Edited Transcript from the podcast episode ‘Pending Legislation Alert for Syndicators and Self-Directed IRA Investors’

With Special Guest Kaaren Hall

Originally Broadcast on Sept. 23, 2021

Kim Lisa Taylor:

Hey, everybody. Welcome to Syndication Attorneys’ free monthly podcast. This is part of the “Raise Private Money Legally” podcast series. We actually used to do this as free monthly teleseminar, but we’ve turned it all into a podcast so everybody can listen to it. What we do here is talk about topics of interest to real estate syndicators, with an opportunity for live questions and answers at the end of the call. I am an attorney Kim Lisa Taylor. 

Before we get started, please note that all of our calls are recorded and may be used for future promotion, posted on our website, or broadcast in a podcast available to the public. If you don’t wish to have your voice recorded or your question answered on the air, then please schedule a one-on-one consultation at our website, syndicationattorneys.com, instead of asking questions during the live call. Information discussed during this free webinar is of a general educational nature and should not be construed as legal advice.

Today, our topic is some pending legislation that’s going to largely affect self-directed IRA investors and syndicators alike if it gets passed. So, I have brought in a very longtime friend and very knowledgeable person, Kaaren Hall of uDirect IRA. She’s the CEO of uDirect IRA, and she’s also involved in a lobbying group, I believe, that helps shape some of this legislation. So, Kaaren, welcome to the podcast.

Kaaren Hall:

Thanks. It’s great to see you. It’s been way too long since you moved from California. But yeah, today is a big day. This is a big time in our industry. And this is a really big topic for syndicators, so thanks so much for bringing me on. 

I’d just like to jump right into it. I think we all know what private equity is. We all know what self-directed IRAs are. So, what I want to do first is put into the chat the actual proposal that we’re talking about, so that everyone can read the actual verbiage later. Just copy that link, and I’ll share it with you. …

And as Kim was saying, this is my company. It’s uDirect IRA Services. We’ve been around for about 12 years now, believe it or not. Isn’t that crazy? Because Kim was there at the beginning. We have thousands of account holders who are sitting on about three quarters of a billion dollars in client assets. And what we do, where Kim’s the attorney, I am not the attorney. I’m not a CPA, but what I am is a self-directed IRA expert. So, that said, that’s my little caveat. Let’s get to it. 

So, we’ve got this proposal going on. It’s a House reconciliation bill. What happened is 10 days ago — and today is September 23rd, so 10 days ago — the House Ways and Means Committee submitted a proposal to Congress. And this morning, actually, I was on a call. As Kim mentioned, I’m part of RITA, the Retirement Industry Trust Association. I sit on the board of directors. We had another — our third call since this has come out — talking with our attorneys who are on the Hill. …

RITA has been on the Hill talking to congressional members and congressional staff. And what they’re finding out is that they’re not even familiar with these proposals that were stuck in like page 10 on this proposal. And these things that were stuck into this proposal will really seriously impact on being able to raise capital from IRAs. So, it’ll impact you as an asset sponsor, it will impact your investors in a lot of ways, and we’re going to go deep on that today. And I seriously would love to have all your questions, and I welcome them. 

So, this proposal, again, was introduced by the House Ways and Means Committee. And what we need to do is take action. So, that is the overall message that I have for you today, is take action. We have to reach out to our congressional representatives. Who’s representing you in the House, who’s representing you in the Senate, reach out to them. If you know them, pick up the phone and call them and tell them your story.

So, here we go. How would this affect you? How would it affect your investor? This proposed legislation would … affect private placements. It would affect the checkbook IRA, the IRA-owned LLC, and trusts. It would affect any minority interests and LLCs that are owned 10% or more by the IRA account holder. And investments… Basically, it’s investments that require the IRA owner to be an accredited investor. That’s one of the provisions.

Kim Lisa Taylor:

Let me ask you a question though, Kaaren. Will this also affect people who are doing Rule 506(b) offerings who are including people who are not accredited? Because those people still have to qualify based on their business or education or financial experience.

