Why can US citizen expats not invest w/Vanguard?

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Why can US citizen expats not invest w/Vanguard?

Postby ExpatInAsia » Mon Feb 11, 2013 4:21 am

I'm new here (first post ever) and maybe this topic has been beaten to death. If so, apologies! I was reading recently about Vanguard and being a Boglehead, and it sounded great to me! Problem: I was an apartment-dweller before moving overseas (no home in the US) and am an orphan (no parents' home to use as my US mailing address). Long story short: Vanguard's minions have repeatedly told me that US federal law (the SEC) + the laws here in Taiwan prohibit me investing with Vanguard. W/repeated exchanges, I've gotten no straight answers from the Vanguard staffers I correspond with (Me: "what laws? What rules? Cite them, please?" Vanguard Minion: "uh...uh...uh...I don't know what specific law says so...but the law says so!"). I can find no such US law, no such law in the Republic of China, and the US Department of State hasn't coughed up a law or international agreement that says "US guy can't invest with Vanguard." In fact, a SEC staff attorney responded to me with the comment that the SEC has no such rule or law!
--
I have US funds, earned in the US, in a US bank, which I can't invest with a US company, based on laws that don't exist!
However, citizens of other countries can be Bogleheads! Quite literally, a member of the Yakuza can invest with Vanguard, but not a passport-holding child of Uncle Sam who lives overseas (unless I'm missing something in Vanguard's explanations). :x
--
I dropped a line to the "Ask Jack" e-address a day or so ago and am wondering if anybody knows of a good Point Of Contact to take this question to at Vanguard proper?

Thanks and again, please redirect me elsewhere in Bogleheads.org if this posting needs to go elsewhere or if it's been beaten to death way back when! :confused
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Re: Why can US citizen expats not invest w/Vanguard?

Postby Alex Frakt » Mon Feb 11, 2013 1:09 pm

It's not a law, it's Vanguard policy. They have decided it's too expensive for them to properly deal with the complex and varying laws that govern such situations. It's understandable given their overall goal of minimizing expenses and risks (i.e., fines and investigations from US or foreign regulators).

Since you are a US citizen, you could work around this by renting a US address from a mail forwarding service. But you'll have to decide if its worth the hassle. From previous threads on this, a lot of people use Fidelity. Their basic index funds are cheap and their service is typically better than Vanguard's.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby Stryker » Mon Feb 11, 2013 1:32 pm

If you go way down to the bottom post on this blog from Andrew Hallam in Singapore, you'll find a poster asking much the same thing.

Another method, If you have access to the stock exchanges in the U.S. you can always buy Vanguard's ETF's. I'm an outright foreigner, and that's what I do.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby englishgirl » Mon Feb 11, 2013 1:44 pm

It's a fairly common problem. See here: http://aaro.org/denied-bank-accounts

In a somewhat related situation, I can't open an account with Vanguard in the UK so I can move a UK investment there, because I have a US address. Even though I am a Vanguard customer in the US, and am not trying to hide any money in an offshore account - the money is stuck in a 401k-type account that I would just like to transfer to a company that will charge me lower fees.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby HueyLD » Mon Feb 11, 2013 2:05 pm

Someone I know who is an U.S. citizen but lives in another country gets around such issues by renting a private POB in a UPS store near where she likes to go on vacation in the U.S. The UPS store scans all her mail (except the obvious junk) and sends her all scan documents regularly. It obviously costs money, but it allows her to have a U.S. "street" address for various purposes.

If investing directly with Vanguard is very important to you, then you may want to consider renting a private POB. However, Fidelity will also allow you to invest in all ETFs available, including Vanguard's ETFs. Investing directly with Vanguard is certainly not a pre-requisite.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby Default User BR » Mon Feb 11, 2013 3:05 pm

About the only thing from Vanguard that you can't get most other places are Admiral shares of index funds. As noted, you can get ETFs, which generally have the same expense ratio, anywhere.

I have lots of Vanguard products in my portfolio, but don't hold them at Vanguard.


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Re: Why can US citizen expats not invest w/Vanguard?

