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US expat investors thrown out of American brokerages
| Published: | 28 Mar at 6 PM |
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Following the lead of a number of USA-based banks, American brokerage firms are busily ridding themselves of their US expat clients.
Nowadays, American investors living overseas are steadily being cut off by USA-based financial services, leaving them at the mercy of greedy offshore bond retailers. Even worse, many are at risk of falling foul of the unregistered, illegally working IFAs lurking in many favourite expat havens. The reason behind this rash of expat exclusion is, of course, FATCA.
Following the introduction of FATCA in 2010, all US expats must declare the details of their foreign bank accounts to the IRS as part of their annual returns. The move prompted many overseas-based foreign trading account providers to discontinue services to US expats. The situation has deteriorated further over the past several years, with major players in the field of investments now informing long-standing expat clients they will have to go.
For example, one US expat living in Singapore was recently informed by Morgan Stanley that she needed to move her money as the brokerage was no longer willing to serve those living overseas. Another US expat based in Thailand was told by TDAmeritrade that his 15-year association with the broker was now at an end. He was given very little time to sort out the mess.
Low-cost brokerages do exist overseas, with Schwab, Standard Chartered and DBS Vickers three of the largest. However, these and many others have also shut their doors to US expat investors since the introduction of FATCA. Given the complicated paperwork demanded by the IRS and the massive fines for non-compliance, it’s perhaps a sensible move for the brokerages, but can spell disaster for their former clients.
Finding a low-cost brokerage amongst the bargain-basement rabble based on the Isle of Man and in other low-tax havens is close to impossible. Products touted by insurance companies such as Friends Provident International include annual fees of 4 per cent upwards and long lock-in periods with predetermined dates as long as 25 years in the future. Pulling out before the given date can cost more than half of the amount invested, no matter the reason behind the need to cancel.
Nowadays, American investors living overseas are steadily being cut off by USA-based financial services, leaving them at the mercy of greedy offshore bond retailers. Even worse, many are at risk of falling foul of the unregistered, illegally working IFAs lurking in many favourite expat havens. The reason behind this rash of expat exclusion is, of course, FATCA.
Following the introduction of FATCA in 2010, all US expats must declare the details of their foreign bank accounts to the IRS as part of their annual returns. The move prompted many overseas-based foreign trading account providers to discontinue services to US expats. The situation has deteriorated further over the past several years, with major players in the field of investments now informing long-standing expat clients they will have to go.
For example, one US expat living in Singapore was recently informed by Morgan Stanley that she needed to move her money as the brokerage was no longer willing to serve those living overseas. Another US expat based in Thailand was told by TDAmeritrade that his 15-year association with the broker was now at an end. He was given very little time to sort out the mess.
Low-cost brokerages do exist overseas, with Schwab, Standard Chartered and DBS Vickers three of the largest. However, these and many others have also shut their doors to US expat investors since the introduction of FATCA. Given the complicated paperwork demanded by the IRS and the massive fines for non-compliance, it’s perhaps a sensible move for the brokerages, but can spell disaster for their former clients.
Finding a low-cost brokerage amongst the bargain-basement rabble based on the Isle of Man and in other low-tax havens is close to impossible. Products touted by insurance companies such as Friends Provident International include annual fees of 4 per cent upwards and long lock-in periods with predetermined dates as long as 25 years in the future. Pulling out before the given date can cost more than half of the amount invested, no matter the reason behind the need to cancel.
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