RETIRED ABROAD? YOUR U.S. BROKER MIGHT DUMP YOU
I was recently at a wedding, surveying the dessert table, when I got a call on my cellphone.
The caller sounded frantic, and after explaining that I was at a wedding and couldn’t really speak (I didn’t want my hot chocolate cake to get cold!), he said he couldn’t wait for me to call him back the next day. So we spoke and he proceeded to tell me that he had just received a call from his broker, at a well-known firm in the U.S., saying that he had to either close out his account or transfer the account to another firm.
Coincidentally, I knew the broker and called him. He told me that he just received a memo saying that for most accounts (there are a few exceptions) that don’t have U.S. addresses on them and have less than $250,000 in assets, the firm has decided that they must be either closed or transferred within two weeks.
Over the past week two friends who live outside the U.S. emailed me saying that they just received letters from their U.S. brokerage firm saying thanks but no thanks. Even though they are American citizens, since they are now domiciled abroad, they will no longer be able to keep their accounts with these brokerage firms.
Continuing trend
I write in my book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw Hill), “some firms have created special divisions and forcibly transferred clients’ accounts to these new divisions, even if doing so severed a long-standing relationship with their brokers. I once met with someone who had been working with the same Cincinnati, Ohio, adviser for 36 years and got a letter saying that his account had been transferred to a new adviser in Houston, Texas.”
Why the change
Since the terrorist attack on the World Trade Center, U.S. firms have taken a very strict approach to non-US domiciled accounts. With the Patriot Act and other new laws, it’s now much harder for these firms to accept accounts from U.S. citizens living abroad — and many have just decided that they would rather not put themselves into this situation and have taken the step to either not take any new business or set up a new division to deal with these accounts. While brokers on these accounts have fought tooth and nail to keep their clients, the compliance departments won out, and this is their solution.
Children
The aforementioned broker that I was speaking with who is being forced to get rid of his accounts under $250,000, also told me that of the fifty or so accounts he needs to dispose of, about thirty belong to children of Israeli immigrants, who were born in Israel and hardly speak any English. This isn’t an Israeli issue. You could have kids born in Singapore, France or Dubai, it’s the same issue.
The issue of children having accounts in the U.S. that their parents set up is a common issue I deal with. He mentioned to me that most of these children don’t even know how to dial the U.S., let alone handle a conversation about their finances in English. They would have a hard time trying to access the money that has been put aside for them. Not only that but the adviser in the States doesn’t know them, and he is unfamiliar with their long-term goals and needs.
What to do?
I would recommend going local. I would find an adviser who is licensed both in your local country and in the U.S., to handle the accounts. Not only would this professional, be attuned to life in your residence abroad, but he would also speak the language of the children, and in general make things much easier going forward with the children.
In addition, anyone who is local who has an arrangement with a U.S. firm won’t have the same problems vis-à-vis not being able to buy certain investment products. They will have all their compliance in place allowing the client to have access to the wide array of investment choices that he comes to expect.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, SIFMA, FSI. For more information, visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il