Postby jidina80 » Mon Feb 11, 2013 3:26 pm

It is a nusiance sometimes to deal with Vanguard as an expat. I maintain a U.S. address as my official address for Vanguard, and recommend you also do that. Almost all dealings with Vanguard can be done via the internet, and they DO accept calls (toll-free) from overseas about our accounts. I've never had a problem with Vanguard accepting forms such as Roth recharacterization on A4 size paper, either. There are a lot of expats, including those in U.S. military services, who have Vanguard accounts. If you have a U.S. social security number and passport, you have no worries. Just get the U.S. address.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby scone » Mon Feb 11, 2013 3:51 pm

I talked to he Vanguard folks about this (at the last Boglehead conference) and they suggested I talk to Vanguard Australia. I haven't followed up yet, but here's the link, HTH:

https://www.vanguardinvestments.com.au/ ... l/home.jsp

If you find out anything new, please post, it's hard to find stuff on international finance, especially pertaining to family estates and trusts. I can't even find a lawyer who knows anything about it.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby AlohaJoe » Mon Feb 11, 2013 4:15 pm

As another data point, I live in Australia and Vanguard has no problems with me having an Australian address. Granted, I set it up ~5 years so it is entirely possible their policies were different back then. I also have a Vanguard (Australia) account for local retirement planning.

I wonder if they just like Australia better, if their policies changed, or if I just snuck past a more care-free service representative when I changed my address? :sharebeer
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Re: Why can US citizen expats not invest w/Vanguard?

Postby NAVigator » Mon Feb 11, 2013 6:25 pm

AlohaJoe wrote:I wonder if they just like Australia better, if their policies changed, or if I just snuck past a more care-free service representative when I changed my address? :sharebeer

No, if you already have a Vanguard account, established in the US, you can continue using it when you move to another country. My daughter moved to Europe about 6 months ago. I called Vanguard to ask about her continuing to use her account. There is no problem and she has since continued investing from her new country.

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Re: Why can US citizen expats not invest w/Vanguard?

Postby cbeck » Tue Feb 12, 2013 12:52 am

NAVigator wrote:No, if you already have a Vanguard account, established in the US, you can continue using it when you move to another country. My daughter moved to Europe about 6 months ago. I called Vanguard to ask about her continuing to use her account. There is no problem and she has since continued investing from her new country.

Jerry


But you cannot open a new account, i.e. Roth IRA.

The best solution is to get a US address.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby Karamatsu » Tue Feb 12, 2013 1:38 am

This is a common problem at a lot of US financial institutions. They all try to pretend it's due to some law, regulation, rule, or just for some vague "compliance" without ever revealing just what it is they're trying to comply with. At the same time, brokers like Fidelity and Schwab have no trouble at all setting up and maintaining an account for US citizens abroad, with no US address required. So clearly those who refuse are not being entirely honest. It may be that regulations for handling overseas accounts have become complex, but that just means some companies think overseas customers are worth the trouble and others don't.

With that in mind, rather than try to set up a US address, which could conceivably lead to trouble down the road (state taxation, possible problems due to claiming to live in one place when in fact your residence is somewhere else), I think it's best in these situations just to use a broker that is set up to handle overseas accounts. Then you're covered, and you can get access to Vanguard funds through their ETF offerings.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby umfundi » Tue Feb 12, 2013 3:11 am

The financial institutions are leery of federal oversight on money laundering for drugs, terrorism, and tax evasion. I can't say I blame them.

There may be no specific law, but the feds can come down on them at any time. The constant answer I get is to get a US street address for your mail. Which also avoids identity theft issues with foreign mail.

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Re: Why can US citizen expats not invest w/Vanguard?

Postby Valuethinker » Tue Feb 12, 2013 4:07 am

englishgirl wrote:It's a fairly common problem. See here: http://aaro.org/denied-bank-accounts

In a somewhat related situation, I can't open an account with Vanguard in the UK so I can move a UK investment there, because I have a US address. Even though I am a Vanguard customer in the US, and am not trying to hide any money in an offshore account - the money is stuck in a 401k-type account that I would just like to transfer to a company that will charge me lower fees.


Can you move to a Self Invested Personal Pension? (SIPP)? Alliance Trust does a decent, simple one I think? The main problem will be money laundering (2 forms of ID, passport + drivers license/ utility bill) showing UK address? You could possibly use a parental address?

The other thought is whether an insurance company would sell you some kind of deferred annuity-- but I don't know about charges.

If you can get below 1% in the UK on charges you are quid's in-- I am paying 0.8% with a major insurer, and short of going the SIPP route, that's about as good as you can do I think.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby denjin » Tue Feb 12, 2013 5:42 am

I invest with them via Ameritrade, but I did have to use a US address to invest. Luckily the last address I lived at in the States was with a relative and I kept it as my bank account address - between the US bank account and the address it is registered at, it was enough. I also so have a US phone number (via Skype).

