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Topic: Schwab discontinuing new ETF accounts for expats.  (Read 320 times)

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Schwab discontinuing new ETF accounts for expats.
« on: August 14, 2019, 09:14:02 PM »
I just received this email today from Schwab. Expats were already cut off from mutual funds by the time I moved here a few years ago, now it looks like ETFs are following. I was really hoping to move my old roth ira into an ETF at some point but now I don't know what I can do.

Quote
Beginning September 19, 2019, Schwab clients who are residents of the E.U. will no longer be able to purchase U.S.-registered exchange-traded funds (ETFs) and exchange-traded notes (ETNs).

What this means for your account.
This restriction results from regulatory changes and affects all residents of the E.U. With this change:
   
•    You will be able to maintain any existing U.S. ETF or ETN positions you hold, but you will not be able to purchase more.
•    Dividends can no longer be reinvested in U.S. ETFs or ETNs.
•    You may liquidate U.S. ETFs or ETNs, but you will not be able to repurchase them.
« Last Edit: August 14, 2019, 09:16:16 PM by seanalltogether »


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Re: Schwab discontinuing new ETF accounts for expats.
« Reply #1 on: August 14, 2019, 09:21:10 PM »
I just received this email today from Schwab. Expats were already cut off from mutual funds by the time I moved here a few years ago, now it looks like ETFs are following. I was really hoping to move my old roth ira into an ETF at some point but now I don't know what I can do.

Beginning September 19, 2019, Schwab clients who are residents of the E.U.

The UK may well not be a member of the EU by November!
March 28th 2013-Moved to UK, husband on spouse visa.Oct 20th 2015-Applied by mail for FLR(M).Feb 1st 2016 FLR(M).March 7th 2018 ILR. YAY! March 21st NCS&JCAP appointment.


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Re: Schwab discontinuing new ETF accounts for expats.
« Reply #2 on: August 14, 2019, 10:16:50 PM »
Normally what funds are held inside a pension wrapper is of little significance because of the different tax treatment. At least the sale and transfer to other funds in an IRA or Roth IRA will not have tax implications.

I hold ETFs with Vanguard outside of IRAs so if this new EU regulation affects those, then selling them will trigger a lot of capital gains.
Dual USC/UKC living in the UK since May 2016


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Re: Schwab discontinuing new ETF accounts for expats.
« Reply #3 on: August 16, 2019, 11:31:53 AM »
I also got this message.  It looks like expat Schwab customers will be limited to buying individual stocks and bonds now.  At least we don't have to sell any of these ETF funds.  They "helpfully" added that UCITS were being made available - however UCITS are viewed as PFIC type funds and would trigger punitive taxation.  It seems that Schwab is quite conservative when it comes to interpreting regulations.  I don't know if other brokerages are going to follow suit but so far we have had nothing from other institutions where we have some retirement assets.  Of course Schwab was one of the few companies that were happy to allow us to maintain brokerage accounts when we moved over from the US.

Thun Financial also emailed me to let me know that it is still possible to buy ETFs through them if a registered investment adviser manages your assets in a Schwab account - see text from Thun below   

Charles Schwab has recently announced that it will no longer permit its retail account holders located in EU countries to buy and sell U.S. listed ETFs as of September 19th. HOWEVER, this new restriction will have no impact on Thun Financial’s ability to buy and sell ETFs on behalf of our EU resident clients. The new restriction applies only to retail Schwab clients, but not to Schwab Institutional clients (i.e. - those with Schwab accounts managed by a U.S. Registered Investment Advisor (RIA), like Thun Financial Advisors). RIAs continue to be able to trade the full range of U.S. ETFs on behalf of their EU-resident clients.

Thun Financial has been working with Schwab to prepare for this change in ETF trading policy for several months. Schwab has communicated to us that they are responding to the new (2018) EU MiFID II regulations. Schwab and many other U.S. brokers have concluded that direct sale of U.S. ETFs to EU residents is not permitted under the MiFID rules. At the same time, unlike some other U.S. brokers, Schwab has also concluded that MiFID rules allow EU residents to have U.S. ETFs bought and sold on their behalf in their accounts by U.S. RIAs. Thun Financial fully concurs with this interpretation of the MiFID rules.

Unfortunately, Schwab’s public communication regarding these developments has not made it clear that the ETF restrictions do not apply to Schwab Institutional clients. This has led many investors to incorrectly conclude that Thun Financial will no longer be able to trade ETFs on behalf of our clients. We are working with Schwab to help them refine their message in this regard. However, we would also like to ask you to communicate to other American and non-American residents of the EU that Thun Financial’s ETF portfolio strategies remain completely viable. ETFs remain the best available financial tools for building well-diversified, cost and tax efficient investment portfolios for investors located in the U.S., the EU and around the world. Thun Financial will continue to build on its success using these products for EU resident investor-clients working with Schwab as a custodian partner.

Finally, Schwab has indicated that it will make available for trading some MiFID compliant UCITs (European ETFs). Unfortunately, these UCITs are not effective investment tools for U.S. citizens and U.S. taxable persons because they are PFICs (Passive Foreign Investment Companies) for U.S. tax purposes and therefore trigger very punitive U.S. taxation.




 


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Re: Schwab discontinuing new ETF accounts for expats.
« Reply #4 on: August 16, 2019, 11:22:22 PM »
OH thanks for posting that. I had come across Thun Financial before when investigating options, its good to know I can fall back on them if i need to buy into new etfs in the future.


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