New Scandal: Watch for These Dealer and Depository Red Flags

By Clint Siegner, Money Metals Exchange

One of the best tips anyone can offer when it comes to investing in physical bullion is to choose your dealer well.

The wrong choice can mean a total loss for clients who are caught as an unreputable dealer took their money and disappeared before delivering their metal.

This is, of course, also true for people putting bullion into their self-directed IRA accounts.

But these investors have an additional imperative; they must also choose well when deciding where their IRA metal will be stored.

First State Depository in Delaware recently failed after it was discovered the vault owner had absconded with much of the metal that was supposed to be held for safekeeping.

When it comes to IRAs, the term “self-directed” has an important legal connotation. The account holders will be responsible for the choices they make.

Up until now at least, IRA custodians have generally tried to be hands off and avoid making recommendations as to which dealers or depositories might be best. They have interpreted IRS guidelines to mean they should be neutral and simply serve as a record keeper. After all, these IRAs are “self-directed.”

Oxford Gold Group Scandal Tars IRA Provider

Equity Trust Company, a provider of self-directed IRAs, was named in a class-action lawsuit last month. An unscrupulous metals dealer, Oxford Gold Group, had utilized Equity Trust as the custodian when clients purchased metal for their retirement accounts.

When Oxford collapsed, news reports indicated a great number of orders had been paid for from client IRA funds held at Equity Trust. But the precious metals purchased were never delivered to the IRA holders’ chosen depository.

Oxford Gold Group’s unfortunate victims seek to hold Equity Trust liable too, specifically for not warning them about Oxford’s failures to deliver.

It will be some time before a resolution is reached. Regardless of the lawsuit’s outcome, however, one thing is clear for self-directed investors…

Nobody should rely on a dealer list or depository list provided by the IRA custodian as anything more than a starting point.

The fact that an IRA custodian has listed a particular dealer or depository as “approved” does not mean the dealer or depository has been fully vetted by the custodian. It does not mean the dealer or depository provide fast delivery or great customer service.

These lists just mean some minimal setup has been completed. Conducting additional due diligence makes sense.

One way is to look at customer reviews online.

The reality, though, is that shady precious metals dealers have managed to create seemingly good reputations online using fake or paid reviews. (And bad reviews can also be fake, planted by a company’s unethical competitors.)

In our estimation, the Better Business Bureau (BBB) is the only reasonably credible review site out there. Buyers should watch out for BBB reports of delivery delays – just as they should carefully monitor delivery speed, communication, and service as to their own orders.

Dealer Delivery Delays Are a Red Flag

Rising numbers of complaints about delays receiving delivery of orders have been a reliable indication of trouble ahead for a dealer. It was for Oxford Gold Group and for many others in the past several years.

Trouble delivering on time is a sign that the dealer might be in financial trouble.

It could even be running a Ponzi scheme; i.e., money coming from most recent orders is being used to purchase the inventory needed to fulfill other orders placed weeks earlier.

The depository you select should be able to provide independent audits of the company’s financials and the metal they store. They should also be able to furnish a Cover Note of Insurance or similar document showing that stored metals are fully insured.

Money Metals Exchange has an A+ rating with BBB and lots of happy clients leaving reviews. Meanwhile, Money Metals Depository readily provides disclosures, audits, and insurance information.

Investors who choose Money Metals when buying, selling, or storing their gold and silver can have peace of mind.