Additionally I do S&S ISA in the UK ( and company defined contribution pension ), but this is a real nightmare due to the onerous reporting they make Americans do for foreign funds. It's very easy to find funds at less than 1% TER, but be careful about platform and other charges. Most of them below .57% will have additional fees on them.
Last edited by denjin on Tue Feb 12, 2013 7:21 am, edited 1 time in total.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby TedSwippet » Tue Feb 12, 2013 5:56 am

Valuethinker wrote:...Can you move to a Self Invested Personal Pension? (SIPP)? Alliance Trust does a decent, simple one I think? The main problem will be money laundering (2 forms of ID, passport + drivers license/ utility bill) showing UK address? You could possibly use a parental address?

The main problem will be this declaration on Alliance Trust applications: "I am not a US person (please tick). If you cannot give this declaration please do not continue with this application." Overreaching and extraterritorial US regulation causes many UK fund supermarkets, fund providers, and banks to no longer offer any products to US citizens or residents. This includes US citizens who live full time in the UK, perhaps for decades or even their whole lives -- you are lucky to be Canadian and not American!

Valuethinker wrote:If you can get below 1% in the UK on charges you are quid's in-- I am paying 0.8% with a major insurer, and short of going the SIPP route, that's about as good as you can do I think.

Eh? Now you've lost me. The UK investing wiki page lists dozens of funds with TERs averaging around 0.3% and bottoming out at 0.09%.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby sleepingrust » Tue Feb 12, 2013 6:50 am

As noted above, Fidelity is great with no-US-address Americans; everything is done on their website and by email.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby denjin » Tue Feb 12, 2013 8:30 am

TedSwippet wrote:
Valuethinker wrote:If you can get below 1% in the UK on charges you are quid's in-- I am paying 0.8% with a major insurer, and short of going the SIPP route, that's about as good as you can do I think.

Eh? Now you've lost me. The UK investing wiki page lists dozens of funds with TERs averaging around 0.3% and bottoming out at 0.09%.

No one in the UK offers you a TER of .3 or less without some additional fees. There will be platform charges or something, unfortunately - not seen anyone offer below ~.5 for 'free'.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby cbeck » Tue Feb 12, 2013 9:41 am

Karamatsu wrote:This is a common problem at a lot of US financial institutions. They all try to pretend it's due to some law, regulation, rule, or just for some vague "compliance" without ever revealing just what it is they're trying to comply with. At the same time, brokers like Fidelity and Schwab have no trouble at all setting up and maintaining an account for US citizens abroad, with no US address required. So clearly those who refuse are not being entirely honest. It may be that regulations for handling overseas accounts have become complex, but that just means some companies think overseas customers are worth the trouble and others don't.

With that in mind, rather than try to set up a US address, which could conceivably lead to trouble down the road (state taxation, possible problems due to claiming to live in one place when in fact your residence is somewhere else), I think it's best in these situations just to use a broker that is set up to handle overseas accounts. Then you're covered, and you can get access to Vanguard funds through their ETF offerings.


I don't think you get it. It's not the US govt that they are worried about. Institutions like Vanguard are worried that they may become liable to the regulations of a country like Japan if it appears that they are soliciting business in the foreign jurisdiction even if they don't have a business address there themselves.

The solution of obtaining a US address does not involve making any claim of living at the address. It is perfectly legitimate to have a mailing address. It's true that the mailing address should be in a state without an income tax to avoid the risk of a tax domicile audit by that state. But it's easy to get such an address. I use a FL mailing address provided by a mail forwarding company, but I have never claimed that that was my residence. Brokerage firms and others can easily identify my address as a mail forwarding company just as they can easily identify my ip address as a foreign one. The fact that they don't shows that they do not actually have any concern with overseas customers per se, as long as they can credibly claim not to be soliciting business in those jurisdictions.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby TedSwippet » Tue Feb 12, 2013 11:34 am

denjin wrote:
TedSwippet wrote:...The UK investing wiki page lists dozens of funds with TERs averaging around 0.3% and bottoming out at 0.09%.

No one in the UK offers you a TER of .3 or less without some additional fees. There will be platform charges or something, unfortunately - not seen anyone offer below ~.5 for 'free'.

The additional fees don't have to swamp everything, though. First example off the top of my head -- Vanguard FTSE all-share index fund, through Hargreaves Lansdown. The fund TER is 0.15% and the HL's platform charge is £24/year. That squeezes overall annual charges to under 0.5% for any portfolio above £6,900, not much over half a year's ISA allowance. And for larger and realistic portfolios -- SIPPs and so on -- the total cumulative charge easily drops below 0.2%. Certainly well below 0.5%.

Perhaps 0.8% was competitive in the past for a UK tracker, but it's very uncompetitive these days.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby denjin » Tue Feb 12, 2013 7:30 pm

TedSwippet wrote:
denjin wrote:
TedSwippet wrote:...The UK investing wiki page lists dozens of funds with TERs averaging around 0.3% and bottoming out at 0.09%.

