U.S Brokerages Slam The Doors On U.S. Expats

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A couple of months ago, an American woman living in Singapore sent me an email.

“I have investments with Morgan Stanley in the U.S.,” she wrote. “I have done business with them for years. But my broker says he can no longer do business with US citizens who live in Singapore.”

One of my American friends lives in Thailand. For the past 15 years, he has invested with TDAmeritrade. They recently sent him an email. It was emphasized in bold.

“On February 5, 2015, TD Ameritrade, Inc. will no longer offer brokerage services in your area… you will need to take action by February 5 to close your TD Ameritrade account… If you have not taken action by February 5, 2015, we will liquidate the account and mail a check for your account balance to your address of record.”

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andrew hallam

andrew hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (Wiley 2011) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use.

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21 Responses

  1. Angela Erickson says:

    Hi Andrew,

    I am an American teacher working in Singapore and trying to figure out which broker to go with. I was recently told that Americans cannot invest using the SRS government program, which was my first choice due to the tax breaks.

    What would you do in my position? Ameritrade gets mixed reviews online . . .

    I am sure you have given advice on this before, but I can’t find it.

    Thanks,
    Angie

  2. Paul says:

    I faced the same problem than Angela with a brokerage account held at TD Ameritrade in the US for 10 years. I was forced to close it upon changing my address to Singapore despite the fact that they had allowed me to keep it opened when I was expat in Belgium as well as UAE. I was so upset. I transfered everything to optionsXpress in Singapore: easy transfer, good customer support locally, nice internet plateform and good smartphone app.

  3. Chris says:

    I just finished reading your book “Global Expat’s guide to Investing” and while I am very excited about setting up my portfolio and actually being able to retire comfortably, I’m finding out that I’m locked out of a bunch of brokerages because I’m American and just moved to Singapore. I am going to go talk with TD Ameritrade Asia now that they have that new office open here and I was just on the optionsXpress website but I wasn’t able to see what the fees/commissions would be on my ETF or Index fund purchases.
    Like you said in the book, I’m trying to avoid anyone biting in to my profits so I want to make sure I go with the least expensive brokerage.
    Any extra advice to all of us Americans living in Singapore on the brokerage options we have to us?

  4. Kevin says:

    Hi Andrew,

    Just read your book and I can’t thank you enough. I’m in the same boat as everyone here except I’m in Hong Kong. Charles Schwab has a branch here, but it requires US$25,000 to open. Would you recommend opening with them or Interactive Brokers? Other expats have been successful with using a family address and marking “unemployed” on Vanguard, but this seems a bit dangerous.

    Unfortunately I’m 28 and just learned about investing so I feel quite far behind, scared and stressed about this fact. I’ve emailed financial advisors but since I don’t have enough money, none have ever emailed back which is a shame because it’s us who need the most help!

    Also, because I’ve heard of abysmal returns and outrageous fees from coworkers, I’ve also opted out of Hong Kong’s MPF retirement scheme which requires employers to match 5% salary up to a salary cap of 30,000 per month (equivalent of HK$1,500). On top of the fees, I believe profits get taxed as PFIC. I may have made the wrong move because I’m still turning down free money regardless of taxation. A Greenback tax specialist said if I plan to stay here, even taking the tax hit is fine because it’s still matched retirement investment.

    If you can please share advice on what you would do I would be extremely grateful!

    Thanks again.

    • Kevin,

      If you’re an American, open an account with Interactive Brokers. Then buy the ETFs that I recommended in my expat book: http://bit.ly/globalexpat

      You will need $10,000 USD equivalent to open the account. If you don’t have that much, save it up first. https://www.interactivebrokers.com/en/home.php

      As for the worker’s plan:

      If you can get a 100% match on that worker’s plan AND if you can withdraw the funds AT ANY TIME WITHOUT PENALTY then invest the amount (and only the amount) that will give you a 100% contribution match. Otherwise, don’t bother.

      Cheers,
      Andrew

      • Kevin says:

        Thanks for the reply Andrew! Will follow all your advice.