Kaaren Hall:

Exactly; yes. Correct. Kim laid out some of the groundwork there. So, yes, if you have to prove your educational level, your income level, or something like that to invest — this is what the proposal says  — then your IRA cannot invest in it. I think Congress is all after the “tax the rich,” and they think that everyone with a self-directed IRA, if they have accredited investor status, that makes them rich. And you know what? That’s not always the truth, is it? I think that the uber-rich, like Peter Thiel, and Mitt Romney, and so forth, there are mega IRAs. And I just want to say that the reason there are mega IRAs, especially Roths, and then these extremely wealthy people, only about 400 of them, by the way, out of the whole universe of humanity in the United States, only about 400 of these mega IRAs exist. So, the reason they exist is because of an Act of Congress. Congress said, “Hey, guess what? Go do this.” And they did.

Congress enacted something called TIPRA, the Tax Increase Reconciliation and Prevention Act, 11 years ago, 2010. Remember that, Kim? 2010 and thereafter, you could invest, you could convert to Roth, regardless of your income. And they did. And so, these people aren’t necessarily doing anything wrong. What they’re doing with their investments is one thing, but converting to Roth and maximizing this opportunity that Congress gave them is not doing something wrong. 

But I think what Congress sees now is, “Wait a minute, wait a minute, we’re giving these uber-wealthy people tax-protected money. Well, they don’t need it. They’re already super wealthy.” So, okay, fine. One of the things that this proposal includes is caps on your ability, on your income, on being able to participate in an IRA. And as an organization, RITA is in favor of that, fine, okay, put a cap on it. The uber-wealthy probably don’t need tax-free money to retire. They’re probably going to retire anyway. But guess what the uber-wealthy usually do with their retirement accounts? Often, they will donate them to charity. So, if they can’t have an IRA, they can’t have this tax-protected money, it could mean less money going to charity. That is one possible outcome.

But how is it going to affect you, the not-uber-wealthy? Unless, of course, you are a multibillionaire. I’m not going to judge who you are. So, just saying that this is going to be very, very impactful on people raising capital. All right, so let’s go forth. 

So, if this legislation were to be enacted as is — and that’s unlikely, because it has to go first through the House, and then through the Senate, they’re going to look at it, and it’s, of course, going to be reviewed, and torn up, and taken apart and put together in a new way. But it’s not enough for our legislators to modify some of these provisions. They have to be completely eliminated. They’re just really nonsensical when you read the bill, because the way it would affect everyone. 

So, what this would do is basically require you, an IRA holder, to dispose of any of those assets that I was just mentioning. If you had an IRA-owned LLC, what you would need to do — since you’re not allowed to own that LLC since your IRA owns 100% of the IRA-owned LLC that exceeds the new proposed limit —  you would have to disband your IRA-owned LLC. You would have to basically have all the assets in the LLC valuated. Number one, IRA would have to pay for that valuation, and then move back into the IRA.

So, that’s probable, and if you have an IRA-owned LLC, it’s a better way out. You’ve got a more likely chance of getting through this without getting taxed. But if your IRA owns a private placement, it was Reg ABCD, the whole thing if you have to be accredited, what would happen is that you would no longer be allowed to hold that asset. So, number one, IRAs could no longer invest in these private placements. And if an IRA had invested in a private placement, the IRA would have until 2023 to divest itself of that asset. 

How is the IRA going to do that? It’s going to do it one of two ways. Either the IRA would say, “Hey, asset sponsor, look, I’m in this situation. I need to liquidate.” Well, as an asset sponsor, you took that money and invested it in your project. You may not be liquid enough to take out all of your IRA investors, and that’s highly likely.

So, the second thing that would happen to the IRA holder is that they would then be taxed on the value of the asset. So, when these IRA holders made these investments, perfectly allowed, none of this existed … By the way, the proposal has no grandfather clause, okay? Because that would make the most sense. It just was stuck in at the very last minute. So, our RITA lobbyists, they meet with the House Ways and Means Committee, they were meeting with them, but maybe like a week or so before this proposal came out. There was no mention of any of this, and then boom, something hidden away on page 10 was this landmine. 

