Author Topic: ETFs for American (USA) expats living in the EU  (Read 4324 times)

BikeLover

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ETFs for American (USA) expats living in the EU
« on: February 26, 2019, 12:50:47 AM »
As a US citizen residing in the EU, I expect to be living in the EU for the next working years, and to retire either in the EU or in the USA. I have an account with Interactive Brokers, and ideally would put my money in two ETFs: VTI and VXUS. Unfortunately, these and most US-domiciled ETFs are not available to investors classified as retail clients, as the Key Information Document (KID) regulated by European regulation is not provided by these ETFs.

I see the following options:
(1) purchase ETFs domiciled in the EU, for example, CSSPX, which tracks the S&P 500. As I understand, this would be classified as a PFIC, with a resulting high and complicated tax burden, highly undesirable.
(2) apply for classification as a professional at Interactive Brokers; in general, one must have over 500,000 EUR, which I am far from having. Another possibility might be to seek to have myself registered as an investment advisor (on this thread: https://www.elitetrader.com/et/threads/priips-kid-on-ib.322160/page-17)
(3) invest in a variety of individual stocks, attempting to roughly match an index, or at least minimize sector risk. This is what I've done since no longer being able to purchase the US-domiciled ETFs.

Is anyone else in this situation? Are there are another options I may have overlooked? Or, if anyone in this situation has chosen the third option, do you have some strategy for selecting a small group of stocks that together should tend to correspond to the overall stock market?

Update April 14, 2019: I don't know when the change happened, but as of April 1, 2019, IB allows me to purchase many US domiciled ETFs, including VTI.

Update August 25, 2019: On May 15, 2019 I bought VTI through IB, and on July 5, 2019 I bought VXUS. I haven't made any orders since then, but it appears to be still possible.
« Last Edit: August 25, 2019, 12:57:03 PM by BikeLover »

beltim

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Re: ETFs for American (USA) expats living in the EU
« Reply #1 on: February 26, 2019, 03:27:54 AM »
Some brokerages allow US citizens to keep or even open accounts on the basis of their last address in the US.  I'm a bit surprised Interactive Brokers doesn't, to be honest.  This way you can more easily satisfy US and European regulations on owning US-domiciled funds.

So, option 4: switch brokers to avoid the problem.

Hula Hoop

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Re: ETFs for American (USA) expats living in the EU
« Reply #2 on: February 26, 2019, 06:00:22 AM »
I'm also an American living in an EU country.  I've been strongly warned by my US tax accountant that as a US citizen it is much better for me to only own ETFs domiciled in the US.  the FATCA/FBAR regime for a US citizen owning ETFs domiciled outside the US is, apparently, punitive.  I haven't really looked into it as I trust my accountant but try doing some googling. 

It's true that many US based financial institutions require a US address.  I use a relative's address for my US financial institution and I suggest that you do the same.

pmac

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Re: ETFs for American (USA) expats living in the EU
« Reply #3 on: February 26, 2019, 05:05:52 PM »
Don't give up your US address. Not worth the hassle.

Bryan_in_Ger

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Re: ETFs for American (USA) expats living in the EU
« Reply #4 on: February 27, 2019, 03:51:16 AM »
Another American in the EU chiming in:

Didn't start investing until I moved overseas, so I am in the same situation.  If you choose beltim's suggestion and go with Option 4, Charles Schwab offers American Expats brokerage services with a starting balance of $25,000.  I decided to go with them since I chickened out opening an account at Vanguard with my parents' address when they asked for employer information during the application; for me, being "creative" with the address was one thing, but lying about employer (and who knows what other questions were going to come up in the application) was too much.

TL;DR: Open an account with Schwab.

Good luck!

BikeLover

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Re: ETFs for American (USA) expats living in the EU
« Reply #5 on: February 27, 2019, 08:28:13 AM »
Charles Schwab offers American Expats brokerage services with a starting balance of $25,000.  I decided to go with them since I chickened out opening an account at Vanguard with my parents' address when they asked for employer information during the application; for me, being "creative" with the address was one thing, but lying about employer (and who knows what other questions were going to come up in the application) was too much.

Similar thing here. When I started investing (2016), I had read a number of accounts of persons who had had their brokerage accounts frozen after the broker discovered that they were actually residing overseas, despite having given an US residential address. Charles Schwab and Interactive Brokers seemed to be the two big brokerages that were explicitly open to American expats, I chose Interactive Brokers on account of its lower fees ($1 per trade and no monthly or yearly fees for balances over $100,000).

But after Interactive Brokers locked out EU residents from american domiciled ETFs the past summer, I considered opening an account at Vanguard after all, using an address I maintain with relatives in the USA, and which is associated with a couple of american credit cards and bank accounts of mine. I started the application for an account at Vanguard, but stopped when they asked for the address of the employer, as I expected putting a foreign employer to result in scrutiny and difficulties, and was unwilling to lie about employer on the application.

Does Charles Schwab International still allow purchasing ETFs such as VTI? Or are you investing in Schwab's own funds?

BikeLover

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Re: ETFs for American (USA) expats living in the EU
« Reply #6 on: February 27, 2019, 08:37:24 AM »
Some brokerages allow US citizens to keep or even open accounts on the basis of their last address in the US.  I'm a bit surprised Interactive Brokers doesn't, to be honest.  This way you can more easily satisfy US and European regulations on owning US-domiciled funds.

So, option 4: switch brokers to avoid the problem.

Thanks, I will look into opening an account with another broker with my US address (where I have relatives, and associated with my US bank accounts and credit cards).

I only begin investing while residing in the EU. It might have been possible at the time to give my last US address to Interactive Brokers, however if I recall correctly the application form explicitly asked about additional tax residency in any other countries than the USA, and they definitely asked for my employer's address. At the time I was concerned about possible future complications such as freezing of the account or forced liquidation if they discovered I was residing in the EU and had only stated US residency.

daverobev

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Re: ETFs for American (USA) expats living in the EU
« Reply #7 on: February 27, 2019, 10:31:33 AM »
Interactive Brokers

a) allows you to select from a biiig list of stock exchanges

b) allows fairly easy transferring of account from one country to another, assuming you plan on ever moving country

I would not open accounts using an address you are not resident at, honestly.

beltim

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Re: ETFs for American (USA) expats living in the EU
« Reply #8 on: February 27, 2019, 10:56:32 AM »
Interactive Brokers

a) allows you to select from a biiig list of stock exchanges

b) allows fairly easy transferring of account from one country to another, assuming you plan on ever moving country

I would not open accounts using an address you are not resident at, honestly.

Did you read the original post?  The OP has an account at Interactive Brokers but can't use them to buy the ETFs he wants.

daverobev

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Re: ETFs for American (USA) expats living in the EU
« Reply #9 on: February 27, 2019, 12:55:39 PM »
Interactive Brokers

a) allows you to select from a biiig list of stock exchanges

b) allows fairly easy transferring of account from one country to another, assuming you plan on ever moving country

I would not open accounts using an address you are not resident at, honestly.

Did you read the original post?  The OP has an account at Interactive Brokers but can't use them to buy the ETFs he wants.

I tend to skim read, and I didn't realise one couldn't just buy whatever they liked if they have trading ability on a given exchange. But, it does appear I can't buy VXUS, VTI, VT, IVV, ITOT, while I can buy - for example - KHC.

Which I find really odd because VXUS is one that reports to the UK government, so it is actually treated as something that can have capital gains and dividend treatment. What use is that, if you can't buy it?!

