Buying insurance on your home, car or life is standard practice as protection against catastrophe. So why not do the same for your retirement investments? That’s the pitch from Trevor Gerszt, who has what he calls the ultimate security solution for the money socked away for when people stop working: investing in precious metals. “The closest thing to an insurance policy on your finances is a percentage of gold and silver,” said the 34-year-old chief executive of Goldco Precious Metals, a Tarzana firm that assists clients with setting up precious metals retirement accounts and selling them gold and silver coins or bars. These investments are proving to be popular – in fact, Goldco ranked No. 16 on Inc. magazine’s list of the 5,000 fastest-growing private companies in the nation published last month. Between 2012 and 2014, its net revenue grew 13,441 percent to $28.6 million. This year, Gerszt projects revenue around $44 million, though that figure includes the value of the metal Goldco sells. Increased business translates into a profitability that was elusive four or five years ago for Goldco. The company said it is increasing its headquarters space on Ventura Boulevard and hiring more staff. By the end of the year, the current 45 employees will grow to 60. Gerszt attributes the growth to the volatility of the stock market and the low price of precious metals – gold going for around $1,100 an ounce and silver hovering between $14 and $15, down significantly from their peaks in 2011. Also, in the past few years, information about precious-metal individual retirement accounts has become more widespread, he added. Seeking shelter Goldco said it has more than 2,000 customers. Gerszt estimates that about 80 percent of them are in their mid-50s to mid-60s, the age when they realize there are five to 10 years of work remaining and they have to start making big decisions about retirement. A precious metal IRA is what’s known as an alternative investment, governed by the same rules as a traditional or Roth IRA. Goldco provides the paperwork to open an account using funds from an existing IRA. Once that is done, the custodian of the IRA receives a request to transfer the funds to the new account. “The client’s money never leaves the shelter of the IRA,” Gerszt said. With funds in the new account, the client can choose from Goldco the coins they want to have as investments. American Eagle gold (one-tenth of an ounce to 1 ounce) and 1-ounce silver coins are among the most popular, Gerszt said. The coins, which are required to be 99 percent pure metal, are not physically held by the investors but instead kept at a third-party depository. Interestingly, some investors stay away from the U.S. currency and instead will take those minted in Britain or Canada, he added. Goldco buys the coins at cost and then sells them at market value price to customers. The company makes money from the difference between those two prices, but it counts as revenue the entire sale price. The company also does cash sales that do not qualify as retirement account investments. In those cases, individuals wire the money and pick the coins they want to own. The coins might be decades old and contain only 90 percent of either gold or silver. For retirement accounts, Goldco believes that only a small percentage of a client’s overall portfolio should be in metals. While the company does not act as a financial adviser, it can give recommendations on what percentage best fits a client’s needs, Gerszt said. Gold and silver tend to be long-term investments. If too much has been invested in the metals and an emergency arises requiring the account to be liquidated, there is the possibility of losing money in the short term, he said. “We don’t want to put our clients in a position to sell their metals before they see their true value and that happens over a longer period of time,” he explained. Reputation issues Like gold mining and gold penny stocks, gold investing has a checkered history. In the L.A. market, mail-order gold brokers have been the target of legal action over bait-and-switch scams. For example, Merit Gold in Santa Monica closed its doors last year and sold its property to a liquidation company after the city attorney filed a consumer protection lawsuit. In 2012, Superior Gold, also in Santa Monica, went out of business after being sued by the city. In the case of Merit, the lawsuit alleged that the company sold customers collectible coins for well above the value of the metal they contained. Randy Moon, a small-business consultant from Dallas, was brought on as general manager at Goldco. While he acknowledged that there have been shady operators in the precious metal industry, Moon thinks Gerszt keeps everything above board. The culture he’s created at Goldco makes the better sales staffers actively seek out the company. “We don’t have a hard time hiring good people,” Moon said. The culture Gerszt has tried to create emphasizes an informational, soft-sell approach. Sales executives don’t have specific sales figures to shoot for and management encourages collaboration among the staff, Gerszt said. “We don’t have a bunch of sharks, people going for the throat,” he explained. “That has not been our approach.” Consumer protection organizations have scored the company high on its ratings scale. The Business Consumer Alliance gave Goldco an “AAA” rating while the Better Business Bureau gave it an “A+” rating. The organizations had not logged complaints about Goldco for the past three years. The Industry Council for Tangible Assets, an advocacy group for the precious metals and rare coin industry in Annapolis, Md., offers a set of criteria that people can consider before selecting a precious metals dealer. Kathy McFadden, executive director of the council, said among the criteria are checking a company’s reputation, looking at its website, asking other people who they invest with and even going to organizations like the Better Business Bureau. “It is doing due diligence,” she said. “If it is too good to be true, you have to look at it closely like you would any other business.” Celebrity endorsement Gerszt acquired Goldco in 2010 after having worked at two other precious metal companies. The Sherman Oaks resident said he got into the precious metal business after leaving the mortgage industry at the time of the real estate crash. Born in South Africa, he moved to California in 1986 with his family and has been working since his teens. Gerszt said the first gold and silver supplier he worked for was eventually shut down for unethical business practices. He declined to name the company. The second, National Gold Group, which he co-founded, sold rare coins and dabbled in retirement accounts. Gerzst left that company to a business partner after about 18 months. With $15,000 seed money, he was able to acquire Goldco in late 2010 and get the business off the ground while living a frugal lifestyle in the West San Fernando Valley. Those lean years had Gerszt involved in all aspects of the business, from marketing to sales. “For the first two years, there wasn’t a file I didn’t have a hand on,” he said. Challenges for Goldco came from two directions – finding the right people to work as account executives and getting the marketing message to the right audience, he said. Both involved trial and error. After buying the company, Gerszt admits that selecting employees was not done well. If someone had sales experience, they would be hired. He was not looking at the office culture as a whole and whether those personalities would fit in and work well with the other staffers. He said that he found workers stepping on each other’s toes or treating clients poorly. “I had to go through a lot of account executives before building the team we’ve had for the past year and a half,” he noted. On the marketing side, the lesson Gerszt learned was to trust his instincts. A television campaign turned out to be an expensive flop when the L.A.-area media-buying company Goldco hooked up with turned out to be a scam and never bought the time it promised. These days, the company does its marketing online and on radio, with nationally syndicated conservative talk-show host Dennis Prager as the closest it has to a celebrity sponsor. Prager is a client and has been to the company offices to look over coins to invest in, Gerszt said. “He was happy to work with us and just doesn’t take on anyone (to endorse),” Gerszt said. Moon, the consultant, said that while Gerszt is great as an entrepreneur, he fell short when it came to the fundamentals of running a business. One area of focus has been in creating a corporate structure of leadership that can move Goldco forward even if Gerszt were out of the picture. However, no structure can replace the relationships the chief executive has built with both employees and clients, according to Moon. “He has built a culture where people will run through walls for him,” he said. “It is a tribute to his character overall.”
Firm Talks Golden Age for Retirees