        Also, even if I plan to live in Hong Kong, I shouldn’t invest in the Hang Seng Index because of American tax rules (PFIC), correct? In the future, if I pass away and the money goes to my spouse (who is a non-american), will they be charged estate tax? If so, is there a better way to set this up to minimize estate taxes?

        Thanks again for the book, it’s opened my eyes to the world of investing, I’ll leave a review soon!

        Thanks again!

  5. Karl says:

    Hi Andrew, as a European who previously worked in the US and still has an IRA there, I am looking for a new rollover IRA account. I found a place called “Worldview Wealth Advisors” (and just re-branded from “Maxim Global Wealth Advisors”) who cater specifically to internationals. Any opinion on them? They charge 1.25% for the management in an ETF portfolio. Thanks!

  6. Albert says:

    Hi Andrew,

    I’m a dual American-Canadian citizen currently living in US with plans to move to Canada this year.

    I currently invest with Vanguard but am unsure what happens when I actually move to Canada and my residence address changes. Would I be able to stay with Vanguard as a US expat, or do you recommend me moving to another brokerage?

  7. Travis says:

    Hello Andrew,

    I have been a follower since the first book you published. This really change the way I think about investments.
    I just have one question. As an expat Canadian living in Qatar I have been investing in the following 3 American ETF’s for the last five years . (VTI, VXUS BSV) with a substantial gain until now. Unfortunately I will be leaving Qatar and going back to Montreal within one year. Do you think it is a good idea to liquidate everything and start all over when I go back home but this time with Canadian ETF’s.

    Thanks and regards,

    Travis

    • Hi Travis,

      If you liquidate, you could end up missing some big stock gains if you can’t get your money invested right away. You never know. Stock market gains are often concentrated over just a handful of days. So here’s what you should do. Keep your current account open. When you arrive in Canada, open a brokerage account. You will be able to pay a fee, per ETF, to wire the entire proceedings (without selling) to your new Canadian brokerage account. It may take 4 weeks or so for the transfer to go through. But that won’t matter. You will own those ETFs the entire time. You may not have access to them for 4 weeks, but they will reflect the daily market changes of those ETFs the entire time.

      Cheers,
      Andrew

  8. Travis says:

    Hello Andrew,

    Many thanks for the quick reply. Please note that my investment in the 3 etf’s total around 200,000.00 usd so I am also worried about the estate tax in case of death. One solution I was thinking about is to buy the same ETF’s but on the TSX using vanguard or ishares. Also with the favorable exchange rate USD/CDN rate it wouldn’t be a bad idea…
    Cheers
    Travis

    • Travis,

      The exchange rate would be a wash. It doesn’t matter what currency your ETF is listed in. The underlying value of the holdings in their home currency is the only thing that matters. On another note, the estate tax rules are different for resident Canadians. You would have to have more than $5 million USD for the IRS to tax you upon death.

      Cheers,
      Andrew

  9. T Burroughs says:

    Hello Andrew,

    I just finished reading your book regarding expats abroad and have some questions.. I know this is a common question but at this point is it still legal to open a US brokerage account at a firm which allows only current US residents? I gather this is the firm’s personal policy, but if I were to use an address in America when signing up is that breaking any laws? Are there any downsides to choosing to do it like this? Or rather, are there any upsides to going with the Charles Schwab global account (which requires I think 25k initially?). Does this global account result in more fees or alter taxes in any way? Does it offer benefits in terms of transferring money into the account from abroad or perhaps better reporting specific to expats for year end tax filing both in the US and abroad?

    If you go with the global account, if and when I were to return to the US would I have to make changes to my account?