Well, you learn something every day.

https://www.justetf.com/uk/news/etf/us-domiciled-etfs.html

Bryan_in_Ger

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Re: ETFs for American (USA) expats living in the EU
« Reply #10 on: February 28, 2019, 09:44:45 AM »
I chose Interactive Brokers on account of its lower fees ($1 per trade and no monthly or yearly fees for balances over $100,000).

Schwab does not have any fees to maintain an account, one "simply" needs $25,000 to transfer into the account initially.  And even then, I think that money can be moved back out to a certain degree right afterwards.  As for trade fees, more on that in a second.

Quote from: BikeLover
Does Charles Schwab International still allow purchasing ETFs such as VTI? Or are you investing in Schwab's own funds?

I use Schwab's own funds: no trade fees, low expenses, good coverage of asset types (for me at least).  Schwab offers access to other ETFs (including VTI and VXUS since you mentioned them specifically), but the commission is $4.95 per order (buy or sell).

flipboard

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Re: ETFs for American (USA) expats living in the EU
« Reply #11 on: February 28, 2019, 10:39:42 AM »
I chose Interactive Brokers on account of its lower fees ($1 per trade and no monthly or yearly fees for balances over $100,000).

Schwab does not have any fees to maintain an account, one "simply" needs $25,000 to transfer into the account initially.  And even then, I think that money can be moved back out to a certain degree right afterwards.  As for trade fees, more on that in a second.

Quote from: BikeLover
Does Charles Schwab International still allow purchasing ETFs such as VTI? Or are you investing in Schwab's own funds?

I use Schwab's own funds: no trade fees, low expenses, good coverage of asset types (for me at least).  Schwab offers access to other ETFs (including VTI and VXUS since you mentioned them specifically), but the commission is $4.95 per order (buy or sell).
Just curious: does your Schwab account have a EU address, and they're still letting you buy US ETF's?

If yes: that's interesting and good to know: IB have a similar setup to Schwab: both are US brokers, both have UK offices, both service EU customers via their UK offices. IB hold the opinion that they are therefore subject to EU law, but it sounds like maybe Schwab doesn't?

(IB seem like a much bigger player, so they're probably also a lot more aware of all the relevant local requirements?)

I have noticed that Schwab have an offer where you can get 200 free trades valid for 2 years, if you add at least $100k of assets to you Schwab account. That can be useful for anyone wanting to have free trades for a larger number of ETF's - although personally I find their in-house range sufficient.

MustacheAndaHalf

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Re: ETFs for American (USA) expats living in the EU
« Reply #12 on: February 28, 2019, 11:24:55 AM »
I found this Vanguard page for investing in Europe which shows investor information kits for various countries (many in the native country's language, and English).
https://global.vanguard.com/portal/site/home

But Schwab is probably better for travelers / ex-pats owing to their "no fee ATMs worldwide", and 0% foreign transaction fees.
https://www.schwab.com/public/schwab/banking_lending/checking_account

flipboard

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Re: ETFs for American (USA) expats living in the EU
« Reply #13 on: February 28, 2019, 12:37:17 PM »
I found this Vanguard page for investing in Europe which shows investor information kits for various countries (many in the native country's language, and English).
https://global.vanguard.com/portal/site/home
If you take a closer look you'll notice most countries don't have any consumer info, and more significantly they only take into account Europe domiciled funds/ETFs, which is useless for the purposes of this thread.

Bryan_in_Ger

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Re: ETFs for American (USA) expats living in the EU
« Reply #14 on: March 01, 2019, 06:56:44 AM »
Just curious: does your Schwab account have a EU address, and they're still letting you buy US ETF's?

If yes: that's interesting and good to know: IB have a similar setup to Schwab: both are US brokers, both have UK offices, both service EU customers via their UK offices. IB hold the opinion that they are therefore subject to EU law, but it sounds like maybe Schwab doesn't?

(IB seem like a much bigger player, so they're probably also a lot more aware of all the relevant local requirements?)

I have noticed that Schwab have an offer where you can get 200 free trades valid for 2 years, if you add at least $100k of assets to you Schwab account. That can be useful for anyone wanting to have free trades for a larger number of ETF's - although personally I find their in-house range sufficient.

Yes, I was able to use my EU address when applying and am able to buy US-domiciled ETFs.  Here is a link to the Schwab website for US Expats - https://international.schwab.com/public/international/us_investing/us_expat_essentials
So they know full well, that I am outside of the US and also a tax resident in Germany.  As for reporting capital gains and dividends, I just plug the total amounts into the appropriate spot in my tax form (corrected into EUR using the appropriate number provided by the German government) and am done with it here in Germany.  I've only filed two years of taxes with Schwab accounts up to this point, but the Ministry of Finance hasn't shown any interest in paperwork for any of my investments yet; my tax filing has been sufficient for them.  It could be a legal gray-area for Schwab as they are marketing US-domiciled products to investors outside of the US, but I doubt they are making large enough waves to bother any regulatory bodies here.

I found this Vanguard page for investing in Europe which shows investor information kits for various countries (many in the native country's language, and English).
https://global.vanguard.com/portal/site/home

But Schwab is probably better for travelers / ex-pats owing to their "no fee ATMs worldwide", and 0% foreign transaction fees.
https://www.schwab.com/public/schwab/banking_lending/checking_account

As flipboard pointed out: EU-based Vanguard services aren't available for private investors in every country.  And what they do have here is definitely EU-domiciled, so not a great choice for Americans.

Schwab has been good for me as an Expat so far; my transfers have gone through at close to quoted exchange rates without any fees on top.  Schwab has banks in different countries to cover the several major currencies investors outside of the US need to exchange.  As a funny aside: my transfers sometimes raise questions at my bank, but that's because Schwab's bank for EUR-transfers is based in Germany (international wire transfers within one country is an odd request).  I don't use the Schwab banking products as I still have a US-based bank account for the odd time I need it; my German account takes care of the rest.

BikeLover

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Re: ETFs for American (USA) expats living in the EU
« Reply #15 on: March 02, 2019, 01:57:21 AM »
Just curious: does your Schwab account have a EU address, and they're still letting you buy US ETF's?

If yes: that's interesting and good to know: IB have a similar setup to Schwab: both are US brokers, both have UK offices, both service EU customers via their UK offices. IB hold the opinion that they are therefore subject to EU law, but it sounds like maybe Schwab doesn't?

(IB seem like a much bigger player, so they're probably also a lot more aware of all the relevant local requirements?)


Yes, I was able to use my EU address when applying and am able to buy US-domiciled ETFs.  Here is a link to the Schwab website for US Expats - https://international.schwab.com/public/international/us_investing/us_expat_essentials
So they know full well, that I am outside of the US and also a tax resident in Germany.  As for reporting capital gains and dividends, I just plug the total amounts into the appropriate spot in my tax form (corrected into EUR using the appropriate number provided by the German government) and am done with it here in Germany.  I've only filed two years of taxes with Schwab accounts up to this point, but the Ministry of Finance hasn't shown any interest in paperwork for any of my investments yet; my tax filing has been sufficient for them.  It could be a legal gray-area for Schwab as they are marketing US-domiciled products to investors outside of the US, but I doubt they are making large enough waves to bother any regulatory bodies here.

For some reason, presumably regulatory issues that vary by country, US expats in some European countries, including Austria, where I have tax residence, are directed to Charles Schwab UK, whereas residents in other countries, such as Germany, can open an account with Charles Schwab International. (https://international.schwab.com/public/international/nn/acct_open_intro.html) The accounts even at Charles Schwab UK are said to be US-domiciled accounts, so that could work.

