Wealth Podcast Post

Alternative Investments with Bill Neville

George Grombacher February 26, 2022

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Alternative Investments with Bill Neville

LifeBlood: We talked about alternative investment investing via self-directed IRAs, how it works, what kinds of investments you can access, the common pitfalls to avoid and how to get started, with Bill Neville, Business Development Manager with the Entrust Group.  

Listen to learn why people have been using self-directed IRAs for over 30 years!

You can learn more about Bill at TheEntrustGroup.com, Facebook, Twitter, Pinterest, YouTube and LinkedIn.

Thanks, as always for listening!  If you got some value and enjoyed the show, please leave us a review wherever you listen and subscribe as well. 

You can learn more about us at LifeBlood.Live, Twitter, LinkedIn, Instagram, YouTube and Facebook or you’d like to be a guest on the show, contact us at contact@LifeBlood.Live.

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Our Guests

George Grombacher

Bill Neville

Episode Transcript

Come on one lead. This is George G. And the time is right to welcome today’s guest strong and powerful Bill Neville. Bill. Are you ready to do this?

Bill Neville 0:19
I’m ready. Thanks.

george grombacher 0:20
All right, let’s let’s let’s go. Bill is the Business Development Manager at the interest groups, San Francisco Bay office, they are the go to for all self directed IRAs over $4 billion in assets and over 22,000 investors. I bet those numbers are probably bigger today. Bill, tell us a little about your personal life’s more about your work and why you do what you do.

Bill Neville 0:44
Um, yeah, I, I’ve been with interest for coming up on 11 years. I’ve been I’m 37 years old. So I’ve been working for what 35 years roughly. And, and I started with interest in a position of manager franchise operations about 11 years ago, and I was about six months into the job when the owner of our company decided that he didn’t want to have the franchise business anymore. Essentially, what he had done is he had started off with licensing agreements for other people to get into the self directed retirement account world, which I’ll explain shortly enough and into the business. And it turned out he was inadvertently running a franchise program. So we were we are custodians, and record keepers of retirement accounts. And then there were all these other businesses that were operating under the interest name, but they were their own independent businesses, and they now have completely different names. So these companies are still in business, it’s actually was a very successful franchise program, from a standpoint that most of them are all still in business and very successful. But they no longer fall into the franchise umbrella. They’re their own company, basically, the owner of our company last like six months in position, decided that he just wanted to be custodian record keeper of retirement accounts, didn’t want to have this franchise operation a more so he sold them the franchise businesses. So if you don’t have a franchise operations, you don’t need a manager franchise operations. And so in, you know, very short period of time, I wasn’t sure what I was going to do. But the company gave me a position overseeing our compliance and internal audit, which were two things I had never done in an industry that I was brand new in. And I did that for the next few years. And the best thing about it was that it really, I learned the business really well. I’ve learned like what a self directed IRA is, and what the roles are in compliance is pretty important whenever you’re in a, in a highly regulated industry, like we’re in. But I wasn’t crazy about the position itself, it was very solitary, very internal. And we had a business development manager position, open up. And so I went to the owner of the company or the president at the time and said, Hey, I think I’d be really good at that job. And so they moved me into that I did both positions for a while. And then eventually, I was full time business development manager and essentially as business development manager. My role is simply to educate people on what a self directed retirement account is, our is and what the roles are and how it works and things you can do and can’t do and invest in. And so really just every all day, every day, large, largely My my, my role is just doing this type of thing. Like what I’m about to do, it’s which is just explain and educate and help people understand what a self directed retirement account is and how it’s different from your IRA or 401k that you might have with Merrill Lynch, Charles Schwab fidelity, Chase Bank, like companies like that, where most people do have their retirement account as their custodian how it’s different when you have it with a self directed custodian such as entrust.

Unknown Speaker 3:58

george grombacher 3:59
I appreciate that. And just when you had it all figured out, then all of a sudden, we’ve got an FTS and everybody wants to talk about cryptocurrency.

Bill Neville 4:07
Yeah, I’m happy to I mean, I don’t know a ton about cryptocurrency, but I can talk about like how you can essentially invest in it inside a retirement account, for sure. And then FTEs, which are allowed, you could

george grombacher 4:18
that’s fascinating, right. So how has that shifted? What was what was the bulk of of the assets that were held 10 years ago? And do you see things really trending in a different way? I mean,

