US citizen investing from EU

[kimhills]

I’m a dual US/EU citizen and recently sold my house and moved from the US to Europe for work. So I have a bunch of cash losing value in my savings account which I’d like to invest ASAP. I don’t know how long I’ll stay in Europe or where I will retire yet in about 10 years.

Ideally I want to keep investing in a US ETF like VTI but not sure what’s the best way to do that, taking into account the complexity of regulations. Here’s what I think I can do:

Option 1: keep using my Vanguard account without updating my former address in the US

Option 2: update the address in my Vanguard account with a friend’s address in the US

Option 3: open an Interactive Brokers account but not able to purchase US ETF’s as far as I know. So I’d have to try to replicate VTI manually by picking individual stocks, which seems complicated and time consuming.

Does anyone have advice on this?
Would love to hear from other expats who have been in the same situation.

 

[genenco]

@kimhills Yeah, there’s not a great way to buy US ETFs from Europe. Basically your options afaik:

1. Lie about your residence. Not a huge deal with a few grand, but I personally was not comfortable doing that with the amounts that I imagine you’re dealing with
2. Go through an advisor or someone. They can buy ETFs on your behalf, but of course they’ll want their cut
3. Become an accredited investor yourself
4. Buy ETF options rather than actual ETFs and then exercise those options
5. Just buy the underlying securities directly like you said

So they all come with their own mix of risk, hassle, and cost

 

[kimhills]

@genenco Thanks for suggesting these options. Realistically what are the risks and consequences of option #1?

For option #2, do you know a good place to look for such advisors?

Option #4 seems interesting. I don’t know much about options and will be looking into it.

 

[alexstore06]

@kimhills Regarding #1 - I spoke to a retired guy from Schwab about this. He said they don't really care where you are physically, but they do care about where you claim your legal residence is, because:

1. In case they need to sue you. They can serve court papers to your legal residence - even if you're not there, there are other processes in most jurisdictions permitting service (newspaper ad + mailing, etc). But those processes would only be approved by the court if you told them your legal residence is there. If you told them your legal residence is in Vanuatu, serving you becomes very difficult, expensive. This increases the legal risks.
2. To avoid compliance with (unknown) local regulations. In some jurisdictions simply being a resident of one gives you extra legal rights (California, for example. with "do-not-sell-my-personal-information"). And if you notified the brokerage about your residency and they continued keeping you as a customer, they may be forced to comply with those - or they may be sued to comply. Naturally, if you don't tell them, you can't force them.

So, as you see, its not about them sending spies to your house checking whether you really live there, its about limiting their legal exposure. The most likely consequence in case you force them to accept the fact that your legal residence is in another country is that they won't want to have you as a customer, and ask you to move your business somewhere else.

Can you set up an LLC for your investing activities?

 

[stephendisraeli]

@alexstore06

Can you set up an LLC for your investing activities?

Someone familiar with all involved tax codes should be consulted before creating any kind of corporation, as this might trigger CFC provisions (and possibly even less-overreaching PFIC provisions in non-US tax codes) with adverse reporting and tax results.

 

[kimhills]

@alexstore06 My wife has one, maybe there’s something there I could go through?
Otherwise Setting up an llc from outside the US might be complicated. I’ll look into it.

 

[stephendisraeli]

@kimhills It may be wise to do research on "controlled foreign corporation" provisions and possibly consulting with a tax specialist before setting up any kind of corporation.

 

[genenco]

@kimhills afaik the main risk is account closure which, again, is not a huge deal if you need to find a new home for a few grand, but if your entire seven-figure life savings are suddenly liquidated, that’s kind of a nightmare. (NB: I don’t have a good answer on how strict they are with account closure. It may very well be that they give you a grace period to transfer assets out in-kind, which is obviously not as big a deal)

If you truly just need someone who will buy ETFs on your behalf, I found Dunhill to be the cheapest. You should be able to get them for under 0.5% AUM

 

[kimhills]

@genenco I wonder if that would trigger a tax event if liquidated.
Frozen account would be ok though.
From what I’ve read a lot of expats manage to keep investing remotely, I’m more worried about the legal consequences if any.

 

[corderadegracia]

@kimhills My understanding is that some of the brokerages that will work with expats (Schwab, IBKR) will allow you to hold or sell ETFs, just not buy them. An option if you are investing a lump sum is to buy the ETFs you want and then let them know you are a foreign resident so you don't risk account closure. They'll let you keep you keep those ETFs (but you won't be able to reinvest dividends since that is a purchase).

 

[hemis7531]

@genenco So they will close the account and send you the money? Or keep it to themselves?

 

[stephendisraeli]

@genenco

Become an accredited investor yourself

Depending on how much money there is, this may be an option. Doing so requires two out of a) 500k€ ready to invest, b) significant working experience in the financial sector and c) a number or recent transactions.

Someone not working in finance might be able to fulfill a) and c).

 

[kimhills]

@stephendisraeli Interesting, unfortunately B and C don’t apply in my case

 

[stephendisraeli]

@kimhills It is sufficient if two out of the three requirements are met. I have found conflicting descriptions of the transaction requirement (ten transactions in the last year vs. ten transactions in each quarter of the last year), but they did not appear outlandishly high.

 

[resjudicata]

@kimhills I have been doing Vanguard for year using my inlaws address in the US (I am in Ireland) and we have had no issues so far. I use Google Voice for a US phone number for 2FA.

 

[micah888]

@resjudicata More than 10 years using my Google Number from abroad… not a since cent paid. Loving it!

 

[kimhills]

@resjudicata Did your in laws have to add you to a utility bill to prove the address? Or did your just change it in your profile without showing a proof of address?

 

[resjudicata]

@kimhills No, I never had to show any proof of address! I didn't change an address though, set up the Vanguard account online with my inlaws' address.

 

[seejer]

@kimhills Hey, so I'm in a similar boat. In the end I decided to keep my US brokerage account without updating my US address (I can still reliably receive mail there). I also use a US phone number for 2FA and log in using a VPN.

From extensive reading (on expat forums, investment forums, Reddit, etc.), it seems like generally, if a brokerage discovers you are not a US resident, you will no longer be able to buy funds or reinvest dividends, but you can sell or continue to hold existing funds. You should also be able to transfer in-kind to another brokerage. I have not yet come across any stories where someone faced legal consequences.

Re. virtual mailing addresses, I've read that many financial institutions can recognize these and will not accept them.

I also noticed that you may have lived in CA before moving. Are you aware of CA's "sticky" status? That may also affect which address you choose to use with Vanguard/financial institutions, depending on your desired CA residency status. Happy to elaborate on this further if needed.

 

[micah888]

@seejer I have been logging in without a VPN since 1996 with TD Waterhouse… then TD Ameritrade… and soon to be Schwab. Just never changed my US address in the account, never had an issue.

However, I heard some brokers like Merrill Edge are more picky and will shut you down if they detect it, but other brokers like Schwab and Fidelity are better in that regard.