I found a discussion at Bogleheads (https://www.bogleheads.org/forum/viewtopic.php?t=255121) where some users recommended using a VPN to open an account at Charles Schwab International from Austria. I haven't seen anything explicitly, however, indicating whether or not Charles Schwab UK allows US expats to buy US-domiciled ETFs.

aspiringnomad

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Re: ETFs for American (USA) expats living in the EU
« Reply #16 on: March 02, 2019, 11:25:03 AM »
I don't live abroad yet, but plan to soon and so have done a bit of research into the implications for my brokerage accounts. Also, my wife is a non-US citizen with her own brokerage account that I helped set up, so I have some experience dealing with foreign-related issues.

Based on all that, I'd also recommend Schwab. They have a good range of low expense ratio, free to trade ETFs to choose from (SCHB, SCHF, SCHE, SCHX, etc...), they are ex-pat/foreigner/traveler friendly (e.g., Schwab bank ATM reimbursements) and they offer much better customer service than Vanguard in my experience.

For those seeking a US address, have you tried setting up a virtual mailbox account? I ask because I'm considering this in lieu of burdening a family member with receiving my mail and having to notify me of any important looking envelopes.

flipboard

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Re: ETFs for American (USA) expats living in the EU
« Reply #17 on: March 03, 2019, 08:37:32 AM »

Schwab has been good for me as an Expat so far; my transfers have gone through at close to quoted exchange rates without any fees on top.
  Schwab has banks in different countries to cover the several major currencies investors outside of the US need to exchange.  As a funny aside: my transfers sometimes raise questions at my bank, but that's because Schwab's bank for EUR-transfers is based in Germany (international wire transfers within one country is an odd request).  I don't use the Schwab banking products as I still have a US-based bank account for the odd time I need it; my German account takes care of the rest.
I would strongly suggest you look very carefully at exchange rates, you might be losing out quite a bit. For my fairly major world-currency they charge 0.5%, so if they do the same for EUR you'd be paying 250 USD for every 50k invested - so if you invest even close to 50k USD per year, you probably can save money by converting currency elsewhere (e.g. at Interactive Brokers who offer market rate currency conversion, with a yearly account fee of 120 USD, but you can get around that yearly account fee by moving 100k of assets to them).

I put example numbers in a post here:
https://forum.mrmoneymustache.com/investor-alley/financial-advice-wanted-for-an-american-living-in-hk/msg2276383/#msg2276383

(And a bit of effort to save a few hundred dollars per year is probably the norm for this forum : ) ).

MustacheAndaHalf

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Re: ETFs for American (USA) expats living in the EU
« Reply #18 on: March 03, 2019, 10:29:04 PM »
I'm also an American living in an EU country.  I've been strongly warned by my US tax accountant that as a US citizen it is much better for me to only own ETFs domiciled in the US.  the FATCA/FBAR regime for a US citizen owning ETFs domiciled outside the US is, apparently, punitive.  I haven't really looked into it as I trust my accountant but try doing some googling. 
@flipboard - I think you're saying the same thing as this earlier poster, but could you expand on the details they left out?

From reading I've done, I have the impression using a foreign investment requires delving into what they didn't distribute and paying tax on that.  Meaning you have to know the internals of the foreign mutual fund, and pay tax when nobody(?) is helping you to calculate it.  Is that the main problem or is it something else?

BikeLover

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Re: ETFs for American (USA) expats living in the EU
« Reply #19 on: March 04, 2019, 09:03:09 AM »
The US tax rules on Passive Foreign Investment Companies (PFIC) are complicated (The IRS here https://www.irs.gov/instructions/i8621 estimates for "all other taxpayers" 17 hours of record keeping and 20 hours preparing and sending the form to the IRS).

More importantly, the effective tax rate is very high!
  • All income distributions are taxed at the highest marginal rate:  39.6%
  • Capital gains tax rates do not apply and gains are also taxed as income at 39.6%, compared to a rate of 15% for domestic, long term capital gains
  • Deferred gains receive an interest charge for the entire time period that gains are held in the PFIC (one reason why record keeping and reporting is so complicated)

https://shieldgeo.com/guide-to-passive-foreign-investment-company-pfic-for-us-expats/
https://thunfinancial.com/home/american-expat-financial-advice-research-articles/why-americans-should-never-ever-own-shares-in-a-non-us-incorporated-mutual-fund/

Bryan_in_Ger

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Re: ETFs for American (USA) expats living in the EU
« Reply #20 on: March 05, 2019, 03:51:05 AM »
For some reason, presumably regulatory issues that vary by country, US expats in some European countries, including Austria, where I have tax residence, are directed to Charles Schwab UK, whereas residents in other countries, such as Germany, can open an account with Charles Schwab International. (https://international.schwab.com/public/international/nn/acct_open_intro.html) The accounts even at Charles Schwab UK are said to be US-domiciled accounts, so that could work.

I found a discussion at Bogleheads (https://www.bogleheads.org/forum/viewtopic.php?t=255121) where some users recommended using a VPN to open an account at Charles Schwab International from Austria. I haven't seen anything explicitly, however, indicating whether or not Charles Schwab UK allows US expats to buy US-domiciled ETFs.

Yeah, looking at the Schwab UK site, I don't see ETFs listed as an option which doesn't help your current situation.  Bummer...  :(

As for using a VPN: I think you'd run into issues when applying for an account anyway because the forms ask for residence, etc.  At that point, they'd direct you back to Schwab UK instead of Schwab General International (or whatever they call the subsidiaries).

I would strongly suggest you look very carefully at exchange rates, you might be losing out quite a bit. For my fairly major world-currency they charge 0.5%, so if they do the same for EUR you'd be paying 250 USD for every 50k invested - so if you invest even close to 50k USD per year, you probably can save money by converting currency elsewhere (e.g. at Interactive Brokers who offer market rate currency conversion, with a yearly account fee of 120 USD, but you can get around that yearly account fee by moving 100k of assets to them).

I put example numbers in a post here:
https://forum.mrmoneymustache.com/investor-alley/financial-advice-wanted-for-an-american-living-in-hk/msg2276383/#msg2276383

(And a bit of effort to save a few hundred dollars per year is probably the norm for this forum : ) ).

You are absolutely right, the transfers have gone through with about 0.5% knocked off.  Still better than what I got transferring between my bank here and in the US, so I was complacent.  I will definitely look into it though.

flipboard

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Re: ETFs for American (USA) expats living in the EU
« Reply #21 on: March 05, 2019, 10:19:46 AM »
For some reason, presumably regulatory issues that vary by country, US expats in some European countries, including Austria, where I have tax residence, are directed to Charles Schwab UK, whereas residents in other countries, such as Germany, can open an account with Charles Schwab International. (https://international.schwab.com/public/international/nn/acct_open_intro.html) The accounts even at Charles Schwab UK are said to be US-domiciled accounts, so that could work.

I found a discussion at Bogleheads (https://www.bogleheads.org/forum/viewtopic.php?t=255121) where some users recommended using a VPN to open an account at Charles Schwab International from Austria. I haven't seen anything explicitly, however, indicating whether or not Charles Schwab UK allows US expats to buy US-domiciled ETFs.

Yeah, looking at the Schwab UK site, I don't see ETFs listed as an option which doesn't help your current situation.  Bummer...  :(

As for using a VPN: I think you'd run into issues when applying for an account anyway because the forms ask for residence, etc.  At that point, they'd direct you back to Schwab UK instead of Schwab General International (or whatever they call the subsidiaries).
The Schwab.co.uk website doesn't mention ETF's... until you try to apply for an account ( https://www.schwab.co.uk/public/schwab-uk-en/nn/open-an-account/open-an-account.html ), where it states:
"Trade U.S. stocks, bonds, ETFs, and more."

