Since their introduction in 1997, gold IRAs have gained popularity as an investment option and a retirement savings strategy to protect against economic volatility. However, their safety as an investment depends on your level of caution. This is because, like any appealing opportunity, the gold IRA industry has seen an increase in scammers entering the market.
Hence, it's not hard for unsuspecting investors to come across various gold IRA scam companies nowadays. Of course, this doesn't mean you should miss out on the investment and tax benefits of a gold IRA. Instead, you can avoid gold IRA scams by following effective tips and considerations to make an informed investment decision.
Read on to explore the details and get a clearer understanding.
Understanding Gold IRA Scams
Gold IRA scams take a slew of deceptive forms, making it crucial to grasp their different types to safeguard your investments. Specifically, they include:
Counterfeit Gold Scams
As one of the most common gold IRA scams, counterfeit gold is used by illegal gold dealers and gold IRA investment companies globally. But what is counterfeit gold? In simple terms, it is fake gold that is being sold as genuine. It’s crafted with worthless materials on the inside, covered by a thin layer of gold on the outside to appear real.
To identify it as fake, note that gold must typically consist of at least 41.7% or ten karats of actual gold according to international standards. So, while most scammers will try to sell you fake gold coins and bars, make sure to consider their purity before trusting the seller's words and the fake yellow shine of the asset.
Hidden Fee Scams
Most scam companies also use hidden fee tactics to attract investors who don't properly read the terms and conditions before proceeding with the investment. In this scheme, these companies intentionally omit mentioning additional fees, which could potentially make their investment plans appear less costly than they actually are.
Instead, they mention only the basic fees or sometimes make statements like free account setup, maintenance, and storage only to grab investors' attention. With such promising claims, investors often rush the investment process without deeply studying the company's terms and conditions that mention all their fees.
This arrangement may appear appealing at first because of the low upfront prices, but they will subsequently slap you with exorbitant continuing fees, becoming a lifetime regret. So, no matter how promising a company's pricing structure may seem, it's important that you go through their terms and conditions and the legal papers thoroughly.
Overpayment Scheme Scams
Overpayment schemes are also common gold IRA scams. In these schemes, companies purchase gold bars and rare coins and raise their prices way beyond the market price of the assets at that time.
With hefty pricing, sellers also make bogus claims about remarkable returns to make the high precious metals acceptable for investors. This, of course, can be avoided by keeping track of the market value of precious metals before relying on any company's claims.
False IRA Scams
Lastly, another common and growing gold IRA scam today is false IRAs. This refers to the alarming trend of companies scamming people by creating false retirement accounts while promising huge profits without sharing the associated risks involved in such investments. Here, it is important to remember that the IRS supports gold IRA investments with companies that the IRS approves.
This makes only these companies eligible to create self-directed Individual Retirement Accounts (IRAs). So, the best way to avoid this scam is to ensure that the IRS approves the company you are considering.
Gold IRA Scam Example
As an example, Safeguard Metals LLC was charged by the Securities and Exchange Commission for engaging in a multimillion-dollar fraudulent scam. The owner of this company, Jeffrey Santulan, along with other personnel, scammed hundreds of investors who were nearing retirement age.
According to the SEC's complaint, Safeguard and Santulan acted as investment advisers and persuaded investors to sell their existing assets to them. After transferring the proceeds, they invested in gold and silver coins, spreading false and misleading information about the safety and liquidity of these investments.
This continued from December 2017 until at least July 2021 when the company was caught and charged. But what made this company so believable for the hundreds of investors that they scammed?
Well, for one, it falsely advertised itself as a full-service investment firm with offices in London, New York City, and Beverly Hills. They also claimed that they had employed renowned professionals and handled $11 billion in assets. Whereas, in reality, Santulan allegedly ran the company from a modest leased space in a Woodland Hills, California, office building with a few sales professionals.
Moreover, SEC's case against the company claims that the sales agents at Safeguard used scripts, some of which were written by Santulan, to better deceive investors. Reportedly, Safeguard earned nearly $67M through the sale of coins to over 450 largely elderly retail investors while pocketing around $25.5 million in markups through this scam.
This entire incident and its details prove that companies can go to great extents to scam investors in the name of profitable gold IRA investments. So it's important to implement key strategies to ensure you aren't any such company's next victim. We will discuss these strategies further in this article.
Do Your Homework: Researching Companies
When considering a gold IRA investment — whether it’s your first time or you’re looking to add a new company to your portfolio — proper research is crucial. During your investigation, make sure to look into their reputation and track record. The best way to investigate these aspects is to read client testimonials and reviews of the company.
For this, turn to consumer review sites like Better Business Bureau (BBB), TrustPilot, or BCA. These sites have authentic business ratings and customer reviews, allowing you to explore both the best and weakest aspects of the company in the words of their previous customers. Besides this, we also suggest you check whether the US Mint or other government organizations have shared any warnings about these companies.
Since these organizations are in charge of regulating precious metals investments, they issue warnings about fraudulent activities or complaints about the companies or individual brokers in this industry. So, keeping a check for such warnings will help you ensure that the company you want to invest with isn't caught for any fraudulent activities yet. From my experience, here are the best reputable gold IRA companies you can rely on.
Beware of Too-Good-to-Be-True Promises
If a company offers you an investment opportunity that appears to be too good to be true, it most often is. Be wary of any company that offers excessively high profits with little to no risk. Remember that all types of investments come with certain risks, even if it's not a high amount.
So, if a company claims otherwise by guaranteeing profit gains and a gold IRA investment being 100% failsafe, don't trust them. There's a huge possibility that these are just Ponzi scams or outright lies, both of which should be avoided at all costs.
