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Key Takeaways and Insights:

Many expats and multi-national residents are working with investment firms that are increasingly abandoning this service.  We explore why firms are discarding these complex clients, and what people should do next.

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  • Financial institutions are increasingly shunning cross-border clients due to compliance costs and risks.
  • This shift was driven by the passage of the Foreign Account Tax Compliance Act, in the wake of the Swiss / UBS offshore haven scandal.
  • Expats and multi-nationals need to reconsider where they custody their assets, and work with financial advisors with specialized cross-border financial planning and tax expertise.

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:

“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

Morgan Stanley:

“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:

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.


Sources:

https://www.advisorhub.com/wells-pulls-out-of-international-wealth/
https://www.bloomberg.com/news/articles/2018-02-16/morgan-stanley-is-dropping-some-wealth-management-clients-abroad
https://indonesiaexpat.id/business-property/us-brokerage-firms-closing-accounts-for-american-expats/

Cerity Partners LLC (“Cerity Partners”) is a registered investment adviser with offices in California, Colorado, Illinois, Ohio, Michigan, New York, Massachusetts, and Texas. Registration of an Investment Advisor does not imply any level of skill or training. This commentary is limited to general information, and should not be construed as personal investment, tax, or legal advice. There is no guarantee that the views and opinions expressed in this piece will come to pass. The information is deemed reliable as of the date of this commentary, but is not guaranteed, and subject to change without notice. It should not be considered as an offer to sell or a solicitation of an offer to buy any security. For information pertaining to the registration status of Cerity Partners, please contact us or refer to the Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov). For additional information about Cerity Partners, including fees and services, send for our disclosure statement as set forth on Form CRS and ADV Part 2 using the contact information herein. Please read the disclosure statement carefully before you invest or send money.

 

 


Meet the Author

Andrew Fisher

Andrew Fisher

Partner

Andrew is a Partner and Market Leader for the San Francisco Bay Area. He serves as a senior client advisor, assisting successful families on a variety of financial planning and wealth management issues. He focuses on optimizing wealth through efficient investing, risk management and tax strategy. With his broad base of finance and investing experience, Andrew enjoys helping his clients find creative solutions to complex financial problems.

Andrew is widely regarded as a leading advisor to international and cross-border families, who often face more complex wealth management and tax issues resulting from their multinational lives, particularly when an individual is a citizen or tax resident of the United States. He frequently writes and speaks to the unique financial complexities faced by international families. He is also the author of The Cross-Border Family Wealth Guide, a personal financial planning book for internationally oriented families.

Prior to joining Cerity Partners, Andrew served for 15 years as President and Chief Investment Officer of Worldview Wealth Advisors. He previously worked in international equity research following the global banking and telecommunications sectors at Montgomery Asset Management, HSBC Securities, and Donaldson, Lufkin & Jenrette (now Credit Suisse). He began his career with PriceWaterhouseCoopers in Los Angeles.

Andrew graduated Cum Laude from California Polytechnic University, San Luis Obispo, with a degree in Finance and a minor in Spanish. He holds both the Chartered Financial Analyst (CFA) and Certified Public Accountant (CPA) designations. Andrew is a past president of the CFA Society of Portland.

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