Kim Lisa Taylor:

Kaaren, let’s stop for a minute. Let’s stop for a minute and let’s talk about what this actually means for our syndication clients. First of all, it’s going to make it harder for you to raise money, because you’re no longer going to be able to bring in people with self-directed IRAs. So, you will be stuck with only cash investors. 

What does that eliminate? You’d have to look back at your previous deals to see what percentage of those deals was made up of IRA investors, and all of a sudden, you’re not going to have that percentage of investors anymore. You’re going to have to go find new cash investors for those amounts. 

Second of all, this divestment requirement is going to require that you either sell the property … Well, and what do you think is going to happen to property values if every multifamily property on the market or that’s currently owned that has 20%, 30% of its investors are self-directed IRA investors now has to sell as of December 31st, 2023? Well, the property values are going to dip and go way down.

The other option you might have is to refinance. But again, your property could be devalued because all the people that are trying to flood the market to sell these investments, or your self-directed IRA investor or you could have to try to buy those people out. So, first, you’d want to go to the self-directed IRA investor and ask them if they can replace those funds with cash. And so then, you would make a distribution to them, or a refund to them of their IRA investment, and then they would have to replace that with cash. 

Or what if you have a group of people, and you have to replace $300,000 or $400,000 in your million-dollar offering? Then you would have to go out and actually do a new offering to cash investors who could come in and could replace those other investors, and those new cash investors might want to come in for a different rate, different value, or something different than what you had previously offered your first prior investors. So, that’s going to be a detriment to you, to the other investors in the deal.

So, there’s all kinds of scenarios that can play out here. And if you’re unable to do any of that, then at that point, then that self-directed IRA investor is going to be penalized, because they’re going to be treated as if they had received a distribution of the value of that IRA, and they’re going to have to pay tax on it that year, right?

Kaaren Hall:

That’s right.

Kim Lisa Taylor:

Am I saying it the right way? So, syndicators, this is hugely significant. And if you’re a self-directed IRA holder, then you’re going to equally bear the brunt of whatever the outcome is here.

Kaaren Hall:

So, let’s go forward. What can you do? Here’s a link you can share: udirectira.com/act-now. And that gives you a link to what we talked about. It also gives you a template letter. But really, what we need to do right now is to contact our members of Congress. Now, what Kim and I are talking about here, the consequences, this is worst-case scenario. But the truth of it is, again, per the call that I was on this morning with our RITA attorneys on the Hill talking to these people, is that they don’t know that this provision is in the proposal. So, we need is to make them aware. It’s not going to be enough to wow them with statistics. What we have to do is tell our story.

Tell our story about our investor who is maybe already retired, doesn’t have the money, would go bankrupt if they had to pay income tax on the value of their asset. They’re living off the checks that come in from the asset, and how that would decimate them. Let’s talk about how this kind of a proposal would affect you, and how it would affect business, how it would affect your ability to improve the community, how would it would affect your ability to offer jobs. Let’s talk about what Congress cares about, which, really, it’s got to be the well-being of their constituents. And we need to remind them that we rely on them to have our well-being at heart.

Kim Lisa Taylor:

Yeah, well, so this is… Can you go back to that link? I’m going to copy it into the chat here for everyone.

Kaaren Hall:

Well, in fact, I’ve got a couple other links I’d like to share.

Kim Lisa Taylor:

Okay, I just put the ones that you had sent, that we included in the newsletter. So also, if you receive the newsletter, you probably did if you’re here, then the links are there to find your congressional representative or your U.S. senators, and that was courtesy of Kaaren. But yeah, any other links you want to share with us, please do, Kaaren.

Kaaren Hall:

Yeah, here’s a template letter too … You’ll see this in the link.

Kim Lisa Taylor:

Oh, great.