No one in the UK offers you a TER of .3 or less without some additional fees. There will be platform charges or something, unfortunately - not seen anyone offer below ~.5 for 'free'.

The additional fees don't have to swamp everything, though. First example off the top of my head -- Vanguard FTSE all-share index fund, through Hargreaves Lansdown. The fund TER is 0.15% and the HL's platform charge is £24/year. That squeezes overall annual charges to under 0.5% for any portfolio above £6,900, not much over half a year's ISA allowance. And for larger and realistic portfolios -- SIPPs and so on -- the total cumulative charge easily drops below 0.2%. Certainly well below 0.5%.

Perhaps 0.8% was competitive in the past for a UK tracker, but it's very uncompetitive these days.

Oh, no arguments from me! :) I have most of my money in their 80% equity fund...and just a small amount extra in two .57 BlackRock funds. I just wanted to make sure people realised that in the UK the various companies such as HL are fond of adding some extra fees. The £2/mo definitely doesn't hurt too much once you have one year+ allowance in...
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Re: Why can US citizen expats not invest w/Vanguard?

Postby ExpatInAsia » Tue Feb 12, 2013 11:42 pm

:happy
Thanks to one and all for your very helpful and insightful comments. I'm not sure how to refer back to specific posters and quote them, but here are 2 follow-on questions:
1.) one person mentioned finding a broker who can sell me the Vanguard investments I want without a US address. If I'm recalling that comment correctly, how can I find such a broker? Would my US bank have someone like that on staff?
2.) some others have suggested a mail-forwarding service in order to have a US mailing address--any suggestions (reliable and a good price; they don't have to be Speedy Gonzalez, as long as the minimal amount of mail they receive gets to me--will accept Slow Boat to China at a lower cost if it comes to that), specifically for Texas (San Antonio or Austin, preferably)?

Thanks again! :idea:
--OOPS! I said "2 questions"--looks like I wrote 3!!!! :?: :?: :?:
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Re: Why can US citizen expats not invest w/Vanguard?

Postby cbeck » Tue Feb 12, 2013 11:51 pm

ExpatInAsia wrote::happy

2.) some others have suggested a mail-forwarding service in order to have a US mailing address--any suggestions (reliable and a good price; they don't have to be Speedy Gonzalez, as long as the minimal amount of mail they receive gets to me--will accept Slow Boat to China at a lower cost if it comes to that), specifically for Texas (San Antonio or Austin, preferably)?


http://www.sbimailservice.com/

I also recommend getting a US phone number. It might not be necessary, but it will help avoid headaches. I use ooma.com, but they are not the cheapest. You might google MagicJack for a low-cost solution.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby umfundi » Wed Feb 13, 2013 3:19 am

I also recommend getting a US phone number.

Skype might be a (no cost?) option.

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Re: Why can US citizen expats not invest w/Vanguard?

Postby Karamatsu » Wed Feb 13, 2013 10:10 pm

It's not the US govt that they are worried about. Institutions like Vanguard are worried that they may become liable to the regulations of a country like Japan if it appears that they are soliciting business in the foreign jurisdiction even if they don't have a business address there themselves.


That may be, but it isn't what they say. One broker, in particular, when summarily closing my account because of my foreign address attributed their policy change it to provisions of the PATRIOT Act, but as with the OP, they were not able to point to any provision in the Act that was forcing their decision. You'd think if their concerns were regulations in the foreign country they would just say so and be done with it.

As for the US mailing address, if you want to keep things above board, the important thing is to check the contract terms to see if they require US residency. Vanguard, for example, explicitly told me they require customers to be US residents, therefore merely having a US mailing address would not be sufficient to open an account. Of course... people can still do that, us a mailing address, but it's a form of deception. Vanguard may even suspect that it's the case (wink wink, nod nod), but in the end, if there is any liability, they will claim to have been deceived, and burden will fall on the customer.

Personally I have no trouble with Vanguard's policy, though.They don't want my business, Schwab and Fidelity do. Fine. But I share the OP's frustration when a company says they can't do something for compliance reasons but then can't/won't explain just what it is they are trying to comply with.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby NAVigator » Wed Feb 13, 2013 10:29 pm

As I explained before, it is not a compliance issue to having an address outside of the US. It is a policy issue of Vanguard against someone outside the US OPENING an account. My daughter, a US citizen, has been a Vanguard customer for ten years. She immigrated to a country in Europe and has no problem keeping her Vanguard account and making transactions from her new location without a US address.

I called the rep at Vanguard to verify this. The one exception where an expat can open a Vanguard account is through inheriting assets held at Vanguard.