Bill Neville 4:31
I mean, the most popular investments are inside a self directed retirement account or real estate and private placements, privately held funds, privately held companies, and that’s not really changing. And I don’t see that. Excuse me. I don’t see that changing. Although we have seen some shifts into investing in crypto like particularly a handful of years ago, I used to get calls practically on a daily basis about them. Now, I don’t get calls quite so frequently, but I still get calls about that. Actually the cannabis space has become an area that people have become, you know, interested. But those are simply privately held companies and privately held companies have been something that you can invest in inside a self directed retirement account for a long time. I mean, to just explain what it is that that our company does real quickly. Most people have a retirement account, whether it’s a traditional IRA, Roth IRA, Sep, 401k, whatever it is, in order for retirement account, qualified retirement account, requires a custodian right, and most people’s custodian is a bank or brokerage firm like a Merrill Lynch like a Charles Schwab, like a fidelity, something like that. A lot of people’s retirement accounts started when they started working for a company and that company offered a 401k. That company’s 401k was administered by again, one of those companies or Vanguard or some company like that. And those firms only let you invest in stocks, bonds and mutual funds, right. So you have a 401k, you work for a company have a 401k, they’ll show you a list of funds. And they’ll even recommend, like if you’re this age, or you have this risk tolerance, we recommend these three or four funds, and they’ll have somebody who you can talk to who will advise you. And that’s what most people think of when they think of retirement account is a brokerage firm that advises you and you invest in stocks, bonds and mutual funds, right. And that’s it. But the IRS actually says you can invest in pretty much anything you want. You can invest in real estate, you can invest in privately held companies, you can invest in cryptocurrency, you can invest in notes, we have somebody invest in cattle in an in an airplane, in a bowling alley, like you can invest in almost anything you want inside of retirement account. But you have to have your account with a custodian who’s willing to process and hold whatever investment is that you want to make. And so that’s where the interest group comes in, is that we are a self directed custodian. So that true self direction means two things. One, you make all your own investment decisions. So we don’t advise you, we don’t sell you investments, we don’t do any due diligence on the investment. So if you want to invest in a rental property, or if you want to buy cryptocurrency, or if you there’s some private company that you want to invest in, it’s up to you to do all your own research. And if you decide you want to invest in that inside retirement account, you’re allowed, you just have to transfer the money over to us. So you’re opening an IRA with us, if you have a Roth IRA with fidelity, you would open a Roth IRA with us, if you have a traditional IRA with whoever you would open a traditional IRA with us, or 401k would roll over typically, to a traditional IRA, you transfer over the money to your account with us. And then you instruct us to make whatever investment you want to make. And here’s the key that investment is held in the name of your retirement account. So Bill Nevile, my name if I’m using my retirement account, so let’s say buy a rental property, what goes on the contract on the closing documents and on title, it’s not bill Neville. It’s the interest group for benefit of Bill Neville account number than my account number. So my IRA is its own entity. It has its own name, its own tax ID number. So the IRA owns the investment. So if you’re investing in cryptocurrency, the cryptocurrency is owned by your retirement account. It’s not owned by you as an individual. And so that’s the role that we play. So we’re strictly a custodian and record keeper, you have online access to your account to review statements to, to, to review transactions to process investments, and we do any annual reporting to the IRS as required. If you want to take a distribution, we’ll distribute it to you. So essentially, we provide all the services that custodial services that you get, again, from a Merrill Lynch Charles Schwab fidelity would most people typically have their retirement account with what we don’t give you is the advisory services. And what we give you that they don’t is the ability to invest in non traditional investments. And again, a non traditional investment is anything other than a stock bond mutual fund.

george grombacher 8:49
Got it? Well, that certainly does make sense. So people commonly come to because they’re interested in investing in one of those other things.

Unknown Speaker 9:00
Yes, typically, they’ve already like they’ve already like, found the property or they’re they’re learning maybe they’re their their real estate investors or they’re wanting to become real estate investors. I mean, self directed IRAs are is talked about in books like Rich Dad, Poor Dad and The Millionaire Next Door, whatever that book like you, if you were to read any of those books, if you were decide I want to become a real estate investor and you start educating yourself, you’re going to come across self directed retirement accounts, because they get talked about in there, right. So yeah, either somebody has already found at let’s say, a privately held company or private fund, that they want to invest in a hedge fund, that the brokerage firm that they don’t they have their account with says, Yeah, we don’t hold that investment. And they start doing some research or maybe the fund company tells them and says, Hey, you can do this inside an IRA. Here’s a list of three or four companies and oftentimes let’s we’ve been in business for four years, we’re often on that list, but that’s typically how people contact us is not is oftentimes because they found an investment they want to make. And through that they’ve discovered, hey, I can do this inside my retirement account, let me learn more about it. And then they contact us. And then that’s where again, my role as business development is to explain the rules talk about what you can and can’t do. There are certain things called prohibited transactions, that you can’t do that around self dealing. So I explain that. And then people decide for themselves, like, one of the things I like is I’m not trying to convince anybody that they should or shouldn’t do that, it’s a very personal decision. It’s a matter of fact, we always encourage people, before you make an investment, you should talk to a CPA, you should talk to an advisor, decide if this is the right investment for you. Because we’re not going to be doing any due diligence on this investment, right? Like you’re responsible for, for either doing it yourself or having somebody having an advisor that is going to help you decide if this is the right investment for you. If it’s uh, you know, how risky it is. And if it fits within your portfolio, right? That’s gonna come from someone else, but But then if you decide then open the account and will process the investment, but everything is done at the account holders instructions.

george grombacher 11:09
Got it? I appreciate that. So you mentioned self dealing, how does how does that commonly play up? Where do we commonly screw that up?

