Investing as a US Expat in Denmark

[justanotherpoet]

I’ve been in Denmark for four years. Three years ago I got to the final stages of hiring a financial advisor in the US, sent them money, etc then they sent it all back when I didn’t have a US phone number. They said that even though the money going to them is coming from a US account, my income is abroad and this makes it difficult for them to proceed due to legal things (I imagine something anti-terrorism?).

It also seems not possible to invest with banks here in Denmark as they all state they don’t want to deal with people who are tax responsible in the US.

I don’t want to put this off anymore but I have honestly no idea what to do. I’m looking for a bank or institution to handle things for me as I don’t want to make any minor trading decisions, it’s not my hobby nor my expertise. Any suggestions?

 

[cb4yah]

@justanotherpoet It's not due to terrorism, it's due to EU consumer protection laws. As a resident of the EU, you cannot invest in US domiciled investments because US financial institutions don't provide something called a Key Information Document that summarizes the risk involved with the investment. The US banks do not want to violate EU law, and so won't let you invest. Look up PRIIPs for more info.

At the same time, investing in pooled investments (called PFICs by the IRS) domiciled outside the US is pointless, because of punitive taxes by the IRS. This law exists ostensibly to prevent tax dodging, but it absolutely screws over US citizens living abroad who wish to save for retirement.

Finally, reporting requirements by the IRS make even getting a bank account difficult. Many banks in Europe reject US persons up front, and will not open any investment accounts for them.

Welcome to financial purgatory.

 

[on_a_mission_]

@cb4yah You can invest in individual securities in a brokerage like IBKR without running into PFIC issues, right?

I haven’t tried it, but it should be okay as long as you avoid mutual funds and ETFs.

 

[cb4yah]

@on_a_mission_ Yes you can.

The main issue with this approach is that it's generally a good idea to diversify your assets. There are index funds that track indices representing weighted averages of several thousand stocks. This allows retail investors to dollar cost average into a diverse, low-cost portfolio for the bulk of their working lives without having to think much about it.

Trying to replicate anything approaching this by buying individual stocks is next to impossible for me and for most other individual investors. Most brokers I've seen charge not insignificant transaction fees, so diversity automatically entails significant losses in fees up front. Also the cost of individual stocks is too high to get a really diverse portfolio unless you have a lot of money to begin with.

 

[on_a_mission_]

@cb4yah I totally agree with everything you wrote. But since it seems like the only reasonable option, I’m going to find a few reliable EU stocks and give it a try.

 

[genenco]

@cb4yah A financial advisor is one of the main ways around that restriction though. EU residents can invest in US funds through an advisor. So unless OP is mistakenly calling like a custodian an advisor, that shouldn’t have been a problem either.

 

[asparien]

@cb4yah

As a resident of the EU, you cannot invest in US domiciled investments because US financial institutions don't provide something called a Key Information Document that summarizes the risk involved with the investment.

Some europeans are such babies.. Honestly. It's an investment. It's risky. Make your own decision. Invest if you want.

Disclaimer: As an European, I have not read a KID in my life. Can't be arsed. Who cares about that document?

 

[resjudicata]

@justanotherpoet This is a tough one. It's almost impossible for a US expat to be upfront about being an expat. Almost everything I've read about this problem ultimately boils down to "Use a relative or friends address and then lie."

My wife and I are repatriating (from Denmark also coincidentally) this summer for reasons that include the difficulties in managing our financial lives.

 

[nicolevd]

@justanotherpoet I use Schwab international brokerage without issues

To add, for a us phone number I use Tello which can be activated over WiFi (enable WiFi calling) as an eSIM so banks can send me verification codes and such

But as everyone else said, for some accounts that do not allow foreign addresses I use a family member. But, like I said for Schwab international they are fine with my foreign address and I invest regularly

 

[sharice]

@nicolevd Same here - I use Schwab and work with a financial advisor who specializes in expat investing

 

[nicolevd]

@sharice Out of curiosity what sort of funds does your advisor have you invest in that are specifically advantageous for expats?

 

[sharice]

@nicolevd We have a complicated combination between my husband and I of citizenship/residence/etc so I couldn’t tell you the details really, sorry - just that part of that advisor’s job is maximizing earnings while minimizing tax burdens…

 

[debshirl]

@sharice Hi. Also an expat with complicated citizenships/residence, etc... and also with Schwab. Is your advisor through Schwab?

 

[sharice]

@debshirl No he isn’t - I had happened to find him while googling for accountants and financial advisors that specialize in intl folks (the DC/Virginia area has several due to the presence of intl orgs, diplomats, etc).

 

[debshirl]

@sharice Thanks

 

[biblestudy]

@nicolevd Does Schwab know you live in EU and still let you buy US based ETFs for example? Thanks!

 

[nicolevd]

@biblestudy Yes they do, my wife’s company stock plan is Schwab so when we moved to the EU it automatically changed so we had no option to use a different address because it’s also linked to our brokerage

And yes i regularly buy ETFs without issue

 

[johanb]

@justanotherpoet Saxo Bank and Nordnet are two of the bigger more popular platforms. They bank with Americans, just takes a little longer to set up. I think both have fully managed options, but i invest myself so I’m not sure.

 

[micah888]

@justanotherpoet I’ve been an expat for 28 years and always used my parent’s US address on any US-based accounts.

For a US phone, I’ve had a free Google number for over a decade. To get one, initially you’ll need a VPN and someone in the US with a US phone willing to enter a code to activate it (used for forwarding calls, but you can switch that off immediately). You then download the Google Voice app, but have to adjust the somewhat cryptic settings to make it work without charging any fees. Rest assured, once you’ve set it up, it’s totally free and works well from overseas without VPN. Works great for most 2FA text messaging as well.

 

[karomar]

@justanotherpoet I’m using Dunhill Financial who specialize in investing for expats. Has anyone else used them? I’m just starting the process and honestly a bit nervous