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Re: Why can US citizen expats not invest w/Vanguard?

Postby ExpatInAsia » Thu Feb 14, 2013 4:01 am

I tested their online application up to a certain point, and this is what it says:
--
More information

Vanguard funds are not registered for sale outside the U.S. You must provide a U.S. address.

Important information about opening a new account. The Vanguard Group Inc. and Vanguard Marketing Corporation are required by federal law to obtain from each person who opens an account certain personal information—including name, street address, and birth date among other information—that will be used to verify identity. If you do not provide us with this information, we will not be able to open the account. If we are unable to verify your identity, The Vanguard Group Inc. and Vanguard Marketing Corporation reserve the right to close your account or take other steps we deem reasonable.
--
Doesn't say "registered with who [whom?]" though! :confused
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Re: Why can US citizen expats not invest w/Vanguard?

Postby bpp » Thu Feb 14, 2013 4:28 am

ExpatInAsia wrote:I tested their online application up to a certain point, and this is what it says:
--
More information

Vanguard funds are not registered for sale outside the U.S. You must provide a U.S. address.
[...]
Doesn't say "registered with who [whom?]" though! :confused


Registered with the relevant authorities in other countries, I'd imagine.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby awrian » Thu Feb 14, 2013 5:13 am

I am a US Citizen and I live in Spain, all my investments are with Vanguard. I don't have a US mailing address. The only problem is I have to call if I want to buy an individual bond, otherwise everything is fine.
I tried to invest here in Spain but the commissions are so so so so so high. Is like a third world here.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby elgob.bogle » Thu Feb 14, 2013 7:41 am

A lot of "Recreational Vehicle" owners choose South Dakota as a "home state" due to their low taxes. This might work for you also. Here's one mail forwarding link: http://www.sdrvmail.com/

Good Luck

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Re: Why can US citizen expats not invest w/Vanguard?

Postby Karamatsu » Thu Feb 14, 2013 7:58 pm

Interesting about their on-line application. I think the devil is in the details. Looking back to what they told me in 2009, when I wanted to open account, was actually this:

Vanguard's U.S. mutual funds are for sale only to residents of the U.S,
Guam, Puerto Rico, and the U.S. Virgin Islands.


So you see the difference: even if all they need for the application to open an account is a US address, it appears that they still won't allow you (within their terms and conditions) to invest in their mutual funds. Since that's what I really wanted to do (avoid the spread, etc), there was no point in going further with the account, but if all someone wants is a VBS account (maybe trading Vanguard ETFs), then a US address of some kind seems to be all that's needed.

Of course, I'm only talking here about what the documents say. Obviously people living abroad do invest in Vanguard mutual funds, and I've never heard of anyone having trouble with that. There was a point where I was offered the option of investing in US-based mutual funds through my bank in Japan, but the catch was that, to do so, I had to sign a waiver saying that I would not hold them liable for any adverse legal consequences that might arise. They would not elaborate on what those consequences might be, so I dropped the matter, but it does seem to imply that there are, at least in principle, possible adverse consequences to be aware of.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby Red-y » Fri Feb 15, 2013 2:07 am

Karamatsu wrote:
As for the US mailing address, if you want to keep things above board, the important thing is to check the contract terms to see if they require US residency. Vanguard, for example, explicitly told me they require customers to be US residents, therefore merely having a US mailing address would not be sufficient to open an account. Of course... people can still do that, us a mailing address, but it's a form of deception. Vanguard may even suspect that it's the case (wink wink, nod nod), but in the end, if there is any liability, they will claim to have been deceived, and burden will fall on the customer.


My experience has been that providing a US mailing address that represents a PMB (Private Mail Box) at The UPS Store etc. may not be sufficient. The major brokerage houses will screen the address you provide, and if it corresponds to a known commercial (as opposed to residential) address, they will contact you for more information before opening the account.

I tried to do this (use a UPS store 'apartment' number as an address) after I moved to Canada. The account application was flagged and I was not able to open a new account as a non-US resident.

And Vanguard's policy varies by country...as a US citizen/Canadian resident, I am persona non grata. I could have kept my IRA and Roth IRAs open with them, but no new money, no switching funds, no purchases of stocks/bonds/ETFs. All I could have done was reinvest dividends and capital gains in what I already owned. I therefore moved my retirement accounts to Fidelity, who lets me trade whatever I want and add new funds to these existing RETIREMENT accounts. I cannot open a taxable regular account at Fidelity as a non-US resident.

