One challenge that U.S expats often incur is investments when living outside the U.S. I want to cover what brokerages or accounts US expats can open for investing.
Traditional accounts may not be open to them that are in the U.S. Therefore, I want to write about some of the platforms that US expats have open to you and how Investments for Expats can help.
Note, that most U.S. brokerage accounts either do not accept or freeze clients’ accounts when you move abroad. In most cases, you will need to contact the brokerage to find out what the terms and conditions are for the specific brokerage. As a side note that is worth pointing out is by using a friend or relative’s address for your investment purposes is not simple and also fraud. There are brokerages now that accept US expats and you can use an address that is based outside of the US.
Brokerages
I will go over three of the brokerage accounts for U.S. expats that I believe, in my opinion, are the best platforms for U.S. expats presently in the market.
These platforms allow for U.S expats to invest in most parts of the world and allow for both self-managed or advisor-led accounts. The platforms also offer low-cost ETFs for expats to invest in.
Opening a U.S. expat account can still come with limitations, as you will still have to be aware of PFICs, tax reporting, and the regulatory landscape in which you are residing which may have extra hurdles.
https://investmentsforexpats.com/pfics-passive-foreign-investment-company-tax-explained/
Interactive Brokers
Interactive Brokers (IB), brokerage is an alternative to Wall street. This has grown over the last 20 years to be one of the leading global individual investor platforms. Individuals can trade on U.S and global exchanges on most of the worlds leading stock exchanges. With the ability to purchase individual stocks, bonds, and ETFs. It also allows Foreign Exchange (FX) at a very low cost which can be very appealing for many expats who are looking to change currency.
There are still places where IB won’t work, including countries where the U.S. Treasury Department’s Office of Foreign Asset Control has upheld sanctions but IB is open for business in more countries than any other reputable brokerage firm.
Customer service has been frowned upon because it can be hard to talk to someone due to all the automated processes you need to go through and I have had clients that have complained about not being able to get to talk to an actual human.
From my own personal experience, it can be a hard platform to navigate and seem quite complex for the average investor. For those looking for more of a trader experience although most trades are low-cost to free) real-time quartations do require a subscription.
Finally, it should also be noted that for residents of the EU, Interactive Brokers has blocked access to U.S.-registered ETFs. Given the dangers of foreign-registered ETFs, discussed above, this leaves Americans in the EU with the daunting task of constructing their portfolios with individual securities (e.g., stocks and bonds) rather than getting their diversification through ETFs. For unsophisticated investors, or even sophisticated investors that don’t have the time or inclination to manage their own stock and bond portfolios, this is a major impediment that must be considered.
My thoughts are that although this might be a difficult platform to use for the beginner investor the low cost and range of stocks and funds more than makeup it’s downsides. This is why we at Investments for Expats are presently using this platform as an advisor-led platform.
Praemium
One platform that many might not be familiar with but is one of Australia’s largest platforms and is big in the international market is Praemium.
In 2019, launched it’s U.S expat service, however, before I go into detail about this I will look more into Praemuim.
Who is Praemuim?
In its own words, taken from the Praemium website:
“Praemium Limited was established in Australia in 2001 as a non-custodial reporting and administration provider and has since grown to be an award-winning provider of investment platforms, portfolio administration, investment management and CRM solutions with offices in Australia, UK, Jersey, Armenia, UAE, Hong Kong and China. The value of investments managed or administered by Praemium is now in excess of AUD$100 billion for almost 1000 financial services organisations.
Praemium’s clients include some of the world’s largest financial service providers, including Citigroup, Asgard and BlackRock.
Praemium launched its platform services into the UK market in 2008 and the international market in 2012, where it is now one of the fastest-growing discretionary platforms available.”
The company has offices in Australia, the UK, Jersey, Dubai, Armenia, Shenzhen and Hong Kong.
Praemium launched its services into the UK market in 2008, where it is now one of the fastest-growing discretionary platforms available.
In the UK, the Praemium group is regulated by the Financial Conduct Authority.
Personally, after having a play around with the portal, it is fairly easy and from a client’s perspective to use, it is easy to navigate and see your investments.
In terms of funds, it doesn’t have a full fund range but it is large enough to see the majority of investors through. You have a range of major currency options and have to keep 1% in the cash management account.
It works with wealth crafts that use the Oxford risk to help model portfolios and for advisors, this can be a useful tool to help automate the risk profiles.
As well as this you have (Capital Gains Tax) CGT calculators, bulk rebalancing and portfolio analytics.
If you have transferred or looking to transfer your pension you have trust options as well as those looking for IHT planning have the ability to wrap into a trust.
See the figure below for the portal specifics
The cost of Praemim is where it can be competitive.
As seen below the breakpoints are from 0.35% to 0.25% depending on your amount.
PFICs Tax
For the U.S none of the funds, are U.S based so not subject to the PFICs taxation.
The U.S part of the platform is more expensive than the international platform starting at 0.35% and going down to 0.25% and with not many options for U.S expats is a feasible option.
With this, you also have a tax filing service for 195 GBP, and here is some information about the platform from its flyers, please see below.
My Thoughts & Opinions
I have been a big fan of the platform and its international branches and I have ranked it as one of my top 3 platforms for international investors in 2022. Although the U.S platform is more expensive, it is still reasonable and I do see prices coming down as the U.S platform becomes more popular.
For U.S expats who have limited options to invest this is a more than welcome platform to help US expats. The fact that it combines the tax reporting service could be a huge bonus to US expats.
If you are a U.S expat that is looking for a platform and advisor we are happy to review your situation and see if we can help in any way.
Please email info@investmentsforexpats.com
Charles Schwab
Charles Schwab which was one of the first platforms to go online has two forms, the advisory service and retail clients (DIY). It is a platform for IFAs through the Schwab Alliance platform.
In terms of funds, Schwab offers a wide range of ETFs. The benefit that would personally put Schwab over IB is the ease of use. It is more user-friendly although not always cutting edge in terms of technology, however, it does get the job done.
Schwab is one of the few brokerage accounts that have a specific platform dedicated to U.S expats. As other platforms have closed doors to the expats that no longer reside in the U.S. Schwab has opened up it’s doors to help solve an issue.
However, even Schwab’s international ambitions have their limits, so Schwab may or may not provide the ideal solution for the international customer, depending on individual circumstances regarding the customer’s residence and/or whether the customer works with an advisor (institutional client vs. retail client). If you want to see whether you live in a permitted country, Schwab provides a convenient link to try to open an international account.
From there, you can simply go to the drop-down menu of countries on the page and select your residence country to determine whether you can complete an application or whether Schwab is unavailable for residents in your country at this time.
For clients living in the EU and working with U.S. independent advisors on the institutional platform, Schwab offers a key advantage: access to U.S.-registered ETFs.
Unfortunately, retail Schwab customers with EU addresses will be blocked from purchasing U.S.-registered ETFs.
Accordingly, just as with IB, retail customers in the Eurozone are considerably hampered by the EU rules that foreclose access to simplified diversification offered by ETFs (and mutual funds).
Summary
At Investments for Expats we are helping U.S expats invest in IB and Praemium platforms, so please feel free to get in touch if you need any help and aim to guide you over the complexity of U.S expat investing.
If you have any questions please email me at info@investmentsforexpats.com.
Please note that investing of any form can return less capital than what you initially invested. Your capital is at risk.
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