Kaaren Hall:

So, that will help. And we’ve got the actual proposal, the uDirect link. But also, today in MarketWatch, there was a really great article that featured one of RITA’s head counsel, Mike Hadley. This is really a brilliant attorney. We’re really lucky to have him. I’ve just put the link to that MarketWatch article also in the chat so you can see more about it. Being at the epicenter of this situation, I’m seeing a lot of attorneys jumping on this, like Kim, taking a proactive role to make sure that you are aware of what’s happening so that you can, again, tell your story. How is this going to impact you? And once we reach them with a voluminous amount of emails, then we’ll be able to make an impact. And by the way, in that uDirect act-now email is also directions on how to find your congressional representatives.

Kim Lisa Taylor:

That’s great, Kaaren. And we’re sharing a lot of links here, so if you want to save the chat, if you go down to where you would add some text in the chat box, there’s some three little dots off to the right hand side. If you click on those, then there’s a pop up that you should get that says save chat. At least that’s how it works on my Mac, I’m not sure if it works the same way on a PC.

Kaaren Hall:

It does.

Kim Lisa Taylor:

Okay, great. So, if you want to save the chat with all these links in it, you can do that. And that will help you get access to all of this great information. I’ve pulled up the template letter. It’s great. All you’ve got to do is put in the name of your congressman, congresswoman, or senator and send it to them. I encourage you to send it to all of them. You can send it to your congressperson and also to your senators. Let them know that this is not going to be helpful, that it’s going to hurt their constituents, you don’t support it, and they should not support it either.

Kaaren Hall:

Right. So, just the number one thing is let’s get the word out. That’s where we’re at today. And by the way, another thing that you’re thinking, but you haven’t asked yet, I’m sure, because that’s how I felt, is how long do we have? We really have to act now. Congress wants to get this thing done, this whole package passed by the end of the year, but they’re going to be looking at it now. So, it was a week ago, Monday, that it was, again, 10 days since it’s been out there. But again, we need to make the House of Representatives, we need to make the Senate and their staff, aware of this so that they do not pass a bill that they really didn’t read thoroughly.

Kim Lisa Taylor:

That never happens.

Kaaren Hall:

No, no.

Kim Lisa Taylor:

That never happens. So, Eric asks, “Does this legislation affect solo 401(k)s?”

Kaaren Hall:

That’s a good question. As far as I know, it doesn’t impact them to the same degree. But there’s, again, it’s TBD. We’re going to see how it comes out in the wash. This is primarily IRAs that we’re talking about now. But it could. What’s to stop them? So, again, what we have is a proposal that needs to go to the House, that needs to go to the Senate. So, let’s just stop it before that happens. Because if this happens, well, then what’s the next thing? What are they going to take away from us? With IRAs, the great thing about a self-directed IRA is it gives us choice, right? We can invest to all these different asset types. And what this also does, another thing to tell your congressional representatives, is this eliminates choice. It removes choice from an investor’s portfolio.

Now, I’m sure that some of the big companies out there, the big financial advisory companies out there would love it if people couldn’t invest in alternative assets and could only invest in the stock market. But I promise you, the market is every bit as risky, if not more, than alternative assets. So, it can’t be a matter of risk. Risk can’t be the argument here. It’s just… And I know that they’re all about “tax the rich.” We also have to make the point that, again, the people affected aren’t going to be the uber-wealthy. This is not going to hurt the uber-wealthy. This is going to hit the middle class, and it’s going to hit hard, and it’s going to hit you as an asset sponsor.

Kim Lisa Taylor:

So, let’s talk about some other things, some frequently asked questions that I get from people who are wanting to invest with their self-directed IRAs. And I know these are common questions that you can probably answer off the top of your head. If you can’t, I’m sure you can direct us to a resource. But can self-directed IRAs invest in publicly traded companies?

Kaaren Hall:

They can. It has to do with a custodian. uDirect IRA Services, we don’t sell any assets. We’re not a broker dealer. And we do charge much less than other companies that are broker dealers, and we’ll offer you stocks, bonds, and mutual funds as well. So, there are different custodians that offer different choices. 