    I currently am a resident in the Netherlands where the taxes are steep.. The Netherlands does not have a capital gains tax, rather they have a “wealth tax.” There is a new breakdown of how this will work in 2017.. I don’t know if this graphic will help to make sense of my question although it is in Dutch – I guess the numbers should make sense ( https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/prive/vermogen_en_aanmerkelijk_belang/vermogen/belasting_betalen_over_uw_vermogen/grondslag_sparen_en_beleggen/berekenen_belasting_over_uw_inkomsten_uit_vermogen_vanaf_2017 ) but ultimately, every person in the NL is allowed to have a savings (in 2017) of 25,000 without paying wealth tax. Once you go above 25k worth of assets there are 3 brackets as shown in the link. I will explain only the first boxes and the rest should then make sense. If you have a savings of 100,000 then you have 75,000 over the allowed tax free limit. For the first 67% of that 75k the Dutch government will assume that you made a profit of 1.63% and for the remaining 33% of the 75k they will assume you made a profit of 5.39%. You are then required to pay a tax of 30% over these assumed profits regardless of if there were any actual earnings or not. The assumed profits go up the more savings you have.. I think the rest of the brackets/boxes should be easily understood now. Here is also a link showing an example of someone who has a savings/assets of 125k calculated: https://www.belastingdienst.nl/wps/wcm/connect/bldcontentnl/belastingdienst/prive/vermogen_en_aanmerkelijk_belang/vermogen/belasting_betalen_over_uw_vermogen/grondslag_sparen_en_beleggen/voorbeeld-alleenstaande-met-125.000-euro-spaargeld/

    First off, I am feeling discouraged. I am not a big earner and am currently 32 years old with no retirement plan/savings. I do have some savings in the bank that I have been scared to do anything with for years, but have realized that it is losing so much value in the meantime and I don’t want to waste anymore time getting started.

    I really enjoy living and working in the Netherlands but as a small business/freelancer I did not qualify for the 30% ruling when I moved here and therefore am left wide open to having the Dutch tax my world wide savings and assets. ***I should also mention that the wealth tax applies to assets (not just cash in the bank) – so the value of your investment portfolio is considered to be a part of your wealth as is a second home, etc. In my research it seems that there are no tax deduction savings vehicles that I can take advantage of because I use the FEIE. Were I able to invest in a 401k, that is one account that the Dutch government does not consider an asset and therefore does not tax every year.

    Am I right to be extremely discouraged due to these factors? It seems even if I manage my own investments that I would be losing the same or perhaps more than an American living in the US who pays for someone to manage their funds for them. If I manage them myself then I reckon that I am not getting the fully advantage due to the fact that I am based in the Netherlands.

    Am I also right to assume that capital gains taxes will be applied by the IRS to any earnings in my investments? Even though I am also required to pay the wealth tax every year in the Netherlands (which they seem to use in place of capital gains taxes)?

    Is there anything else I should be considering..? I also am not sure how anyone affords to retire in the Netherlands ultimately if they have to pay wealth taxes indefinitely on their assets..

    Sorry for the extremely long question(s). I am very much looking forward to hearing your thought and analysis of this situation. If there are any workarounds or word of encouragement I will welcome everything!

  10. Paul says:

    Hi Andrew
    Great site and great book.
    What is a realistic annual yield for an ETF strategy over 30 years if we put retirement money aside every year? I find on internet 5, 6, 7%… it seems a bit low but it is an average of ups ans downs of the stock market and the money is invested every year (in good and less good years) so it is impossible to just directly extrapolate from the Dow Jones performance between 1987 and 2017 for instance. Thanks.

    • Hi Paul,

      Nobody knows. But if you build a portfolio of low cost index funds, you will outperform those who pay higher fees. Incidentally, the markets could average 6% and you could average 10%. Think of what might happen if you were to invest for the next 30 years. In year 25, assume stocks crashed by 50%. You would then be buying at a discount. If you were lucky, they would stay down for years. As such, you could end up easily beating the average return of the market during that measured time period.

      Cheers,
      Andrew

      • Paul says:

        Thanks Andrew. What website can I actually use to check if I did relatively well or not well over the last 20 years with my own mixed strategy for pension plan? Very challenging if not impossible to find a website that would provide some benchmarks on let’s say a identical new money investment every year for 20 years. Thanks. Paul

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