How to choose the best IRA for you

If you’ve chosen to roll over your 401(k), or if you’re just simply looking to open an IRA for the first time, you’re probably wondering how to choose from the universe of IRA providers. Choice can obviously be a good thing, but it can also come with some decision fatigue.

Below, we’ll discuss the 4 key features you might consider before choosing an IRA provider.

1. IRA cost

This is likely to be a driving – if not the primary – factor in figuring out where you’d like to hold your new IRA. Different IRA providers come with wildly varying cost structures, and you’ll need to make sure you’re getting adequate value for every dollar spent. 

• Account opening/maintenance fees. Some providers will charge you to open an account and keep the account open. If they’re charged at all, these fees should be relatively modest; ideally, you’ll find an online provider that charges no account-level fees and offers a broad suite of investment choices.

• Trading fees. Some online brokers might charge you a fee every time you buy or sell a stock, while others might charge you a fee for holding certain mutual funds. This information should be made clear on the provider’s website, so be sure you understand what it’ll cost you to invest money.

• Assets Under Management (“AUM” or “wrap” fees). Many brokerage houses, like the big Wall Street names as well as many robo advisory firms, offer customized investment management for a percentage of total assets managed. For instance, a 1% AUM fee charged on a $100,000 IRA yields a $1,000 annual fee for the provider. These fees can make sense if you don’t feel comfortable managing your own investments and want to outsource the process entirely.

2. Access to advice

Many people like to know there is a human behind the screen should they need more comprehensive advice or financial planning counseling. Advisors typically come as part of the overall product offering at many of the traditional wealth management companies, like Morgan Stanley and UBS. Even the large robo advisory firms, like Betterment, offer access to Certified Financial Planner (CFP(R))  practitioners. 

Not everyone requires human advice or any sort of financial planning guidance. This is truly at your discretion. But if you decide that you do want advice when it comes to setting up your IRA and investing the money within, then you’ll need to make sure the company you choose offers it. 

When working with an advisor, it’s sensible to look for someone who is a fiduciary at all times. What this means is that the advisor is legally and ethically obligated to act in your best interests, rather than their own. It’s also ideal to find someone with a CFP(R) or a CFA designation, which indicates they’ve completed rigorous coursework, passed qualifying exams, and have logged enough experience to advise you properly. 

IRA advice can be extremely complex, so you’ll also need to work with a company that puts your IRA in the context of your entire financial picture. This is another way of saying that you can’t provide advice for a single IRA on its own; everyone has different income levels, tax situations, and asset profiles, so it’s important that your IRA advisor takes a holistic approach. 

Reputation also matters, to an extent. Make sure to choose a provider that has a long, established track record of delivering success to clients, like Vanguard, Fidelity, or Charles Schwab. Even some of the newer fintech and wealthtech firms have enough years under their belt to be deemed trustworthy (think Betterment, Wealthfront, and SoFi – to name a few). Some of the newer crypto IRA providers may require more thorough vetting, simply because they’re offering speculative assets and typically only have a few years in business. 

3. Investment options

While cost and access to advice are important, you’ll also need to make sure that your IRA provider actually offers the investments you want. With the rise of cryptocurrency and other digital assets, some people have decided they want to use a slice of their IRA to invest in more alternative holdings. 

• Popular investments. Most IRA providers will offer access to standard securities, like stocks, bonds, ETFs (Exchange Traded Funds), and mutual funds. These are the typical securities most people use to access the stock and bond markets, and for most people, make up the majority of their respective investment portfolios.

• Alternative assets. Some IRA providers, like many of the newer crypto IRA providers, offer access to Bitcoin (and the other major cryptocurrencies) as well as precious metals. This is a relatively new space within the realm of IRA investing, and most of the established IRA providers don’t offer the same type of access.

• Self-directed IRAs. Some people also like the idea of self-directed IRAs, which are similar to standard IRAs but allow even more broad investment choices – including alternative investments. Self-directed IRAs might include real estate, limited partnerships, and commodities, which can play a part in a diversified portfolio. Still, self-directed IRAs should be utilized with care, as they tend to be more complex than your standard IRA and you’ll likely spend more time and due diligence in the investment selection process.

4. Ease of use/technology interface

Let’s face it: not everyone has time to decode complex financial jargon or navigate a cumbersome website. This comes down to personal preference, but you’ll need to find a provider that has a user-friendly technology stack, and one whose app and website works with your preferences. This is an often undervalued attribute in an IRA provider, but it has to matter – especially when there are so many choices in the IRA ecosystem. 

5. Access to banking features or other perks

Some IRA providers will also offer other services that you might value, like direct deposit or other banking features. Some IRA providers, like Charles Schwab, will partner with mortgage lenders (in Schwab’s case, Rocket Mortgage) to offer competitive rates to account holders. The benefits and perks will vary greatly across providers, so you’ll need to ask questions to find out which benefits are offered, and which are most valuable to you. 

Access to broader customer service – as well as access to brick-and-mortar locations – can be a perk for some people, while others won’t value this access at all. Some people like the idea of being able to walk into a branch and receive in-person consultation, while others are perfectly fine working through an app or a laptop. This boils down to personal preference.