Kim Lisa Taylor:

And the reason that came up is because I was talking to another self-directed IRA company, and they said, “We can’t hold any publicly traded companies.” So, that’s something that you need to know that sets uDirect apart from these other self-directed IRA companies that maybe can’t… Their custodians can’t hold those publicly traded assets. If this bill were to pass, and you’re with a company that can’t do that, then now what do you do with your money? You’re really going to be very much limited …

Kaaren Hall:

Well, that’s what uDirect is. We don’t let you invest in the market. So, we don’t have any market opportunities. That’s us. What would happen is, first off, okay, worst-case scenario, again, this passes as-is, which is highly unlikely. If it passes as-is, what happens to uDirect? Well, guess what? You can still invest in brick-and-mortar real estate. You can still take your IRA and make notes to people, as long as you don’t have to be accredited to do it. You can buy performing and non-performing debt with your self-directed IRA. You can still invest in precious metals, raw land, there’s still a lot of asset classes you can invest in. Doesn’t mean we shut our doors. But if your thing is you want to be invested in equities, in public equities you can transfer, and then you can invest in public equities. We do not sell any assets. We don’t recommend any assets. It’s self-directed, and so we stick with that.

Kim Lisa Taylor:

So, you’re saying that if somebody had their account with uDirect, they would not be able to determine that they wanted to invest in the stock market?

Kaaren Hall:

Not today. We’ve got some time to see what happens. It’s not that we couldn’t pivot and make that happen by the time this passes, because we certainly could. We’re looking at that as a business decision. But today, that’s not offered. But let’s see what happens … If this passes, it will change everything.

Kim Lisa Taylor:

So, real estate notes, they can still invest in; not collectibles. But what about art?

Kaaren Hall:

Yeah, precious metals, as long as they meet a certain purity. When IRAs were created in 1975, the IRS only said you can’t invest in life insurance and collectibles, and everything else was okay. And an IRA is an IRA, and whether it’s self-directed or not, depends upon the assets that the account can hold, right? So, it’s just an IRA. We call it self-directed because it can hold alternative assets.

Kim Lisa Taylor:

I see. Okay. All right. And then what about, can someone invest in a Reg A+ offering?

Kaaren Hall:

If they don’t have to be accredited, if they don’t have to prove their level of education or income, then it would pass under the radar. There you go.

Kim Lisa Taylor:

For this current legislation, but what about now?

Kaaren Hall:

Right now, yes, absolutely. …

But we’re advising our account holders, we’re advising our asset sponsors, B2Bs, about this legislation so that everybody knows. Before you pull the trigger on a private placement, what you need to do is contact your congressional representatives and tell them, “Hey, look, this is what I want to do. And I’m going to invest in this multifamily building, which is going to provide housing for maybe students or the population.” And the government’s all about multifamily, right, especially here in California. We just had something passed. So, just talk about, “This is what my investment would do for the community. And if I can’t invest using my IRA dollars, that’s going to impact our community with maybe affordable housing,” for example.

Kim Lisa Taylor:

So, we’ve got a question from Brian.

Kaaren Hall:

Awesome, let’s hear the question.

Kim Lisa Taylor:

Go ahead and just type your question into the chat, and then we’ll get it from there. Or there’s another place you can put it, but chat’s fine.

Kaaren Hall:

While doing that, I’ll tell you that with RITA call this morning with our lobbyists, I was very encouraged that really what this is, is a matter of awareness. And what happens is if you get on the phone with your representative, and tell them how this impacts you, that’s what’s going to do it. That’s what’s going to make a difference. That’s what’s going to move the needle on this. And it’s already moving. The outpouring has been really pretty enormous, but it’s just not enough. We have to make sure we overturn every stone and do everything within our power to make sure that our voice is heard. And let’s let the process work for us.

Kim Lisa Taylor:

Here’s another question from DJ: “In addition to our House and Senate representatives, should we also send our concerns to members the Ways and Means Committee?”

Kaaren Hall:

No, that’s a committee, and so the House Ways and Means Committee already submitted their proposal, all right? They approved it. It’s out the door.

Kim Lisa Taylor:

Yeah, so they don’t have any more control over it.

