By David Kuenzi
Summary: Kuenzi shares six key reasons why Americans living abroad should keep their money at US based financial institutions.
Americans living abroad often end up moving their investment accounts to non-US financial institutions. Whether they employ a large global investment bank headquartered in Switzerland or the UK or find themselves enticed into the world of “off-shore” banking in places like Lichtenstein or Panama, they are making a mistake. The very high costs of investment services outside the US, the lack of proper tax advice, and the risks engendered in weak regulatory regimes constitute serious impediments to successful long-term wealth accumulation. Below I expand on the six most important reasons that Americans living abroad should keep their money at US based financial institutions and seek out the advice of an experienced financial advisor who understands the special circumstances of Americans living abroad.
Investment “expenses” are high everywhere in the world, but the fact is they are still much lower in the US compared to everywhere else. In the hyper-competitive US market, on-line trading, “discount” brokerage services, index funds and exchange traded funds have driven down costs. In Europe and Asia expenses remain high due to fractured markets, lack of investor protection rules and a general lack of competition among providers, especially in some of the smaller markets. For example, a recent survey of mutual funds fee by country found that, among 18 developed European, American and Asian markets, average US fees were 22% lower than the next least expensive market (France). Fees in Switzerland and Canada were 43% and 279% higher, respectively, than in the US. It is not uncommon for customers of international banks in Switzerland to pay as much as $500 to buy $30,000 worth of stock, while the same transaction in the US could be performed for $20 or less.
David Kuenzi is the founder of Thun Financial Advisors. He is a Certified Financial Planner® and has previously held positions with Chase Manhattan Bank, Deutsche Bank and Bank Austria. His financial industry career included postings in New York, London and Moscow. Kuenzi grew up in Wisconsin but spent most of his professional career in New York City and in Europe, before returning to the Midwest in 2005. He received his undergraduate degree from the University of Wisconsin and completed graduate work in politics and economics at Columbia University and Harvard University before launching a career in finance.
Here is the problem and my question. Even if you are a US citizen but you put a different country as your address at a US brokerage house, your assets will immediately be frozen. You cannot have a bank account in the US if you do not reside in the US. If this is incorrect, could you sight anything that would dispute it? I have not been able to find anything that clearly states the law on this. I have called Schwab and not gotten a clear answer. It sort of sounded like, "Why are you asking this?" [email protected]
guestI am an American living in Canada, with duel US/Canada nationality. I had a brokerage account and mutual fund account with a very large US investment Co. for about 15 years. About 5 years ago I was told by the company that they could no longer keep me as a client, because I had foreign residency. I was unable to find another US Investment firm that would have me as a customer. Have rules been changed recently?
guestYes, try to find a bank or brokerage firm that will accept a client with a non-US address. From my research, there is noting in the law or US Treasury regulations that prohibit this as long as they verify the individual's identity. However, as a practical matter, all the banks and brokerage firms I've asked will not accept applications from individuals who don't have a local physical mailing address. This is a big problem for anyone wanting to retire abroad and keep their accounts in the U.S.
First Published: Jan 17, 2009
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