A lot of people don’t want to take that ownership, but some of it is related to education like we’re doing now. Does NuView have events or any type of educational distribution?

We do. We’re with you. We don’t expect 100% success. If the number was in the 25% to 35% range, I’d probably say that’s where it belongs. Think about, Jamie, through your own experience, how resilient you’ve probably had to be to get into this business. You’ve put in a lot of education and a lot of time. I’d be willing to bet you learned some lessons and the experience at the same time. Maybe you’ve been fortunate to learn from others but there’s a lot of people that, that shouldn’t be doing this. I don’t mean that to be critical, but just like there are things I can’t do in my life and I shouldn’t be, and there are things they shouldn’t be. That number probably isn’t north of 35% on a high-end. Our goal is to continue to educate. It’s been our primary focus for the last several years I’ve been part of this company, and it continues to be a major focus for us going forward.

We are educators on how you can do it and what you can do. That’s what we do. We have educational classes, content and all kinds of stuff all over our website. We do a lot of live stuff right now. Everything’s virtual for obvious reasons. Take a look at our website at NuViewTrust.com. You can see upcoming events. We do procure a lot of our own content along with third-party content. Our goal is to help people understand how it works. The nice thing is there’s people like you, Jamie, in groups that you participate in, where they can learn a little bit more of the how, of the investments, the how of the self-direction. We hope our clients are smart and educated. Smart and educated clients generally make good decisions. That’s what we want.

Is there anything else you want to throw in before we wrap up? Any other ways that you separate yourselves from other custodians?

One is education. That’s something that we pride ourselves on. The second is we’re full service. Only 1 or 2 custodians I know that can do both self-directed accounts directly, a checkbook control account and the solo QRP if you want it. You don’t have to go buy it from different parties and try to build all these relationships with people that make their money only in that arena. It’s not that you’re getting biased information. Chick-fil-A is not going to tell you how good Taco Bell is. They’re only going to tell you it’s available to you. We want to educate, and more importantly, we want to allow you to serve yourself the way and the structure that you think is best for you, and we’ll help support that process no matter what you choose.

I love the fact that you educate. It sounds like you’re not selling too hard. You’re trying to provide options for people to take control of their financial future and take advantage of these benefits that these accounts offer. What’s the best way for people to get in touch with you? You mentioned the website. Is that the best way?

That’s the best way to learn about our company and understand what we do, and most people start there. My email is Jason@NuViewTrust.com. You can email me directly. If you are reading and a question popped up, “You started talking about this. I may have gotten this answer or here’s my scenario.” Money is personal. We understand that. If it’s something that you have a question about, shoot me an email and I’ll get back to you with an answer, get you connected to our team if it’s a little more involved.

We’ve covered a lot of ground, both high-level and in the weeds as well. Our readers are going to get a lot of value out of this. Thanks a lot, Jason. I appreciate your time.

Jamie, thank you so much for having me.

Take care. Everyone, go out and do some good deeds.

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About Jason DeBono

GDNI 142 | Self-Directed InvestmentsJason graduated from the University of Central Florida and has since acquired 15-years of experience in the self-directed IRA industry. He has served as Director of Business Development, Director of Operations, and Vice President for NuView Trust Company – a self-directed custodian with over $1.5 billion of assets under custody. Now, in his role as President, Jason oversees the day to day activities of the company. He is heavily recruited to speak on podcasts and at national events as a subject matter expert in tax-advantaged investing through retirement accounts. Additionally, Jason has provided continuing education to CPAs, Attorneys, and Real Estate professionals and has been a guest speaker at hundreds of investment events and conferences throughout the United States.
Outside of his role at NuView, Jason serves as Co-founder and Chairman of Chair the Love, a 501(c)(3) organization, which provides wheelchairs and other mobility-related services to those in need.
He currently resides in Central Florida with his wife, Christina, son, Tyler, and daughter, Delaney.

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