Kaaren Hall:

If you want to, go ahead. Honestly, it wouldn’t hurt. It just wouldn’t hurt. Yes, because if you know anyone on the Hill at all, they talk to each other. Leave no stone unturned. Do it, absolutely. Oh, I see Mark’s question. 

Kim Lisa Taylor:

Yeah, go ahead and ask. Mark wants to know the name of the group you were on with the call.

Kaaren Hall:

It’s called the Retirement Industry Trust Association. So, for an acronym, we call it RITA, R-I-T-A. So, Retirement Industry Trust Association. It’s an organization of self-directed IRA companies. I’ve been a member of this group for 10 years. I’ve been on the board for six. And what we do is anything that has to do with self-directed IRAs. For example, there was a time when they were going to say that self-directed IRA providers were fiduciary, so we had to get in front of them and say, “That’s not what we do,” and help them understand what we do. We’re not fiduciary; we don’t offer advice. It’s strictly self-directed. We offer this administrative, basically, process that allows people this freedom. And so, that’s what RITA is. It’s an organization where self-directed IRA people can get together and talk about our mutual concerns, and address them…

It was founded by Mary Moore maybe 30 years ago. Mary Moore was one of the attorneys who was instrumental in creating the Roth IRA. And she’s just a powerhouse, and we’re just so lucky to have her. She’s amazing. She put this thing together, and we’ve been going, like I say, for a long, long time helping the self-directed IRA community.

Kim Lisa Taylor:

So, let’s go to another question that we have. We get a lot about… Well, prohibited transactions. So yeah, I think there’s a couple different categories, right? There’s what? Self-dealing is one of them. What are the others?

Kaaren Hall:

Well, there’s self-dealing. So, right, self-dealing means if your IRA benefits you, that’s personal benefit. So, you’re not allowed to benefit from your IRA, okay? So, you can’t benefit, but neither can any of the ascendants or descendants in your family, your parents and grandparents, you and your spouse, your children and your grandchildren can’t have personal benefit from the IRA. That’s a prohibited transaction. … By the way, somebody wants some numbers here. I have some on my notes. But anyway, those are some of the prohibited transactions. It’s prohibited to offer what’s called services to the plan. You can’t provide services to the plan. So, for example, if you are a decision maker in the asset, your IRA isn’t going to invest, because you’re offering services to the plan, personal services. 

Kim Lisa Taylor:

So, that means if you’re a syndicator, so just putting this back into what our clients are looking for, attendees are looking for, is if you’re a syndicator you can’t invest your own money passively, your own self-directed IRA passively in your deal if you’re also going to be in management. You can invest in somebody else’s deal, but you can’t invest personally, and then receive those management benefits, because that’s going to be part of the personal benefit prohibition as well.

Kaaren Hall:

And having benefit sometimes can be hidden. Offering services to the plan may not be necessarily apparent. It doesn’t seem like it at first. That’s why it’s always great to call uDirect and say, “Hey, I’m looking to do this deal.” We’ll ask you some qualifying questions and see if we can weed out any possible prohibited transaction for our account holder.

So, here’s an example. This one account holder personally owns this building, and they’re so excited because they found this other building, and they want their IRA to buy it. And so, wait a minute, but guess what? The buildings are next door. So, if you personally own this building, then your IRA buys this one, doesn’t that set a market value, and can’t you personally benefit? Can’t the value of the one you personally own increase because your IRA buys the one next door? Yes. If your IRA buys it, sets the market value, improves the property, makes this property more valuable, you’ve received benefit, personal benefit from your IRA. … You might not realize all the ways things can be prohibited.

Kim Lisa Taylor:

Wow. And what happens … And so, what are the penalties if somebody does it wrong?

Kaaren Hall:

Right, so first off, if you get tapped by the IRS, and they say, “Hey, you have a prohibited transaction,” you can, first off, there’s a get-out-of-jail — used to be for free, now it’s for $10,000 — card. So, you can request a “private letter ruling.” So, you hire attorneys, request a private letter ruling, give them 10 grand, and then say, here’s why it’s not prohibited, and why you shouldn’t make me face these consequences, which are, when your IRA is deemed to have committed a prohibited transaction, it’s just game over for the IRA. It ceases to have its tax protection. Now, it’s disbursed to you as your just regular money. That shell of the IRA protection is gone. The money is just your personal money, and you get 1099’d on that, and you get to pay income tax at your current regular rate.