Maybe they just forgot to be explicit about ETF's elsewhere? schwab.co.uk seems more like a lightweight marketing website than anything else, and I imagine you'll get the full Schwab experience once you're logged in. For many things, the UK website ends up redirecting to Schwab.com for many things - including the detailed price list, which does list ETF's.

In your position, I'd recommend contacting them before opening the account to clarify - but it appears to be an oversight.

(For even more fun: UK customers are actually told to apply to Schwab USA. It's only "Ireland, France, Italy, Netherlands, Austria, or Sweden" that are told to apply via Schwab UK.)

Bryan_in_Ger

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Re: ETFs for American (USA) expats living in the EU
« Reply #22 on: March 06, 2019, 12:47:57 PM »
The Schwab.co.uk website doesn't mention ETF's... until you try to apply for an account ( https://www.schwab.co.uk/public/schwab-uk-en/nn/open-an-account/open-an-account.html ), where it states:
"Trade U.S. stocks, bonds, ETFs, and more."

Maybe they just forgot to be explicit about ETF's elsewhere? schwab.co.uk seems more like a lightweight marketing website than anything else, and I imagine you'll get the full Schwab experience once you're logged in. For many things, the UK website ends up redirecting to Schwab.com for many things - including the detailed price list, which does list ETF's.

In your position, I'd recommend contacting them before opening the account to clarify - but it appears to be an oversight.

(For even more fun: UK customers are actually told to apply to Schwab USA. It's only "Ireland, France, Italy, Netherlands, Austria, or Sweden" that are told to apply via Schwab UK.)

My experience in Germany is pretty much how flipboard describes it, so I could see the UK version working identically.  The international site is just a layer of marketing and after that everything is done on schwab.com.  Another added bonus for international investors is a dedicated hotline; I've only called them twice to ask some mundane questions (I can't even remember what), but they had the hotline manned on US holidays since both times I called happened to be such an occasion.  :)

I second flipboard: call them up and ask if you'll have access to US-based ETFs.  Fragen kostet nichts (do they say that in Austria too?).

meatro

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Re: ETFs for American (USA) expats living in the EU
« Reply #23 on: August 18, 2019, 03:31:14 PM »
I am a US citizen with a German permanent address. 

Update to all:
https://www.americanexpatfinance.com/news/item/231-charles-schwab-unveils-mifid-ii-related-changes-to-etfs-for-europe
> private individuals can purchase US-domiciled ETFs at Schwab only until Sept. 19 2019
> after that, you can only sell and cannot reinvest dividends, but you can hold.

The article mentions that this does "not apply to clients of Schwab whose accounts are managed by U.S.-based Registered Investment Advisors (RIAs)".  I assume this because those RIAs are considered professionals and the MiFID II rules requiring KIDs apply to non-professional private investors.
> does anyone know any no frills, low fee RIAs who might support Mustachians abroad?
> has anyone tried to become an RIA themselves?  Not sure how feasible this is.  I looked at German stuff and to become a "Finanzanlagenvermittler" seems to be a pain.

I had never considered opening a Schwab International account until reading this thread.  ... but the simple fact that you can buy ETFs through them for another 30 days might make me scamper to open an account.  Basically, I compared them to IB and ruled them out based on offerings: the exchange rate fees and the inability to buy any other foreign products were worse in comparison.
Foreign Exchange Fees were 1% of principal if amount converted under 100k.  Above that, 0.75%.
> were did you guys get 0.5%?  That is half as awful!
(Plus, it may be possible to transfer to USD through Transferwise (about 0.3-0.4% fee) before the money goes to Schwab, so maybe I shouldn't have stressed so much).

I would like to share my experience with IB:
Account opened at Interactive Brokers (U.K.) Limited. in mid June 2019.  I was not allowed an account with Interactive Brokers LLC in the US.  I have NOT been unable to purchase US domiciled ETFs as a non professional.  The reasons given by IB customer service are the same listed in link of the original post.
> are you IB guys still able to buy them as June 2019?  I ask because the original post says they could be purchased in April 2019.

Schwab, IB and I guess everyone else seem to be adjusting to the EU regulations slowly but surely.  For the long term, I am not sure how to purchase ETFs at all, let alone Vanguard.
> any further thoughts on how you guys plan to get along?
« Last Edit: August 18, 2019, 03:35:28 PM by meatro »

flipboard

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Re: ETFs for American (USA) expats living in the EU
« Reply #24 on: August 19, 2019, 11:51:05 AM »
I had never considered opening a Schwab International account until reading this thread.  ... but the simple fact that you can buy ETFs through them for another 30 days might make me scamper to open an account.  Basically, I compared them to IB and ruled them out based on offerings: the exchange rate fees and the inability to buy any other foreign products were worse in comparison.
Foreign Exchange Fees were 1% of principal if amount converted under 100k.  Above that, 0.75%.
> were did you guys get 0.5%?  That is half as awful!
(Plus, it may be possible to transfer to USD through Transferwise (about 0.3-0.4% fee) before the money goes to Schwab, so maybe I shouldn't have stressed so much).
They do quote 1% on their site, but as far as I can tell that's only for foreign trades. I've always had 0.5% for all my incoming transfers, even for amounts as small as 80EUR.

Quote
Schwab, IB and I guess everyone else seem to be adjusting to the EU regulations slowly but surely.  For the long term, I am not sure how to purchase ETFs at all, let alone Vanguard.
> any further thoughts on how you guys plan to get along?
Try to find a US-based brokerage that accepts non-resident customers, that doesn't have any EU ties. There are, apparently, a few such brokers.

PDXTabs

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Re: ETFs for American (USA) expats living in the EU
« Reply #25 on: August 19, 2019, 12:12:17 PM »
Try to find a US-based brokerage that accepts non-resident customers, that doesn't have any EU ties. There are, apparently, a few such brokers.

If anyone figures out some good options I'd love to know about them.

Geographer

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Re: ETFs for American (USA) expats living in the EU
« Reply #26 on: August 22, 2019, 03:59:52 PM »
I'm in a similar situation, US citizen who will be moving to Italy in a couple months. I have a joint Vanguard brokerage account with my wife, holding VTSAX and VTIAX. When I move, will I still be able to invest in these funds with Vanguard?

flipboard

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Re: ETFs for American (USA) expats living in the EU
« Reply #27 on: August 22, 2019, 11:36:42 PM »
I'm in a similar situation, US citizen who will be moving to Italy in a couple months. I have a joint Vanguard brokerage account with my wife, holding VTSAX and VTIAX. When I move, will I still be able to invest in these funds with Vanguard?
If you don't tell Vanguard: yes. If you do: they'll stop you from buying anything, because its Vanguard...

Note that laws in the USA restrict mutual-fund purchases by non-residents, so you wouldn't be able to buy mutual funds in any case when you move from any broker. ETF's are still available, but you'd need to find a broker happy to serve non-residents. But any broker with EU ties (Schwab, IB) can't sell you most US-dom ETFs, which narrows down your choices to US brokers without EU ties who are happy to serve non-residents. [Of course, unless you don't tell your broker in the first place that you moved.]


Geographer

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Re: ETFs for American (USA) expats living in the EU
« Reply #28 on: August 23, 2019, 04:12:23 AM »
Dang, I think the Vanguard customer service rep gave me wrong info then. I called a few weeks ago to ask the same question. and he said "of course you can keep your account and keep investing.... we have investors all over the world!"

flipboard

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Re: ETFs for American (USA) expats living in the EU
« Reply #29 on: August 23, 2019, 10:09:29 AM »
Dang, I think the Vanguard customer service rep gave me wrong info then. I called a few weeks ago to ask the same question. and he said "of course you can keep your account and keep investing.... we have investors all over the world!"
Vanguard are famous for stopping trading for non-residents in the past. But it's also possible they've changed. It might be worth searching around to see if anyone else has managed to keep their account functional (beyond being blocked from mutual funds, but that's universal and not a loss seeing as ETFs are generally cheaper).

meatro

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Re: ETFs for American (USA) expats living in the EU
« Reply #30 on: August 25, 2019, 04:16:05 AM »
Little update from me:

https://www.internaxx.com/expat-investor/smart-investing/after-new-regulations-heres-how-canadians-europe-can-build-portfolio
A good sum up of the restrictions with alternatives (only for Canadian citizens and their sweet, sweet non-citizenship based taxation). 

