Many people who are living abroad but who have U.S. investment accounts have started receiving unpleasant notices from their account custodian that their accounts are being closed and must be moved. This is true no matter whether the person is a U.S. citizen or permanent resident (Green Card holder), or a non-resident for U.S. tax purposes. Many affected people are wondering what is behind this, and what can I do to fix the problem? Unfortunately, the solution to the problem is not so easy in today’s world.
Recently financial institutions have been weighing the profitability of foreign client relationships against the compliance risk, and many have decided that the increased reporting scrutiny and regulatory costs are not worth the relationship. As a result, many institutions are refusing to open new accounts with foreign addresses in countries such as France, The Netherlands, Australia, New Zealand, and many more.
Some of these institutions are even going as far as terminating existing relationships and forcing account closures, if the customer is located anywhere outside of the U.S. This is putting many expats and cross-border individuals at risk of having their assets restricted, or even liquidated and distributed to them, thus causing unwanted tax and investment implications. Many of these investors are being pushed into finding creative ways to work around these issues and find a new home for their investments to avoid these unwanted consequences.
This tectonic shift is affecting many global investment firms that custody client assets. Consider the following snippets that have appeared in the media.
“Wells Fargo is focused on meeting our regulatory requirements, managing risk, and simplifying operations across the company,” Wells Fargo Advisors spokeswoman Shea Leordeanu said. “For Wells Fargo Advisors, Wells Fargo Private Bank, and Abbot Downing, our core business focus is serving clients who primarily reside in the U.S. As such, we have decided to exit the international segment of our business.”1
“Serving the investment needs and opportunities unique to clients who reside outside of the U.S. has become increasingly complex,” the New York-based bank said Friday in a statement. “As a result of a review of our international account policies, we have decided to exit some international relationships.”2
Merrill Lynch and Morgan Stanley have recently been sending letters to many of their US citizen clients living outside the USA saying that their accounts will be closed as of a certain date in the very near future. The letter typically states something like the following:
“We have conducted an extensive review of our non-US resident client business to determine whether we had the ability to continue to effectively serve your wealth and investment needs under increasing business requirements and regulatory restrictions. Having completed this analysis, we believe you would be better served by a firm or firms that can meet your comprehensive wealth and investment management needs. Therefore we will no longer be servicing your Merrill Lynch Wealth Management account(s)…”3
And this is only the tip of the iceberg. Following the passage and implementation of the Foreign Account Tax Compliance Act (FATCA), along with numerous other regulations across “know your client” (KYC) and anti-money laundering (AML), some wealth management firms have restructured or even exited their cross-border / expat / international client operations. This includes not only the firms listed above, but also organizations such as UBS, Ameriprise, Edward Jones, USAA, and others.
If you are running into any of these issues or fear that your investments may be at risk, Cerity Partners is here to help. We maintain relationships with several custodians who are committed to the financial success of multi-nationals. If you are currently living abroad or have a foreign address with investments held in the U.S., we may be able to help.
To learn how, let’s talk.
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