As people on this thread have commented, if you're looking at other countries besides Canada, you may be OK to keep the Vanguard account and transact. Call them. Call them again to be sure you get the same answer twice. Then get it in writing.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby umfundi » Fri Feb 15, 2013 2:38 am

As though a Barbarian invasion from the North is a real concern. :wink: :annoyed

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Re: Why can US citizen expats not invest w/Vanguard?

Postby kramer » Fri Feb 15, 2013 9:21 am

I have 2 brokerage accounts (Vanguard and Schwab) and 1 savings account and 3 checking accounts and 1 credit card. When I left the USA, I was able to change my mailing address to a mail forwarding location for all of these accounts with no problems. In fact, I did it with Scottrade as well back when I had 3 brokerage accounts. However, I have not opened any new accounts since leaving.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby cazaubon » Fri Feb 15, 2013 8:44 pm

I am surprised that since Vanguard is now doing business in Canada that they still won't allow US Vanguard customers who are Canadian residents to manage their accounts remotely.

Is it any more expensive to hold Vanguard funds in Fidelity? My current 401K is with Fidelity and I assumed I would roll it over to Vanguard when I left the company and moved to Canada, but I don't want to pay more than what Vanguard charges.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby Alex Frakt » Sat Feb 16, 2013 7:08 pm

cazaubon wrote:Is it any more expensive to hold Vanguard funds in Fidelity? My current 401K is with Fidelity and I assumed I would roll it over to Vanguard when I left the company and moved to Canada, but I don't want to pay more than what Vanguard charges.

It's not more expensive to hold them, but Fidelity will charge a transaction fee (I think it's $75) on all purchases and sales of Vanguard (traditional) mutual funds. If you want to use Vanguard ETF's, you'll pay Fidelity's standard brokerage trading fee (which may be $0 depending on your account types and balances).
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Re: Why can US citizen expats not invest w/Vanguard?

Postby Karamatsu » Sat Feb 16, 2013 8:56 pm

I cannot open a taxable regular account at Fidelity as a non-US resident.


I didn't realize that. I do know that Schwab will open a new taxable account for a non-resident US citizen. They did that for a friend of mine a few years ago, anyway. Some paperwork had to go back and forth to verify his identity but it wasn't difficult. It may have helped that I introduced him, but I doubt it. My reputation isn't that impressive!
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Re: Why can US citizen expats not invest w/Vanguard?

Postby Red-y » Sun Feb 17, 2013 12:44 am

Alex Frakt wrote:
cazaubon wrote:Is it any more expensive to hold Vanguard funds in Fidelity? My current 401K is with Fidelity and I assumed I would roll it over to Vanguard when I left the company and moved to Canada, but I don't want to pay more than what Vanguard charges.

It's not more expensive to hold them, but Fidelity will charge a transaction fee (I think it's $75) on all purchases and sales of Vanguard (traditional) mutual funds. If you want to use Vanguard ETF's, you'll pay Fidelity's standard brokerage trading fee (which may be $0 depending on your account types and balances).

Buying a Vanguard mutual fund in a Fidelity account involves a $75 fee to purchase; it's free to sell any VG mutual fund shares. You can't buy Admiral class shares, only Investor class shares. Generally the ER on the ETF is the same as the equivalent Admiral class, so that's the way to go.

I'm paying $7.95 per trade on ETFs and I have a pretty high account balance...as far as I know, the only free ETF trades at Fidelity are the 30 iShares ETFs they've designated as free for any one to trade.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby roblpm » Thu Mar 14, 2013 7:07 pm

The main problem will be this declaration on Alliance Trust applications: "I am not a US person (please tick). If you cannot give this declaration please do not continue with this application." Overreaching and extraterritorial US regulation causes many UK fund supermarkets, fund providers, and banks to no longer offer any products to US citizens or residents. This includes US citizens who live full time in the UK, perhaps for decades or even their whole lives -- you are lucky to be Canadian and not American!


I have a slightly different problem in that I am British, lived in the UK all my life but happen to be a US citizen as well. Never filed a US tax return and trying to start figuring out how I am going to do it. I have an Alliance Trust SIPP (the US person thing says resident when you look at the blurb, not citizen so I thought I was OK!) with Vanguard Life Startegy Funds (only £40k though!).

So I really dont know what to do!

So does anyone know any UK fund supermarkets who will deal with US citizens?

Does anyone know any funds available in the UK that are not classed as PFICs?

Does anyone have any good ideas! Nightmare! In order to renounce your US citizenship you need to have done the last 5 years returns ........................!!
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Re: Why can US citizen expats not invest w/Vanguard?