  • If you don't live in Europe, this won't affect you.
  • If you already own ETFs that trade on the Toronto Stock Exchange or the New York Stock Exchange you don't have to sell them.
  • You can continue to hold your current ETFs if they trade on the Toronto or the New York exchanges, but you can't add money to them.
  • All EU brokerages have been asked to comply with this rule. The rule has even extended to the U.S. brokerage, Interactive Brokers, which enforced the rule in June for its European-based clients.
  • Canadians in Europe that use Canadian-based brokerages won't be affected.

@Geographer, maybe Vanguard meant in a broad sense that you can keep investing as in Points 2/3.  I know that Germans who invest in EU ETFs and then move to the US are forced to liquidate their EU ETF shares or transfer them out of the account to a non-US-person (normally a family member).  Holding is way better than forced liquidation, even if it is clearly lacking.

Point 4 also a confirmation that the info in the original post is now outdated: IB may have allowed US-ETF purchases in April of 2019, but in my experience mid-June 2019 and this linked post it no longer does.
KORREKTION 25.08.2019: >> Post is from 2018! BikeLover was able to purchase in April and July 2019!  I could not.  For this and more confusion, read newer posts.

Point 5 does open the door for some Canadian, Cayman, or Sengalese broker... not just US.
So this echoes and expands @flipboard 's sentiment: the goal is a non-EU broker without EU ties that accepts non-resident customers.  Expect even more taxes and paperwork if a non-US broker, though.
> I am still looking for this, let's look together!

I found one small US broker who seems up for this, but am a bit skeptical as there is no track-record.  The customer service did say I could purchase ETFs as I am not a EU citizen.  My understanding of the policy is that it applies to EU residents, however, and thus my initial impression is a little dampened.  At the same time, if I can purchase them and the regulation kicks in, I don't think I would get in trouble as a customer.
> Does that seem plausible?
> Anyone have experience with Toledo Trade?

Also, I feel like this question might deserve its own thread, but it is a viable way:
> does anyone know any no frills, low fee RIAs who might support Mustachians abroad?

Finally, a useful resource which may update over time: the German broker Lynx accepts US citizens customers (most don't), but has EU ties and therefore all US, Canadian, Mexican, Hong Kongese and Australian ETFs are currently out.  You can search for your unavailable ETF here:  https://www.lynxbroker.de/service/gesperrte-etfs/#Amerika  So many to not be able to choose from!

If the funds manager decides to become EU conform and make KIDs (Vanguardian angel, are you listening?), then they could be purchased by retail client EU residents.  Optimistically, I would hope that if enough people complain to the goodhearted people at Vanguard, maybe they will make it happen.  Heck, if they would let me make the KID for them I would.  I can't imagine it's any worse than the other things I've had to rule out (i.e. becoming a US RIA and setting up an LLC to be classified as a MIFID professional) and it has a lot more incentive than securing my paltry peach fuzz stache for myself.
> communicate our plight loudly to Vanguard!
« Last Edit: August 25, 2019, 01:45:27 PM by meatro »

BikeLover

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Re: ETFs for American (USA) expats living in the EU
« Reply #31 on: August 25, 2019, 01:04:05 PM »
  • If you don't live in Europe, this won't affect you.
  • If you already own ETFs that trade on the Toronto Stock Exchange or the New York Stock Exchange you don't have to sell them.
  • You can continue to hold your current ETFs if they trade on the Toronto or the New York exchanges, but you can't add money to them.
  • All EU brokerages have been asked to comply with this rule. The rule has even extended to the U.S. brokerage, Interactive Brokers, which enforced the rule in June for its European-based clients.
  • Canadians in Europe that use Canadian-based brokerages won't be affected.

Point 4 is also a confirmation that the info in the original post is now outdated: IB may have allowed US-ETF purchases in April of 2019, but in my experience mid-June 2019 and this link post it no longer does.

The linked post is dated September 5, 2018 -- the reference to June in the post refers to June 2018. My latest purchase was VXUS on July 5, 2019. Either I was somehow automatically given professional status, which I don't believe is the case, or later rules were made or IB found a way that allows them to sell US-ETFs to American citizens residing in Austria -- possibly residing anywhere in the EU.

meatro

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Re: ETFs for American (USA) expats living in the EU
« Reply #32 on: August 25, 2019, 01:33:55 PM »
@BikeLover thanks for the feedback!  And good eye about the date, totally oversaw that.  I'll edit the message.
Maybe IB is not handling this uniformly?  My account is with IB Interactive Brokers (U.K.) Limited, are you with IB LLC  (US based)?

BikeLover

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Re: ETFs for American (USA) expats living in the EU
« Reply #33 on: August 25, 2019, 11:45:32 PM »
@BikeLover thanks for the feedback!  And good eye about the date, totally oversaw that.  I'll edit the message.
Maybe IB is not handling this uniformly?  My account is with IB Interactive Brokers (U.K.) Limited, are you with IB LLC  (US based)?

I'm fairly sure the account is with IB Interactive Brokers (U.K.) Limited. That appears on my statements and other documents, at any rate.

Are you able to buy individual US stocks via IB? If not, my guess would be that trading permissions with IB are not set to allow trading in US stocks. In that case, you would change the permissions under "settings" and hopefully be approved for that.

meatro

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Re: ETFs for American (USA) expats living in the EU
« Reply #34 on: August 26, 2019, 02:41:12 PM »
@BikeLover I am able to buy (at least preview) stocks like AAPL.  When I search for VTI, I get the warning "Contract not available for trading".  This is true in the Client Login or TWS.  When I asked the service, they referenced MIFID regulations and told me I needed to fulfill certain requirements to be classified as a professional as a European resident.
If you opened the account abroad, then I'm stumped.  I can't imagine Austria having different regulations from Germany.  I will ask the service again and really highlight the US citizenship to make sure that is not a difference. 

TexanInBavaria

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Re: ETFs for American (USA) expats living in the EU
« Reply #35 on: August 27, 2019, 12:39:59 AM »
@BikeLover thanks for the feedback!  And good eye about the date, totally oversaw that.  I'll edit the message.
Maybe IB is not handling this uniformly?  My account is with IB Interactive Brokers (U.K.) Limited, are you with IB LLC  (US based)?

I'm fairly sure the account is with IB Interactive Brokers (U.K.) Limited. That appears on my statements and other documents, at any rate.

Are you able to buy individual US stocks via IB? If not, my guess would be that trading permissions with IB are not set to allow trading in US stocks. In that case, you would change the permissions under "settings" and hopefully be approved for that.

It must be your investor status - I'm a US citizen in Germany, and I opened my IB account while here. It's the UK branch. I was able to buy US stocks just fine, but not any of the ETFs. Because of that, I opened an account with Schwab, and had been delighted with them, up until that bombshell...

