Asset diversification has long been touted as a critical strategy for wealth building. This method of portfolio management, which traditionally involves a mix of stocks, fixed assets and commodities allows for maximum return at the least amount of risk — an important element for retirement savings.
One company with a strong foothold in this investment space is Equity Trust, a financial services company that allows individual investors to diversify their retirement investment portfolios through asset class options like private equity, precious metals, tax liens and real estate among others. With over $25 billion in assets under custody and administration as of the end of 2017, Equity Trust’s self-directed retirement accounts have become a viable option for entrepreneurial investors seeking control over their wealth building activities.
Merging the Worlds of IRAs and Crypto
Equity Trust recently launched a new digital asset platform that allows individual retirement accounts (IRAs) to invest in cryptocurrencies. It can be simple to open an account online through myEQUITY (its online account system), or investors can call and open an account through a senior account executive.
The minimum investment required is $10,000 in addition to a $500 nonrefundable fee for use of the digital asset platform.
Through this platform, investors can purchase and sell bitcoin, bitcoin cash, ether, ethereum classic, litecoin and XRP using a trade-date-plus-one formula (i.e., next-day cash availability for sale transactions). The industry-leading cycle starts when purchase/sell orders are immediately filed by liquidity providers to lock in the price and exchange of fiat and digital currency takes place the following morning.
Because Internal Revenue Service (IRS) guidelines treat crypto in a manner similar to real estate, an IRA offers some potential tax advantages. If IRS guidelines are followed, taxes are deferred, meaning that there are no immediate tax implications. By way of example, the major spike in bitcoin prices in 2017 led to some major financial returns for investors in this space, but it also resulted in a significant tax impact. If these investments had been made through an IRA, taxes could have possibly been deferred through retirement.
This move on the part of Equity Trust to create a digital currency platform signals demand on the part of clients and other investors for tax-favorable investment vehicles like IRAs.
This pioneering platform brings ease of use to the digital currency investment process through a simple online interface. Here, both individual investors as well as institutional professionals who represent clients are able to rapidly place digital currency orders using funds from IRAs.
The emergence of the digital asset platform reflects the most recent in a series of technology investments made by Equity Trust. Dave Allen, Equity Trust’s COO, said “it demonstrates the company’s aim to invest in technologies that align with a broader strategic approach of delivering innovative, world-class products and services that maximize client value while accelerating client access to alternative investments.”
Equity Trust’s target market includes current cryptocurrency investors desiring a long-term investment approach, where there is the potential for wealth to be built over a number of years. Equity Trust’s platform is also ideal for investors seeking a more diversified retirement portfolio who may not have explored cryptocurrency in the past.
One of the prized features of the platform is the ability to connect a client’s Equity Trust account with a “cold storage” facility, allowing for a secure long-term storage approach for digital currency. This feature significantly mitigates the customer risks often associated with the investor holding their own cryptocurrency keys.
Allen indicated that a main factor that led the company to pursue the intersection between IRAs and cryptocurrency was the stated demand of Equity Trust’s existing clients.
“Equity Trust has specialized expertise in providing responsible access to alternative asset classes, ” he said. “And with cryptocurrency emerging as an asset that’s experiencing increased demand, investors are desiring tax-advantaged retirement options to invest in cryptocurrency. It made sense for Equity Trust to apply its expertise in this area and deliver a solution.”
Note: Trading and investing in digital assets is speculative and can be high risk. Based on the shifting business and regulatory environment of such a new industry, this content should not be considered investment or legal advice.