Also, keep in mind that there is very little variation between the price of gold and the account opening/setup rates of reputable gold IRA companies. So make sure to be extremely cautious if you come across a company that promises extremely low prices that are not close to the industry standard.
Understand Fees and Pricing
As mentioned earlier, one of the major scams investors face when investing in gold IRAs is in the form of hidden or unrealistic fees and pricing structures. By implementing these strategies, scammers put investors under pressure to make rapid decisions, eventually turning them into their victims. Now, to avoid falling prey to such pricing scams, it's important to consider the following factors:
Rushed Investment Suggestions
First, never trust a company that tries to rush you into making a gold IRA investment. At most, these are companies that are trying to scam you. Compared to them, reputable and legit investment companies give you as much time as you need to make an informed decision. Hence, it is best to avoid investing with companies that push a sense of urgency to invest with them.
Supported Payment Methods
Another payment consideration to avoid investment scams is the payment methods a company accepts. Notably, genuine and reliable IRA firms will most certainly accept safe and secure payment methods. Moreover, they will also make their privacy and payment protection policies public so investors can easily find them and make their investment decisions accordingly.
If a company only supports payment methods that don't seem legitimate or reliable, it is most likely that they use this approach to conduct fraudulent activities. Proceeding with such companies will not only put your hard-earned money at risk but will also expose your personal financial information to hackers.
Don't be afraid to query the offered payment method. This can sometimes deter a would-be scammer and save you from making an expensive mistake.
Waived Fee Claims
Some companies also claim that they charge no account maintenance, storage, or insurance expenses. While it may sound promising, we suggest you be wary of these companies. While theoretically correct, this often means that you will be paying a roundup yearly fee to the company, which will include all the other charges.
Some companies also make this claim when it's not the investment company but rather the storage depository. So, eventually, these depositories will be the ones charging you yearly maintenance and storage fees for your gold IRA assets.
Check Storage and Delivery Policies
Undeniably, the safe custody of actual gold is an important aspect of investing in a Gold IRA. So, it's better to avoid investing with companies that don't provide clear and comprehensive information on their storage facilities. Moreover, even when you can choose to store your assets at a commingled storage vault, a reliable gold IRA provider will also offer you segregated storage options.
So you will be the one making the decision here, and not the company itself. Besides this, a trusted gold IRA company will only work with IRS-approved third-party depositories. This will allow you to access insured storage of your assets, allowing you to rest assured about the storage security of the gold in your IRA.
By considering these factors, you can proceed with a company that offers you years-long assurance of the security of your assets (until you are eligible to seek their physical possession).
Seek Recommendations and Referrals
The best way to make a smart investment decision is to seek recommendations and referrals from those familiar with the investment type. One great way to do this is by joining public groups and forums with people who have invested in a gold IRA in the past.
This is a great way to explore reliable investment companies and avoid falling prey to common scams. Through this approach, you can consider other's experiences to get the awareness you need to avoid common or new scams practiced by fraudulent companies.
But, before you completely rely on other investor's suggestions, make sure to consult with a legal or financial advisor. This financial advisor will help you ensure that every step you take in this investment plan is safe and according to IRS regulations.
Seeking professional aid this way will also help you understand the entire investment process, making it easier to proceed with it without any confusion or legal uncertainties.
Avoid Pushy Sales Tactics
Unreliable gold IRA companies use pushy sales tactics to scam investors. This, of course, is the only way they can fool investors into proceeding with them since such companies don't have a solid track record of professional excellence to prove their legitimacy.
In fact, the example we mentioned earlier of Safeguard Metals LLC is proof of how sales tactics are the only way these companies convince people to invest with them. Now, if we consider legit companies, you will never find them using pushy sales pitches or tactics to make you invest with them. Instead, their expertise and solid track record will speak on their behalf.
Notably, here are some specific sales pitches or claims that are a clear red flag and should be avoided when choosing a gold IRA investment partner:
Why Is it Important to Make a Well-Informed Decision?
Considering the claims and sales pitches mentioned above, one of the main strategies of fake gold IRA companies is to push you to make immediate investments. The best way to avoid falling prey to these claims is to take your time and do a thorough research on your preferred company.
While you're at it, also make sure to inquire the company about any costs that appear high or unexplainable. Sometimes, when you inquire about a company, they also share details about the hidden fees that aren't mentioned on their website.
So before claiming such a company as a scam, make sure to personally consult with their team and ask as many questions as you have. Ultimately, make sure to proceed with the investment only once you have all the answers and are sure about the legitimacy of a company.
Regularly Monitor Your Investment
Last but not least, if you believe you can't face any scams or concerns once you have invested with a reliable company, you're wrong. Sometimes, companies or the depositories they work with may be negligent or unreliable concerning the security of your assets.
Now, since a gold IRA investment is your financial plan to secure your retirement age, frequently monitoring your gold IRA assets is crucial. This will keep you away from the stress of not knowing about the security of your assets while ensuring that they are in the same state as the time of purchase when you're ready to seek their physical possession.
While a gold IRA investment is a wise approach to future financial stability, it can also turn into a disaster if you end up falling for gold IRA scams. Hence, it's crucial that you take every step needed to perform thorough research, exercise careful consideration, and stay vigilant for potential scams and risks at every step of the process.
Ultimately, your financial security is what matters the most, and that is mainly why you would choose to invest in a gold IRA in the first place. So make sure to avoid rushed decisions so that your investment can ensure that both your funds and future are protected through this investment. Do your research carefully and choose one of the best gold IRA companies such as Goldco or Augusta Precious Metals.