Postby Karamatsu » Thu Mar 14, 2013 8:09 pm

Wow, that's a thorny issue and I think you really need professional legal representation on the citizenship and back-filing issue. That's not a place to make mistakes. If you want to continue holding your citizenship then the answer is probably just to file. The IRS may still have an amnesty program for that, but you should check with someone who knows for certain, as well as how many years back you have to go, whether you can use the Foreign Earned Income Exclusion, etc. If you don't want to continue your citizenship then you may have choices depending on whether you are willing to forego entering the US... ever. But I don't know. It's a terrible position to be in.

As for funds, the only way to be sure you avoid PFIC issues is to check and make sure that the fund does all the necessary reporting. US domiciled funds purchased through a British broker, for example, may be OK (check), and may even send you a 1099. There may also be some local funds that, for one reason or another, are willing to jump through the necessary regulatory hoops in order to capture the US expat market. You'll have to check around. The other route you can go, but you have to be very careful, is to knowingly invest in PFICs and take the mark-to-market election, but this is risky and negates the tax efficiency of holding equities. Best not to go there unless you really know what you're doing because you'll be paying taxes on income that you do not actually receive. There are ways around this, but it all gets very messy.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby KyleAAA » Thu Mar 14, 2013 9:29 pm

Well, you can invest in their ETFs. That's likely what I would do in your situation.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby nun » Mon Sep 02, 2013 11:59 pm

If you are a US citizen living in the UK Vanguard told me that they will continue to service accounts if they were opened when you lived in the US.

The bigger issue is that you should not own PFIC investments (ie non-US mutual funds) as they are very US tax inefficient. Also you will probably fall under HMRC's non-distributing funds rules, so almost all US mutual funds will also be very tax inefficient.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby harini » Sat Sep 07, 2013 10:53 am

I am a US citizen who is planning to move to India for some extended period. I have a condo in New Jersey that I have rented out for the past 5 years - I am living in California now. Can I give the condo address as my permanent address (hoping I will never ever get mail there), and give my Indian address as my mailing address and still do business with Vanguard as usual with no restrictions?
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Re: Why can US citizen expats not invest w/Vanguard?

Postby sperry8 » Sat Sep 07, 2013 5:47 pm

ExpatInAsia wrote::happy
Thanks to one and all for your very helpful and insightful comments. I'm not sure how to refer back to specific posters and quote them, but here are 2 follow-on questions:
1.) one person mentioned finding a broker who can sell me the Vanguard investments I want without a US address. If I'm recalling that comment correctly, how can I find such a broker? Would my US bank have someone like that on staff?
2.) some others have suggested a mail-forwarding service in order to have a US mailing address--any suggestions (reliable and a good price; they don't have to be Speedy Gonzalez, as long as the minimal amount of mail they receive gets to me--will accept Slow Boat to China at a lower cost if it comes to that), specifically for Texas (San Antonio or Austin, preferably)?

Thanks again! :idea:
--OOPS! I said "2 questions"--looks like I wrote 3!!!! :?: :?: :?:


Dont bother with a broker - just get a US address. It's easy.
1- I suggest using a company like UPS Store or Mail Boxes Etc who offer street based mailing addresses - they give you what appears to be a mailing address (you don't want a PO Box - companies don't accept them). They will send your mail to you on demand. But since you can set Vanguard to send all your paperwork online, you will rarely if ever need to ask for your mail. And when you do, all you'll get is any change of address or change of beneficiary letters.
2- Don't pay for a phone number. See if you can get a Google Voice number - they give you a free number and all calls can be set to go to voicemail and be transcribed and sent right to your email. If you can't get Google Voice, you can try Phonebooth.com - it works the same way. But the free account has a waiting list. Perhaps its short. https://www.phonebooth.com/pb/signup
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Re: Why can US citizen expats not invest w/Vanguard?

Postby kramer » Sun Sep 08, 2013 12:36 am

sperry8 wrote:
ExpatInAsia wrote::happy
Thanks to one and all for your very helpful and insightful comments. I'm not sure how to refer back to specific posters and quote them, but here are 2 follow-on questions:
1.) one person mentioned finding a broker who can sell me the Vanguard investments I want without a US address. If I'm recalling that comment correctly, how can I find such a broker? Would my US bank have someone like that on staff?
2.) some others have suggested a mail-forwarding service in order to have a US mailing address--any suggestions (reliable and a good price; they don't have to be Speedy Gonzalez, as long as the minimal amount of mail they receive gets to me--will accept Slow Boat to China at a lower cost if it comes to that), specifically for Texas (San Antonio or Austin, preferably)?