Kim Lisa Taylor:

And would that be the same penalty then that would apply if you worked for somebody and you had some pension plan or something or some investments, retirement investments through them, and you decided to take it personally?

Kaaren Hall:

No, but there could be excise taxes associated with penalties. So, you could also face penalties. So, you’re not withdrawing the money. It’s not something that you want to do. So, this is a time to get … You want a good lawyer, you want a good tax person with you if you’re in that prohibited transaction situation. But before you’re going to invest through uDirect IRA, we’re going to look at your deal. You’re going to look at your deal. We’ve got at least three sets of reviews. But whether or not your IRA commits a prohibited transaction is entirely on the account. It’s entirely the account holder’s responsibility.

Kim Lisa Taylor:

All right, let’s see. Somebody, Mark asked, “Do you know how much capital in the U.S. is invested through self-directed IRAs that would be impacted by this proposal?”

Kaaren Hall:

Everybody loves numbers. Honestly, self-directed IRA companies are privately held. And so, we have compiled an estimate, and that’s one of the things RITA does. All the RITA members, we privately send our data in. So, it’s roughly three million accounts, okay? Three million accounts. It’s 11 or $118 billion in assets.

Kim Lisa Taylor:

118 billion, B?

Kaaren Hall:

Yes, with a B. $118 billion in account assets. So, that’s… It’s huge. 

Kim Lisa Taylor:

I heard a number a long time ago, and I don’t know if it’s still valid, that said that the average self-directed IRA account has $70,000 in it. 

Kaaren Hall:

Yeah, it varies. I had dinner with another self-directed IRA company a couple of weeks ago, and their… So, our average account balance is one thing, theirs is another. It just, it depends on the company. … it’s hard to say. But it’s probably between 150 and 200 (thousand dollars), I would think, as an industry.

Kim Lisa Taylor:

It’s been around a while now. At the time I had that discussion with somebody, the whole self-directed IRA industry was a lot newer than it is now.

Kaaren Hall:

When you and I met, Kim, self-directed IRAs were still sort of unknown, still a “best kept secret.” But back in 2009, everyone’s like, “Where am I going to find capital? I can’t get it from banks.” And then boom, the self-directed IRA became the answer. So, it was at the right place at the right time. But it had already been around for years — 20, 25 years, or more.

Kim Lisa Taylor:

I want to tell a funny story. So, Kaaren gave me my first-ever gig, and it was via teleconference. We did it, and I learned after I listened to the recording of it that every time she asked me a question, I started with, “well….” It’s so funny to listen to it afterwards. So, I probably still do something annoying like that now. You guys can all write in and tell me what I do. But I just learned not to listen to my recordings anymore.

Kaaren Hall:

We’re always so hard on ourselves.

Kim Lisa Taylor:

I know, I know.

Kaaren Hall:

But that’s kind of an attorney, because you’re going to say, “Well, it depends.” That’s what attorneys say. But Mark, you were asking this question about… And those numbers are interesting, but what’s really important today is not the numbers. What’s important today is your story. It’s Kim’s story. How does this affect you as an attorney helping people to raise capital? What’s that going to do to your business? And how would you be impacted? How would you personally be impacted? How would it impact working capital, being able to provide working capital for businesses? How would it affect job creation? How would it affect investment choice? These are the things that we have to talk about with Congress. That’s my soapbox, and I so appreciate the opportunity to be able to talk about this, because this is the time to make your opinion known.

Kim Lisa Taylor:

That’s right. So yeah, everybody on this call, please, please take action. We will send out a replay of this event and let everybody listen to it again if you want, and hopefully more and more people will be able to hear. It’s a very important message, and it’s very important that we get it out. So, if you guys can help us get this message out to even more people by posting it on social media or whatever you can do to help get the word out in addition to talking to your own congresspeople and senators, then please do that. Mark has another question.