I'm now trying to decide whether to DIY a subset of S&P 500 in my IB UK account (lower trading fees) within the next $10-20k to start with, or focus on BRKB for future purchases, as it seems to be a reasonable subset of S&P 500 on its own. As an IT dork, I'm working on some code to calculate an initial buy, plus functions for determining where each next quarterly buy-in should go. If I get the code to an easy-to-use state, I'll release it as the world's silliest robo-adviser :)

DIY direct indexing: https://web.archive.org/web/20190811181431/https://www.accountableadvisory.com/clients/replicating-the-sp-500-index-for-only-10000-a-do-it-yourself-guide/ (Wayback Machine, as that site is unfortunately down right now)
« Last Edit: August 27, 2019, 12:56:34 AM by TexanInBavaria »

meatro

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Re: ETFs for American (USA) expats living in the EU
« Reply #36 on: August 27, 2019, 01:18:11 AM »
IB confirmed it is the investor status.

@BikeLover  you can check your under Client Portal > Settings > Account Settings > MiFID Client Category.  Or maybe you should just count your blessings.  Still, I'm very curious what happened.  Are you making big trades, too?

A reference for all:  these are the exact messages I got from IB.

Quote
Summary: Contract not Available for Trading VTI
2019/08/26 16:57:30
When I search for and select "Stock" for VTI I get the message Contract not Available for Trading.

I asked about this in June. I was told that I cannot purchase it as EU resident since it does not conform to PRIIPS and I am a retail investor according to MIFID.

I want to be clear: I am a US citizen with a permanent residence in Germany. I want to buy VTI on a US exchange. Is that not allowed? I ask because I know of someone in a similar situation (US citizen, retail, EU permanent address) who IS able to buy VTI through IB.

How long as this policy been in place? Does it really apply to me as an American citizen?

Thank you,
XXX

IBCS 2019/08/26 17:10:55
Mr XXX,

The restrictions are applied based upon residency, not citizenship. There are individuals who were originally were classified as Retail who have met the conditions to have their classification changed to Professional. This can be requested online via the Client Portal (go to Settings/Account Settings and then click on the gear-shaped icon alongside "MiFID Client Category".

Regards,
Andrew


IBCS 2019/06/26 17:50:23
Dear Mr. xxxxx,

Retail investors residing in the European Economic Area (EEA) who attempt to enter an opening order associated with a product that does not comply with the EU's Packaged Retail and Insurance-based Investment Product Regulation (PRIIPS) will be rejected. The regulation is intended to enhance understanding of these products through the provision of disclosure documentation. This documentation is referred to as the Key Information Document (or "KID") which. The KID provides information such as product description, costs, risks & performance.

In terms of opening new positions - we do not have a timeframe as to when (or if) these will be updated or tradable again. You should be able to close any open position, including any ETF, through your trading software.

The products that this applies to have returns associated with a reference value and include derivatives (options and futures), ETFs, ETNs, funds and certain debt instruments. It does not apply to stock, FX and standard bonds.

Orders will be rejected if the manufacturer, or issuer, of the product has decided not to provide the KID required to distribute the product to EEA retail residents.

Note that this restriction does not apply to existing positions subject to the KID requirement that you are attempting to close. For more information about these restrictions please reference the IB knowledge base article entitled, "PRIIPs Regulation” at LINK../2993

Although you may not be able to open a new position in that ETF symbol due to the European Economic Area regulations but you can still click on Close or use the to right-click Close button on any position in the TWS/Mosaic/Web Trader/IBKR Mobile to close an open position. If you are still unable to close an open position through the trading software, you can call the IB Trade Desk and they can place a closing marketable order.

With respect to the PRIIP and MiFID regulations, Interactive Brokers is required to categorize its clients as either Retail or Professional in order to determine the correct level of investor protection and transparency. It is possible to be reclassified from retail to professional once certain qualitative, quantitative and procedural requirements are met.

Qualitative Requirements: we must conduct an assessment of your expertise, experience and knowledge to ensure that you are capable of making your own investment decisions and that you understand the risks involved.

Quantitative Requirements: we must ensure you have satisfied two of the following criteria:
- You have carried out trades in significant size on the relevant market at an average frequency of 10 per quarter over the previous four quarters;
- Your portfolio including cash exceeds EUR 500,000;
- You have worked in the financial sector for at least one year in a professional position.

Procedural Requirements: If you believe you meet the requirements to be reclassified as a professional, you can submit a MiFID Client Category Change Request, please follow the below given steps.

- Within Account Management >> Click on Settings >> Account Settings.
- The Account Settings screen opens. The Configuration panel appears on the right of the screen.
- Click the gear (configure) icon next to MiFID Client Category.
- Review the information then click Request To Change MIFID Category.
- Answer elective questions by selecting the radio buttons, then click Continue.
- You will be able to view a notification that determines your eligibility. Click Continue to proceed to the confirmation screen.
- Click Ok to return.

You can visit the link below to locate and download the form:
LINK../IBKR-UK-ProServNotification-Elective-Professional.pdf

If you need further assistance, please let me know.

Regards,
IBKR Client Services

flipboard

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Re: ETFs for American (USA) expats living in the EU
« Reply #37 on: August 27, 2019, 02:57:27 AM »
@Geographer, maybe Vanguard meant in a broad sense that you can keep investing as in Points 2/3.  I know that Germans who invest in EU ETFs and then move to the US are forced to liquidate their EU ETF shares or transfer them out of the account to a non-US-person (normally a family member).  Holding is way better than forced liquidation, even if it is clearly lacking.
This is a different issue: non-US passive funds (including ETFs) are punitively treated by US tax laws (because the US needs to protect its financial sector I guess?). Holding non-US funds while being taxed as a US resident is hence expensive AND painful (the paperwork is complicated). This is purely because of tax-laws in country of residence. Hence selling such ETF's ASAP is generally a good idea if you're going to start being taxed as a US resident.

{Oh, and European brokerages also don't want to deal with US-taxed customers, because the US likes to sue them left right and center for serving US customers. So they might have had their account shut down for that reason.}

Whereas the EU-resident MiFiD issue is about EU laws designed to protect customers, which only block purchases - but don't affect existing holdings in any way.

Quote
I found one small US broker who seems up for this, but am a bit skeptical as there is no track-record.  The customer service did say I could purchase ETFs as I am not a EU citizen.  My understanding of the policy is that it applies to EU residents, however, and thus my initial impression is a little dampened.  At the same time, if I can purchase them and the regulation kicks in, I don't think I would get in trouble as a customer.
> Does that seem plausible?
> Anyone have experience with Toledo Trade?
This is entirely plausible. The policies apply only to brokers within the EU, so a brokerage in the US with no EU offices is not affected. (IB have offices in London, and serve many customers from London, hence they are subject to EU laws.) The rules state that brokerages in the EU can't sell such funds to EU residents, which also means that an EU brokerage can sell US funds to non-EU-resident customers.

Citizenship is entirely irrelevant in the MiFiD discussions. It's only relevant for US citizens who have additional restrictions due to their home country taxing them worldwide, but that's orthogonal to MiFiD.

Quote
If the funds manager decides to become EU conform and make KIDs (Vanguardian angel, are you listening?), then they could be purchased by retail client EU residents.  Optimistically, I would hope that if enough people complain to the goodhearted people at Vanguard, maybe they will make it happen.  Heck, if they would let me make the KID for them I would.  I can't imagine it's any worse than the other things I've had to rule out (i.e. becoming a US RIA and setting up an LLC to be classified as a MIFID professional) and it has a lot more incentive than securing my paltry peach fuzz stache for myself.
> communicate our plight loudly to Vanguard!
Lol, Vanguard literally couldn't care less about anyone who either doesn't have US citizenship or who doesn't live in the US.

