Utilizing the internet to establish and cultivate relationships is a necessity in today’s business environment. However, headlines have highlighted the somewhat dubious ways that some of today’s tech giants earn their profits. The monetization of our personal information has emerged as an unpleasant truth about online services that don’t charge their users but in turn sell their names, e-mail addresses, and phone numbers to data companies and advertisers.
While Facebook has taken the brunt of recent criticism for its dealings with Cambridge Analytica, many of the internet’s key players have capitalized on personal information in the same way. If you provide your e-mail address (or more) and click the little box that says, “I agree to these Terms and Conditions,” there’s a chance your information will be distributed in a manner you may not like but have nonetheless agreed to.
These revelations have prompted calls for transparency in the use and dissemination of customer data from consumers and governments alike. From a business standpoint, you may consider providing this in-demand transparency if you’re supplementing your face-to-face efforts with an online presence. Qualifying your potential borrowers likely involves the collection of their sensitive information, which individuals or businesses in need of capital may not be as eager to provide in today’s climate.
One way to mitigate this apprehension could be to compose and distribute clearly written terms and conditions. This may seem like overkill, but a clear and concise document that outlines your exact data sharing policies can go a long way toward re-enforcing confidence in your business model. An easily understood statement along the lines of, “We will never share, sell or distribute your information to third parties,” may be the difference between earning new business and falling behind the times.
If you originate loans from a self-directed retirement account like an IRA, 401(k) or health savings account (HSA), you may encounter other unique challenges in transparency. Similar to the false impression that issuing notes with tax-advantaged retirement funds can be a tedious enterprise, borrowers may be skeptical about conducting business with a non-human account even though you, the IRA holder, are the engine behind every business activity inherent to the loan. By educating yourself about self-directed IRAs and putting these negative interpretations to rest, you can put your tried and true private lending strategy to work for your retirement while establishing trust-based business relationships.
In addition to our previously mentioned idea about terms and conditions, here are two other ways that IRA investors can inspire confidence among borrowers:
- Partner with an IRA custodian with a proven track record of data protection. As financial institutions, IRA providers must collect key personal information like your social security number and date of birth. These companies must verify the identities of all incoming clients to ensure they’re not contributing to the financial well-being of criminals. Banks and other such firms that manage sensitive information and large sums of money are popular fraud targets, so be sure to do your homework before opening a self-directed IRA (for the good of your retirement and for the piece of mind of your clients).
A proper custodian should have clearly stated security objectives and reasonable yet secure barriers for your online accounts (two-factor authorization, password requirements, etc.). Their online security personnel should also be able to identify future threats and incorporate safeguards proactively rather than reactively.
- Help the borrower understand the minimal differences between borrowing your non-IRA funds and borrowing IRA funds. The process of originating loans with a self-directed IRA is comparable to that of originating loans with personal funds. You may have figured this out by now, but your prospective borrowers may not share this understanding and may have misgivings about borrowing money from an account instead of a person. Reminding people that you’re still the decision-maker and that doing business with an IRA carries zero ramifications for them can help alleviate any concerns. At the very least, a conversation along these lines can help bolster your image as a transparent lender.
When it comes to the people or businesses who provide your income, making their priorities your priorities can pay dividends. As internet consumers take a closer look at how their information is shared, you can set yourself apart by laying your cards on the table and proving that you’re a responsible lender with nothing to hide.
Clay Malcolm is Chief Business Development Officer at New Direction IRA, Inc., a provider of self-directed retirement plans that hold alternative investments. He provides preliminary and continuing education to anyone interested in promissory notes, real estate financing and other loan structures as assets in IRAs, 401(k)s and HSAs. Mr. Malcolm can be reached at 877-742-1270 (Ext. 113) or firstname.lastname@example.org.