Kaaren Hall:

Yeah, it’s a good question.

Kim Lisa Taylor:

“How do you advise clients who are considering making a self-directed IRA investment right now? Are you advising them to pause and wait?”

Kaaren Hall:

Well, we don’t advise. Understand, we’re not advisory, but we inform. We help them make an informed decision. So, what we’re doing is giving them this link I just put up — udirectira.com/act-now — and we were giving them that link and saying, “Hey, look, this proposal is on the table. If you want to continue having your freedoms to invest in this asset, you need to know this.” So, what we’re doing is informing, because we’re not advisory.

Kim Lisa Taylor:

Well, and we’ve added it as a risk to all of the private placement memorandums that we’re putting out. Of course, we’ve always had the risk in them that says that legislation could change and could affect any aspect of that, and we have a whole self-directed IRA section that talks about the fact that legislation could change. But we’re now adding the fact that there’s proposed legislation that could have a significant impact, so that both the syndicator knows that you might want to consider whether or not you’re going to take that risk of having self-directed IRAs invest with you right now if you’re planning to hold the asset longer, or you might want to talk to that investor about if this happened, would you be able to replace those funds with cash.

So, that might be an option as well as to just have some cautionary discussions with your investors so that you understand the risks of admitting them to your deals, and they understand the risks that they could face if they invest through their self=directed IRA, so that you can both plan ahead for it. I’m not saying to refuse them admission. I’m saying just make sure that everybody has a plan for, what do we do next if this happens? And hopefully, we’re going to know the outcome of this very shortly. And if we get enough objection to it, then you know maybe they’ll strike that provision. But that’s really what it sounds like needs to happen.

Kaaren Hall:

Right, here is my email: info@udirectira.com. You can shoot your questions to me, and I’ll tell you where we stand as far as I know. RITA, we’re going to be having weekly calls with our people on the Hill so that we can hear what they’re hearing. And again, a lot of attorneys like Kim are taking a leadership role. And so, I just really thank you for having me on your event today so that I can share this information.

Kim Lisa Taylor:

Well, and Kaaren is a wealth of information. She’s been a leader in this industry, in the self-directed IRA industry since its infancy, so she knows a lot about this. She’s always taken a leadership role, and she was the first one to inform me that this was happening. So, we appreciate you so much, Kaaren, and all that you do. And we hope that if any of you were thinking about doing a self-directed IRA, that you will consider uDirect, because they offer a great service. 

All right, well, Kaaren, thank you so much. We got… Mark said, “Very helpful. Thank you, Kim and Kaaren. Is there any timeline here of when we may know where this is going?” Well, watch the news. This three-and-a-half-trillion-dollar reconciliation bill is being debated by Congress right now, and it’s being pushed hard by those that want it to pass. So, you need to be proactive, and not just sit back and watch the news and wait for it to happen. You’d better take some action.

Kaaren Hall:

Go to uDirect IRA Services on either LinkedIn or Facebook. I’ll post any updates there for sure. Our website is another source. We’re going to put it on our blog. It’s also this link. But basically, Congress is looking to wrap up this whole matter, this giant matter, of which this is one part, by the end of the year. So, we’ve got to act now because we’re coming up on Q4.

Kim Lisa Taylor:

Yeah, okay. All right, well, thank you so much. If you want to reach out to Syndication Attorneys, of course, you can schedule an appointment with one of my team at syndicationattorneys.com. And there are a myriad of ways that you can get involved with us and have us as your attorneys if you’re not already clients, so we can talk to you about those options if you go to our website. 

But for right now, just know that we’re a resource, and we’re going to try to keep you informed, just like Kaaren. And please avail yourself of her resources as well as ours. We have a ton of articles. All of our previously recorded podcasts and frequently asked questions are posted at syndicationattorneys.com, as well as you can get a free digital copy of my book, “How To Legally Raise Private Money” if you go there, or you can buy it on Amazon. So, thank you so much, everybody, for joining us today, and we look forward to seeing you at a future podcast. Thank you.

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