TexanInBavaria

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Re: ETFs for American (USA) expats living in the EU
« Reply #38 on: August 27, 2019, 04:21:49 AM »
I've got an appointment for a telco with a Toledo Trade rep this evening (German time), where I'll ask about our particular situation. Their site claims to be able to serve clients from Germany AND the US, we shall see about our weird combination...

meatro

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Re: ETFs for American (USA) expats living in the EU
« Reply #39 on: August 27, 2019, 11:26:37 AM »
Mr. Toledo emails me that it's all gravy, esp. if you already have IB:

> IB is their clearing house (same funding process and rates as IB's fixed rate system)
> They are not subject to EU regulations:
"Since Interactive Brokers has offices in the EU you are currently assigned to their EU office division.  ToledoTrade does not have offices in the EU. We are based out of our corporate office in Illinois and have a branch office in Florida. "  "I asked a representative [at IB], they told me it was permissible"
> possible do an internal transfer of funds and securities from your IB account to your ToledoTrade account.

Hot dog!

@TexanInBavaria you get a good vibe on the phone?  It feels like a one-man operation with no track record.  I had never thought about trading with a such a small broker before, so I'm not sure if this has any real risk... but it's licensed by the SEC so I figure we're as secured as we would be anywhere?

Also
Quote
Vanguard literally couldn't care less about anyone who either doesn't have US citizenship or who doesn't live in the US.
@flipboard  gosh, but they don't even KNOW me ^^  Seriously, it's a shame.  There's a lot of gold in them thar hills and it would solidify their rep as being individual investor oriented.

TexanInBavaria

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Re: ETFs for American (USA) expats living in the EU
« Reply #40 on: August 28, 2019, 04:26:29 AM »
Mr. Toledo emails me that it's all gravy, esp. if you already have IB:

> IB is their clearing house (same funding process and rates as IB's fixed rate system)
> They are not subject to EU regulations:
"Since Interactive Brokers has offices in the EU you are currently assigned to their EU office division.  ToledoTrade does not have offices in the EU. We are based out of our corporate office in Illinois and have a branch office in Florida. "  "I asked a representative [at IB], they told me it was permissible"
> possible do an internal transfer of funds and securities from your IB account to your ToledoTrade account.

Hot dog!

@TexanInBavaria you get a good vibe on the phone?  It feels like a one-man operation with no track record.  I had never thought about trading with a such a small broker before, so I'm not sure if this has any real risk... but it's licensed by the SEC so I figure we're as secured as we would be anywhere?

Also
Quote
Vanguard literally couldn't care less about anyone who either doesn't have US citizenship or who doesn't live in the US.
@flipboard  gosh, but they don't even KNOW me ^^  Seriously, it's a shame.  There's a lot of gold in them thar hills and it would solidify their rep as being individual investor oriented.

You're right; it's one-man operation, but under the umbrella of Gar Wood Securities, which has been around for about 15 years (looking at the latter's FINRA data). Mr. Toledo was helpful on the phone, and Gar Wood Securities does not appear to have any operations in the EU. They're also willing to take our word for it that we're "professionals". The operation is SIPC-insured ($500k per account, up to $250k of which can be cash). I'm guessing this is an attempt by Gar Wood to get people who want to be more active investors but who are put off by the apparent complexity of Interactive Brokers and for whom "not domiciled in the EU" is a feature, not a bug.

My main worry would be the sustainability of this operation if he doesn't end up with a lot of non-Mustachian/Boglehead customers. My activities would generate a maximum of $117/yr if I bought an allocation from each of my five funds each month, and I'm honestly not sure if that's enough to cover what it will cost Toledo Trade to maintain my account.

meatro

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Re: ETFs for American (USA) expats living in the EU
« Reply #41 on: August 28, 2019, 11:04:43 AM »
Do we have to officially state that we're professionals?    I thought that they would accept retail clients since they were not subject to EU regulations.

I also checked out the FINRA, seems OK to (very professional investor) me.  I'm glad your impression on the phone was good.

In theory, if we have 100k invested, IB would waive the 10EUR/month fee.  So if we're above that, they are at least not losing money.  But you're probably right, they won't make much off of our rebalancings.  Not really sure who has a big incentive to open an account there except folks like us.

So the business model may not sustain.  But my thinking is this: neither Schwab nor IB makes you sell positions you already hold.  If Toledo Trade goes under, you will have to park all your shares at IB and look for a new way that works (i.e. other broker, SMA, professional status change, ...).  But you will have been able to purchase ETFs for a while longer, maybe for quite some time, and can keep them indefinitely. 

Heck, buying them at Schwab up until now has really been on borrowed time since the regulations went into effect in Jan 2018.  And BikeLover over here has somehow gotten things to work for him at IB.  Meaning: who knows how strictly regulations will be enforced, by who, on whom and when.  The situation is fluid, so we have to adapt.

And to make all other points moot:  I don't know of another viable option at this time to purchase any ETFs anywhere in the world by myself except ToledoTrade.  OK, the SMA option is out there with what I assume are highish fee's, but that's it and without fees is clearly the way to go.

TexanInBavaria

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Re: ETFs for American (USA) expats living in the EU
« Reply #42 on: August 29, 2019, 12:58:04 AM »
Do we have to officially state that we're professionals?    I thought that they would accept retail clients since they were not subject to EU regulations.

I also checked out the FINRA, seems OK to (very professional investor) me.  I'm glad your impression on the phone was good.

In theory, if we have 100k invested, IB would waive the 10EUR/month fee.  So if we're above that, they are at least not losing money.  But you're probably right, they won't make much off of our rebalancings.  Not really sure who has a big incentive to open an account there except folks like us.

So the business model may not sustain.  But my thinking is this: neither Schwab nor IB makes you sell positions you already hold.  If Toledo Trade goes under, you will have to park all your shares at IB and look for a new way that works (i.e. other broker, SMA, professional status change, ...).  But you will have been able to purchase ETFs for a while longer, maybe for quite some time, and can keep them indefinitely. 

Heck, buying them at Schwab up until now has really been on borrowed time since the regulations went into effect in Jan 2018.  And BikeLover over here has somehow gotten things to work for him at IB.  Meaning: who knows how strictly regulations will be enforced, by who, on whom and when.  The situation is fluid, so we have to adapt.

And to make all other points moot:  I don't know of another viable option at this time to purchase any ETFs anywhere in the world by myself except ToledoTrade.  OK, the SMA option is out there with what I assume are highish fee's, but that's it and without fees is clearly the way to go.

Good point - we don't, at least for now. Mr. Toledo had Gar Wood send me a client application form and said that I do not have to be a "professional," but that in general, they'll take their clients' word for their status.

The main reason I'd put myself down as a "professional" is to improve my ability to buy ETFs later, should ToledoTrade/Gar Wood ever end up having to deal with EU regs. As far as that goes, I'm considering studying for and taking the Series 65 Registered Investment Adviser exam, which unlike the Series 7, you do not have to be sponsored for by a firm. I did ok on a sample question set - time value of money calculations, common stock valuation techniques, very general security law stuff, so I think with some more study, I should be able to pass, and might learn something useful, too.

I briefly considered doing the German equivalent (Finanzanlagenfachmann/-frau: https://www.ihk-nuernberg.de/de/Geschaeftsbereiche/Berufsbildung/Pruefung/Sachkundepruefung/sachkundepruefung-finanzanlagenfachmann-frau-ihk-34f-gewo/), but would rather not deal with all that stuff in German!

lutorm

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Re: ETFs for American (USA) expats living in the EU
« Reply #43 on: August 29, 2019, 01:04:21 AM »
I thought this was an interesting discussion as I'm a dual US/Swedish citizen and may at some point move back to Sweden.

Is it not possible to put US funds into a trust that would continue to be a "US resident" and trade accordingly even if you are no longer residing there yourself?

