American Expat: Brokerage Account Closures and Restrictions | Cerity Partners (2024)

American citizens living abroad face many complicated investing and compliance issues (such as finding an American expat brokerage firm). Careful attention must be paid to the selection of investments, filing a U.S. expat tax return, dealing with the Foreign Account Tax Compliance Act (FATCA), and understanding country of residence tax rules. Savvy American expat investors ultimately realize that building wealth through U.S. financial institutions is the most tax-compliant solution. Unfortunately, many traditional U.S. brokerage firms and banks restrict the financial accounts of American expats with permanent residence in another country.

The Brokerage Account Closure Problem1 for American Expats

It is getting harder and harder to find an expat-friendly broker. International brokerage firms such as Morgan Stanley, Merrill Lynch, UBS and Wells Fargo are restricting business with American expat clients.2 When these firms discover a customer no longer physically resides in the United States, they may freeze their brokerage accounts or force American expats to liquidate their investment holdings. Not using an expat-friendly brokerage firm can be disastrous from a tax and long-term financial planning standpoint.

U.S. expat brokerage account restrictions vary between brokerage firms. Some firms let clients keep their existing brokerage account once they have moved overseas but will not permit clients to open a new brokerage account due to residency in a foreign country. Other firms request that expat clients close all their existing U.S. financial accounts when discovering a client has an international address. The American expat account restrictions may even be different for taxable and retirement accounts (IRAs, Roth IRAs and 401(k)s). Every online expat broker is different!

Brokers enforce these international account restrictions in a variety of ways. Some non-U.S. residents have reported that they cannot access their U.S. brokerage account when they attempt to log in from a foreign IP address. Other U.S. banks focus more closely on the foreign address listed on the account. Sometimes an investment advisor must report that they have an American expat client to their compliance department. Regardless of how the financial institution finds out, the account may ultimately face an international brokerage account restriction and the investor will need to find an expat-friendly broker. Fortunately, there are many excellent investment custodian/investment brokerage options for U.S. expats.

Reasons Behind American Expat Brokerage Account Closures

There are several reasons for these U.S. expat brokerage account restrictions and no single factor is solely to blame. The primary rationale is likely a combination of increased U.S. regulation of financial institutions and a perceived compliance risk that U.S. banks have about operating in certain foreign countries. This is especially true of the larger financial institutions that offer commercial and investment banking services. They do not want to expose these core banking functions to undue regulatory oversight by servicing U.S. expat retail clients.

There is no U.S. law that says American expat brokerage accounts must be frozen or shut down when moving abroad. The decision to freeze an account is an internal financial institution policy. Rather than complying with these new international regulations, many U.S.-based brokers (such as UBS, Wells Fargo, Merrill Lynch and Morgan Stanley) have decided it is easier to close or freeze American expat brokerage accounts. 2019 Brexit concerns increased these complexities for many U.S. brokerage firms serving U.S. expats. However, this response has caused countless headaches for American expat investors who need a reliable place to grow and protect their wealth.

Special Case – American Expat Inherited IRA Accounts

One area where expat brokerage account restrictions are particularly burdensome is related to inherited IRA accounts. Oftentimes a parent or other family member living in the United States may pass away while the beneficiary of their IRA is an American living abroad. Many brokers will not open an inherited IRA account due to the foreign residency, which in an extreme case may force a taxable liquidation for a beneficiary that lives overseas.

Transferring inherited IRA assets to an American expat may require a special procedure and extensive communication with an investment custodian. A specialized American expat financial advisor can add tremendous value when opening an expat-inherited IRA account and can develop a more suitable international investment strategy.

2018 EU Regulations and U.S. Expat ETF Trading

Since 2018, another issue affecting U.S. expat investors is the EU MiFID II regulations—a legislative framework designed in part to protect investors. These new EU regulations affect what are called PRIIPs (packaged retail investment and insurance-based products) and KIDs (key information documents). The law imposes requirements that investment funds distributed to retail investors must produce specific EU-compliant fact sheets and disclosures.

Very few publicly traded U.S. investment funds (such as ETFs and mutual funds) have produced these EU specific documents as of November 2022. Major U.S. custodians such as Charles Schwab, Fidelity, TD Ameritrade, and other brokers who facilitate the purchase of these investments are complying with MiFid II in different ways. Some firms have stopped accepting EU resident clients (even U.S. citizens living abroad). Others concluded that direct sale of U.S. ETFs to EU residents is not permitted under the MiFID II rules and have further restricted U.S. expat accounts. With these constant changes, it may be advisable to work with an American expat financial advisor.

Best Brokerage Options for American Expats

So how should American expats deal with this account restriction issue? What is the best online expat broker? Companies focused solely on brokerage operations (i.e., do not have significant commercial banking operations) have been able to continue working with American expats. The internal legal structures of these financial institutions have allowed them to comply with international regulations related to working with clients in multiple countries, and as a result, they choose not to restrict American expat brokerage accounts.

