Account Owner is Broker–Any Good Reason?

Submitted by Mick Murray on Sat, 2017-11-11 18:21

I’ve run in to this a few times where the brokerage firm is the owner of a clients IRA. In order for the client to move money away from the broker, the broker has to sign paperwork. The clients were not aware of this structure. In one recent review, I discovered that the firm was listed as beneficiary of one client’s IRA.

These clients are all of sounds mind. There are no issues with competency.

The broker defends the practice as being able to provide better customer service. I suspect that the firms do this better control conservation efforts if a client wants to move. My RIA does not allow this practice.

Are there any legitimate reasons do this?



Submitted by William Tuttle on Sat, 2017-11-11 20:58

No one but an individual can own an IRA account. What you are probably referring to is that the broker has “discretionary control” of the account. This is the only way certain broker’s work. I don’t know how the client would be unaware of this, because they have to expressly sign a document giving the broker such control. It is a degree of authority that is ripe for abuse. Since the broker has full discretion to trade on your account. Personally, I would advise anyone I knew to stay away from such accounts.

Submitted by Mick Murray on Sat, 2017-11-11 21:32

Here the brokerage was owner under some type of arrangement. The client and I called Jackson Nation to review the client’s VA and JN said that the brokerage would have to either 1) sign off on any transfer paperwork, or transfer ownership to the client. Clients were unaware and concede that they may have signed paperwork without knowing.

Submitted by William Tuttle on Sun, 2017-11-12 18:03

I will repeat, it is simply not permitted for a broker to be the owner of an IRA. Ownership has a specifc statuatory definition. What you are desccribing is discredtionary control or authority to tranaact on the account. They might have to signoff on any transfer or you might have to terminate control/authority. It might just sound like semantics, but it most definitely is not. There is a fundamental distinction between ownership and a contractual level of control/authority.

Submitted by Alan - IRA critic on Sun, 2017-11-12 19:28

Does this account hold ONLY the annuity which is typically the case, or is the annuity just one investment along with others in the IRA?  And if there are other investments, is is possible that the broker is listed as the annuity owner only, but NOT the owner of the IRA that holds it?

Submitted by Mick Murray on Mon, 2017-11-13 15:49

The broker holds title as trustee. They are also beneficiary of the annuity as trustee with the spouse being listed as a contingent beneficiary. The broker claims that they do it this way to better serve the client, but the cynic in me wonders if it’s a way to prevent money from being moved without talking to the broker first.I’ve seen this a few times and each time the client was unaware of the structure. They didn’t realize what they were signing.My question: are there client advantages to having the account titled this way or is more a structure to help the broker cinverse business? Thanks

Submitted by Alan - IRA critic on Tue, 2017-11-14 00:40

You did not answer my question regarding the annuity vs. the IRA account itself. See prior post.

Submitted by Ben Meyer on Wed, 2017-11-15 15:08

Saying that the broker holds title as trustee suggests that this IRA is a “Trusteed IRA”.  Clarification would require a thorough review of the underlying documents.  Also a listing of investments and titling, as Alan has posted.

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