Unknown Speaker 11:17
Um, so there are certain people that are considered disqualified persons to your IRA. So that would be you as the account holder. So if you had an account with us, you as the account holder, your spouse, your ancestors, so parents, grandparents, etc, your lineal descendants, so children, grandchildren, and then spouses of lineal descendants. So let me give you some examples of what you’re not allowed to do. An IRA can’t lend money to a disqualified person, right, an IRA can when money like you could use your IRA, there are what are called note investors, people who invest in notes that are oftentimes collateralized by real estate, and

Unknown Speaker 11:52
IRA can be

Unknown Speaker 11:57
become a bank and when money and get interest, but it can’t lend money to a dispositor. When it comes to real estate, a disqualified person can’t use the property for personal use owned by an IRA. So if you buy a property using your IRA, you can’t use it as a second home or vacation home, let’s say you buy it in a college town and your kids go to school in that town, your kids can’t use the property, they can’t stay in the property, right? That’s considered self dealing. They also can’t do any physical labor on the property, you can’t put sweat equity into a property owned by your IRA. You can’t necessarily invest in a company that you already own personally, right. So if you own a company, and you decide that you want to take your IRA, you want to invest it back in your own company, it’s mostly going to be disallowed, right? There are some rules around it depending upon your percentage ownership if you have less than a certain percent, or if you’re a passive investor, rather than like an actual CEO, like I don’t want to get too in the weeds with that, because but generally, like if you own a company, you can’t use your IRA to invest back in your own company. Right? Those are the types of things that are considered self deal where your parents company or your children’s company, something like that.

george grombacher 13:09
Got it? And just out of curiosity, how how do people get in trouble for that? Is it if they get audited?

Unknown Speaker 13:17
Yep, that’s exactly how they got out. That’s what that’s what it would require would be, you know, the IRS would have to be auditing them and looking at their retirement account and the investments they make and discover that they engaged in, in self dealing, what happens is, is if you commit a prohibited transaction, your IRA becomes a disallowed entity at the point that the prohibited transaction occurred. So let’s say like somehow, the IRS discovers that you have been staying in the property that you own inside your IRA that you’ve been using as a vacation home, right. And that happened three years ago, where they go back and say, Okay, three years ago, that IRA was no longer qualified as a as a as a tax protected entity, because you committed a prohibited transaction. So any transaction occurred, so what happens is, the entire account becomes a distribution to you, which is then a taxable event. Plus, if you’re under 59, and a half, there’s a 10% penalty, and then any transactions that occurred after that, that occurred inside the retirement account would now be considered disallowed. And all of that would be considered a taxable event. So it’s like you’re gonna end up they’re gonna, like throw you in jail unnecessarily. But there is could potentially be a pretty big tax consequence associated with committing further transaction.

george grombacher 14:32
better just to not do it.

Unknown Speaker 14:35
For sure, yeah. But I mean, people do it inadvertently, I can see it could be possible to do it, particularly when you’re talking about maybe a privately held company right? Because the rules are a little ambiguous when it comes to privately held companies in terms of like I said, if you own your own company, but you’re a certain percentage owner then you can still invest but you’re if you’re above that percent, you can’t invest but then again, if you are passive investor, then the percentage goes up. to a higher amount, it’s actually kind of ambiguous. There’s a little it’s a little challenging to really interpret the rules correctly. But yeah, I mean, it. I would think that more often than not, if it happens, it probably happens in.

george grombacher 15:14
Got it. And the rules are the same in terms of the contribution amounts. Roth durational.

Unknown Speaker 15:21
Yep. Yeah, I mean, the contribution limits the distribution roles, like a traditional IRA with fidelity is no different than a traditional IRA with the interest group. From all those standpoint, from the contribution limits from the tax rolls, all that stuff. The only difference is that those custodians typically aren’t willing to hold non traditional assets, and they advise you, whereas we will hold non traditional assets. But we don’t give you any advice. That’s really the only difference. But all the custodial record keeping rules and services is typically going to be the same.

george grombacher 15:56
Got it? Nice. Beautiful. Are there? Are there things where? Well, I guess the question is, how do I know if if I’m a good candidate for this?