Having a brokerage account frozen or closed when living abroad may finally be the impetus to seek out a specialized American expat financial advisor who understands the unique cross-border tax and investing issues that global families face. Americans living abroad must pay close attention to their personal finances and understand how multiple tax jurisdictions interact. With careful planning and the right advice, American expats can invest in a compliant and tax-efficient manner through multiple expat-compliant investment custodians.

As a trusted fiduciary, Cerity Partners strives to provide the most appropriate advice for our international and American expat clients, always putting their interests first. We explore the custodial options available to you and guide you to make informed decisions. As an American expat financial advisor, we invite you to meet with us to discuss your unique needs and to learn how we can add value to your financial situation.


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American Expat: Brokerage Account Closures and Restrictions | Cerity Partners (2024)


Why US expat brokerage accounts are being closed? ›

In the US in particular, KYC (Know Your Client) and Anti-Money Laundering rules are the primary drivers of account closures for expats. Another layer of complication for US banks is due to EU MFID rules, which prohibit EU residents from purchasing funds that don't provide an EU-format information sheet.

Can expats have US brokerage accounts? ›

The internal legal structures of these financial institutions have allowed them to comply with international regulations related to working with clients in multiple countries, and as a result, they choose not to restrict American expat brokerage accounts.

Can a brokerage firm close your account? ›

Generally, either you or your brokerage firm may close your brokerage account at any time.

What happens to my investments if I move abroad? ›

This decision will depend on various factors, including the type of stocks you own, the regulations of your destination country, and your long-term investment goals. If your destination country does not allow foreign ownership of certain stocks, you may need to sell them before your move.

Why is my individual brokerage account restricted? ›

Consequences: If you incur three good faith violations in a 12-month period in a cash account, your brokerage firm will restrict your account. This means you will only be able to buy securities if you have sufficient settled cash in the account prior to placing a trade.

Can US expats use Fidelity? ›

Can I establish a relationship with Fidelity? A. No. Unfortunately, we do not open accounts for any new customers residing outside the United States.

Can I live outside the US with Charles Schwab? ›

We understand that as an American living outside the U.S., there are some difficult challenges. That's why we aim to make the financial transition as smooth as possible. We can help you invest in U.S. markets while living abroad, access U.S. dollar–based accounts, and provide reporting for U.S. tax filing.

Is Vanguard expat friendly? ›

Persons residing outside the United States are invited to visit Vanguard's website for Non-U.S. Investors for more information about products and services available to them.

Can US expats open a Vanguard account? ›

Please note: You need to be a U.S. citizen with a U.S. mailing address to open an account. If you live or work outside the U.S., please check out our international site.

What happens when a brokerage closes your account? ›

The failure of a firm might understandably cause some anxiety for its customers. However, should your firm cease operations, don't panic: In virtually all cases, customer assets are safe and typically are transferred in an orderly fashion to another registered brokerage firm.

What happens if a broker closes your account? ›

Overview. Typically, when a brokerage firm fails, the Securities Investor Protection Corporation (SIPC) arranges the transfer of the failed brokerage's accounts to a different securities brokerage firm.

Is Charles Schwab in financial trouble? ›

From August 2022 through March 2023, Charles Schwab lost deposits due to client cash sorting at a pace of $5.6 billion per month as yields on savings accounts or other safe short-term assets like certificates of deposits rose. These deposit outflow pressures slowed significantly following the regional banking crisis.

What happens to my Vanguard account if I move abroad? ›

Please note that, if you move abroad, we reserve the right to place restrictions on your account. This may affect our ability to provide you with the Vanguard Managed ISA. If required to do so, we may also inform any relevant foreign authority about your investments.

What are the disadvantages of investing abroad? ›

Investing internationally provides diversification and potential for growth, especially in emerging markets, but it comes with a set of risks. Among them, the main ones are the higher costs, the changes and fluctuations in currency exchange rates, and the different levels of liquidity in markets outside the U.S.

Should I close my bank account if I move to another country? ›

As discussed on this page, we would advise against closing unless it is absolutely necessary or unless there are large fees. In most situations, it best to keep accounts open and active - in particular, if you expect to return to the US in the future.

Is Schwab in danger of closing? ›

Charles Schwab's threat of distress is under 28% at this time. It has slight chance of undergoing some form of financial crunch in the near future.

Can expats invest in US stock market? ›

U.S. stock is a popular investment for U.S. citizens and foreigners alike. There is no citizenship requirement for owning U.S. stock and foreigners can easily access U.S. stock through U.S.-based brokers and international brokers.

Can I have a Schwab account if I live abroad? ›

To apply for a Schwab One International® account, simply prepare the required supporting documents and go through the online account opening process.

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