PDXTabs

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Re: ETFs for American (USA) expats living in the EU
« Reply #44 on: August 29, 2019, 09:07:10 AM »
Is it not possible to put US funds into a trust that would continue to be a "US resident" and trade accordingly even if you are no longer residing there yourself?

It probably is for taxable accounts. But you can't for IRA/401k as it would be a taxable event to move the funds from your name into the name of your trust.

TexanInBavaria

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Re: ETFs for American (USA) expats living in the EU
« Reply #45 on: August 29, 2019, 09:18:48 AM »
Is it not possible to put US funds into a trust that would continue to be a "US resident" and trade accordingly even if you are no longer residing there yourself?

It probably is for taxable accounts. But you can't for IRA/401k as it would be a taxable event to move the funds from your name into the name of your trust.

I've heard that German legal treatment of trusts is weird - they (often rightfully) suspect they're being used as a tax dodge. For example, if I inherit from my American aunt, I'd owe a maximum of 25% inheritance tax up to about 600k EUR, and only 20% if it were less than 300k. If I inherit from a trust she set up, depending on the nature of the trust, I could be hit for 30% on everything over 20k, as the trust is not a close relative of mine. German inheritance tax exemption and rates are based on degree of kinship, and it doesn't matter where you are inheriting from: if you are a resident of Germany, you owe. There are some provisions in US-German tax treaties to prevent situations like US citizens on short-term assignments in Germany getting slammed for inheritance taxes because an American relative happened to have died during their secondment, but it does not apply to people like me who are permanent residents.

I might investigate the consequences of using a trust for my *own* assets that I will still report for tax purposes, though... interesting idea.
« Last Edit: August 29, 2019, 09:35:53 AM by TexanInBavaria »

meatro

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Re: ETFs for American (USA) expats living in the EU
« Reply #46 on: August 29, 2019, 11:57:55 AM »
@TexanInBavaria That is also a good point about getting the status once and trying to carry it over...
are there any disadvantages to the professional status?
I read in MIFID you are "afforded a lower level of protection" but I'm not sure if that's anything to worry over.
I know it raises the IB information fees, but that's no biggie.

Quote
As far as that goes, I'm considering studying for and taking the Series 65 Registered Investment Adviser exam, which unlike the Series 7, you do not have to be sponsored for by a firm. I did ok on a sample question set - time value of money calculations, common stock valuation techniques, very general security law stuff, so I think with some more study, I should be able to pass, and might learn something useful, too

This guy is serious.  So I looked briefly into that (and the German equivalent^^) and figure that they are both doable with some time and prep.  You can even take the Series 65 in Frankfurt.  But my initial interpretation of the MIFID is that after you pass either exam, you still need to become "1. Entities which are required to be authorised or regulated to operate in the financial markets".  Meaning you have to register yourself with a government authority as a business.
https://www.fxdd.com/fileadmin/user_upload/pdfs/mt/en/MIFID_CLIENT_CATEGORISATION.pdf

The assumption about starting a business or registering is what got my "way too much hassle" stamp of disapproval since I couldn't find a great way of registering in the US (directly to SEC?  LLC in some random state? yearly fees and checks?).  In Germany, it's transparent but lots of fees and paperwork, then you own a foreign company for US tax purposes :c  I imagine a yellow snowball rolling down a hill and growing in size and, inexplicably, hue.

BUT! if the test is enough, then this becomes a lot more doable.  If you reread the regulations, do you feel like that satisfy them though?  Maybe as "4. Other  institutional  investors  whose  main  activity  is  to  invest  in  financial  instruments,  including  entities dedicated  to  the  securitisation  of  assets  or  other  financial  transactions."?  Maybe?

If the business entity interpretation holds, in theory, if someone would unravel the registration in the US thing, you could maybe even forgo the Series 65:  I read that in some states you can have an investment advisory LLC without even passing that exam, as long as you take on some low number of clients like five or less. No clue which states or if the LLC in that state is difficult or expensive.  But in that case, you could have a "professional" business with no qualification which isn't great for profit but could really work out well for us here.  ... until the state regulations change ^^

... I like how the goal of the regulations is to protect uninformed, little man average Joe investors!  In a way, by forcing people to become highly qualified, (sham) business "professionals", it is working.
« Last Edit: August 29, 2019, 12:16:02 PM by meatro »

flipboard

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Re: ETFs for American (USA) expats living in the EU
« Reply #47 on: August 30, 2019, 12:32:58 AM »
I may be missing something - why this obsession with getting certifications?

IB have a page describing how to get classified as a professional status (which lets you bypass MiFiD), and getting certifications doesn't really seem to help much (whereas having sufficient assets and trades, or having an authorised company, would help):
https://ibkr.info/article/3298

At some point it might become easier to just move to a country where you aren't affected by MiFiD though. I know Switzerland isn't, I'm less sure about Norway, Liechtenstien, Iceland (they're non-EU, but they are EEA, hence might be affected).
« Last Edit: August 30, 2019, 12:35:37 AM by flipboard »

meatro

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Re: ETFs for American (USA) expats living in the EU
« Reply #48 on: August 30, 2019, 01:25:30 AM »
That is a great link for all of the pros and cons of professional status.

@flipboard You're right.  The idea of the exam is that you could legitimately become a one-person US business "authorised or regulated to operate in the financial markets" and then become a "per se professional client".  It's a potential option for bright investors without 500k amassed yet.  Maybe could become a side hustle.  But just to become MIFID pro, I don't think any certificate is must have.  If there's some US state or even a country which authorizes you as a financial business without certification, that's should be enough.

I guess no US citizen trying FIRE in the EU picked it for ease... but I personally would prefer a ton of regulatory hijinks than sequester myself to less tax disadvantaged countries for the rest of my life.  As the laws can always change, it's no guarantee.  And psychologically, it'd be like living life on the lam.  I got a language down pat, a city, friends... so I'll take the hassle.  But this is a personal decision and yeah, Switzerland might be the way for some people to go.

US citizenship based taxation and FATCA are the instigators for all this nonsense. 
https://en.wikipedia.org/wiki/International_taxation#/media/File:Individual_taxation_systems.png
#HotPinkCitzenshipBasedTaxationBlows #EritreaKnowsWhatImAbout

So the real, drastic thing that no one has mentioned here yet:  if you drop US citizenship, then you can buy EU domiciled ETFs, pay EU taxes, and drink EU beer like, well, a normal EU person.  That's the easy, permanent route (with obvious, life-changing disadvantages if you reconsider returning to the US for more than vacation or, depending on your flavor of non-US citizenship, what happens if your relatives pass away and leave significant money to you).  This is just an option for a select few I'd guess, since it really burns the bridge.

TexanInBavaria

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Re: ETFs for American (USA) expats living in the EU
« Reply #49 on: August 30, 2019, 01:30:42 AM »
I may be missing something - why this obsession with getting certifications?

IB have a page describing how to get classified as a professional status (which lets you bypass MiFiD), and getting certifications doesn't really seem to help much (whereas having sufficient assets and trades, or having an authorised company, would help):
https://ibkr.info/article/3298

At some point it might become easier to just move to a country where you aren't affected by MiFiD though. I know Switzerland isn't, I'm less sure about Norway, Liechtenstien, Iceland (they're non-EU, but they are EEA, hence might be affected).

Some of us are literally married to Germany and trying to make the best of it :D

And I think I've been here long enough that Germany has started rubbing off on me - Germans have a high regard for official certifications and credentials. I got into my current job at a higher pay rate because I have a Masters degree; a Master of Science in IT that was way easier to get than my BS in Computer Science from a really competitive US university.
« Last Edit: August 30, 2019, 01:34:19 AM by TexanInBavaria »