Unknown Speaker 16:09
Yeah. That’s a good question. I mean, I think that my I get this this question sometimes. And my answer is basically, if you are prepared to do all your own due diligence, or you have someone in your life who you trust, who’s giving you good advice, right? Because, you know, if you’re planning on investing, I mean, Bernie Madoff took a fair amount of money from self directed retirement accounts, right, like people lost money from in their retirement accounts to Bernie Madoff, right. So if you’re investing in now, on the on the st. Some people might look at self directed IRAs and non traditional assets and say, well, they’re more risky, but not necessarily, right is real estate, necessarily a more risky investment in the stock market, I think it could be argued other ones is gold, or silver, you know, precious metals, considered a more risky investment than the stock market, I think, again, you would say the opposite, it’s probably a more conservative investment, but you need a self directed IRA, if you want to invest in gold or silver inside your retirement account. But in when there can be potentially very risky investments, like startup companies, for example, startup companies are pretty popular investment for us, right? A startup company, you know, they have a fairly high failure rate than publicly traded companies that are already on the New York Stock Exchange, right, that’s probably more risky. So, you know, be prepared to, again, do your own due diligence, or have someone who’s advising you, and I would say, look at the investment and determine the riskiness of it, and you have to calculate like, of the overall portfolio that you have of both personal savings and retirement account savings. Like, yes, this investment into Uber back in the day was probably a pretty risky investment that paid off huge, but you know, they’re certainly forever Uber, you can find hundreds of companies that, you know, sort of bought in private investors and lost the money because they didn’t run the business power, they ended up, you know, just not having a good idea, or it became became defunct fairly quickly. Just, you know, know, the risk that you’re getting into, I guess, is what you say and also understand. I don’t want to keep repeating myself, but I understand that we’re not going to get do any due diligence or advise you if your investment goes bad, that’s entirely on you. Right.

george grombacher 18:30
Yeah, makes sense. Well, Bill, people are ready for that difference making tip? What do you have for them?

Unknown Speaker 18:37
I mean, you know, I think my tip that, for me makes a difference is just that a lot of people aren’t aware that this is a thing, right? Like, I mean, you might have a higher knowledgeable audience than, you know, the average individual who is just trying to work and pay their bills and pay a mortgage and raise their kids and really have no idea but what a self directed IRA is, but like the the biggest tip is know that if you want to invest in something just other than stocks, bonds and mutual funds inside your retirement account, you’re allowed, like people have been ever since ERISA went into effect in the mid 1970s. You’ve always been allowed to invest in real estate and privately held companies and precious metals, you’ve always been allowed, but most people aren’t aware of it because most people’s retirement account started with and is maintained by in custody by a brokerage firm. And those brokerage firms are I have no incentive to inform you of this, right. Like they have no incentive to give you an idea that says you can take your money out of your account with us and they’ll put it somewhere else to invest in something else. So the tip is just be aware that this exists. And if this is an avenue that you want to pursue, there’s lots of opere you know, ways to go out there and educate yourself about cryptocurrency investing, about note investing about real estate investing about tax lien investing And that if you want to do a tax sheltered inside of retirement account, there are companies like the interest group that exists out there for the sole purpose of giving you the opportunity and making it legal and compliant for you to do that investment inside your retirement account.

george grombacher 20:13
I think that that is great stuff that definitely gets caught. Well, thank you so much for coming on. Where can people learn more about you? And how what does it take to open up an account with the interest group?

Unknown Speaker 20:24
Yeah, I mean, our website is that interest group calm and to open an account, I mean, we have a tab that says open an account right on our website, it takes maybe 10 minutes to open an account, which is just name, address, social security number, date of birth type of account, we have a $50 new account fee paid a $50 fee and boom, your accounts established and now you can fund your account and move forward with investing. If you want to get a hold of me, then my my phone number it’s 510-587-0950 and my extension is 237 or my email is B Neville so Bill Neville B and my first initial Neville and Evi LLP, at that interest group.com You can also find us on Find me on our website if you if you want to look there, but yeah go to our website we have a ton of information we have a ton of educational material about different types of alternative assets including again real estate notes, precious metals, privately held companies, we have pot we have we do our own monthly webinars there’s there’s a lot of stuff on there educational we call it the Learning Center. Feel free to peruse and learn everything you can.

george grombacher 21:39
Excellent. Well if you enjoyed this as much as I did show your appreciation and share today show the friend who also appreciates good ideas go to the interest group.com It’s th e e n tr ust group.com Shoot me an email, get in contact and figure out if this is the right thing for you. Thanks, Kimbell. Thank you. And until next time, keep fighting the good fight. We’re all in this together.

Transcribed by https://otter.ai

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