Thanks again! :idea:
--OOPS! I said "2 questions"--looks like I wrote 3!!!! :?: :?: :?:


Dont bother with a broker - just get a US address. It's easy.
1- I suggest using a company like UPS Store or Mail Boxes Etc who offer street based mailing addresses - they give you what appears to be a mailing address (you don't want a PO Box - companies don't accept them). They will send your mail to you on demand. But since you can set Vanguard to send all your paperwork online, you will rarely if ever need to ask for your mail. And when you do, all you'll get is any change of address or change of beneficiary letters.
2- Don't pay for a phone number. See if you can get a Google Voice number - they give you a free number and all calls can be set to go to voicemail and be transcribed and sent right to your email. If you can't get Google Voice, you can try Phonebooth.com - it works the same way. But the free account has a waiting list. Perhaps its short. https://www.phonebooth.com/pb/signup


On the mail service, I would suggest making sure that they have a scanning service. As an overseas resident, I basically never need to see my snail mail. It is almost entirely superfluous. I even did my tax returns this year (Turbo Tax) without having seen any of my snail mail. The exception is the very occasional important mail. For instance, the IRS had some questions about a past tax return of mine a few years ago. I was able to have those inquiries scanned each time and I read them within 24 hours of receipt in Colombia. Instead of trashing the rest of the superfluous mail, I just have it forwarded to me each time I visit the USA. Each time I receive a piece of mail, I am sent a photograph of the envelope in my email. I must pay extra to actually have it scanned.

I have used Skype for my USA phone number. For $60/year, I am getting a permanent phone number with voicemail that I can also forward to another number, if desired, and I also get unlimited calling to the USA and Canada, all included. I am not sure if this offer is still available to new customers. If you forward your calls, one problem can be your foreign language voicemail on your mobile phone in another country if you don't answer the call. When I was living in Colombia, this would confuse some callers.

Once, I wanted to make a posting on craigslist for advertising something. I was making the post before I returned to the USA from overseas. I could not to do it because my USA phone number was a VOIP number. They require a real phone (even some mobile services, like cricket, do not qualify as a real phone number). So I had to wait until I got the USA and use my Tmobile mobile phone number to post the advertisement.

Finally, another thing to consider is how you might get mail order packages to your adopted country (from Amazon, etc). This is totally country-specific with issues of mail reliability, customs charges, etc. But it is something to consider in a mail service. If you are going to a popular location, there may be mail services that specialize in that country.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby cbeck » Sun Sep 08, 2013 9:03 am

harini wrote:I am a US citizen who is planning to move to India for some extended period. I have a condo in New Jersey that I have rented out for the past 5 years - I am living in California now. Can I give the condo address as my permanent address (hoping I will never ever get mail there), and give my Indian address as my mailing address and still do business with Vanguard as usual with no restrictions?


You should be careful to avoid liability for state taxes. CA is one of the most aggressive states in coming after former residents for state income tax arrears. Your ownership of rental property in NJ and/or your use of the condo as your permanent address might make you liable for NJ income taxes as well. You have to review the tax domicile regulations of each state.

Using a mail forwarding company based in a state without an income tax would probably lessen your risk of state tax liability, although in itself that would not necessarily be enough to protect you, especially from CA. I have been using such an address as my US address with Vanguard and other brokers for the past few years without a problem so far.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby umfundi » Sun Sep 08, 2013 9:55 am

For a drop box address, look at what the RV (Recreational Vehicle) people do. Last time I looked, South Dakota seemed to be the state of choice. (These are people who have no fixed address, and tour the country in their RVs.)

I spoke to Charles Schwab on a similar issue a few weeks ago, and they understood exactly what I was asking. I suggest you call them about having a non-resident account.

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Re: Why can US citizen expats not invest w/Vanguard?

Postby bpp » Sun Sep 08, 2013 10:14 am

ExpatInAsia wrote:Long story short: Vanguard's minions have repeatedly told me that US federal law (the SEC) + the laws here in Taiwan prohibit me investing with Vanguard. W/repeated exchanges, I've gotten no straight answers from the Vanguard staffers I correspond with (Me: "what laws? What rules? Cite them, please?" Vanguard Minion: "uh...uh...uh...I don't know what specific law says so...but the law says so!"). I can find no such US law, no such law in the Republic of China, and the US Department of State hasn't coughed up a law or international agreement that says "US guy can't invest with Vanguard." In fact, a SEC staff attorney responded to me with the comment that the SEC has no such rule or law!


For what it is worth, I have gotten similar refusals from Citibank Japan and Fidelity Japan. "SEC rules." I sent an e-mail to the SEC, and got the reply that there is no such rule, and that the SEC does not even consider me to be within their jurisdiction.

I relayed this information to Citibank and Fidelity, and was told by both of them that, "We don't care. US citizens are too much trouble to deal with, so as company policy we have decided not do deal with them."

In response, I have decided as a matter of personal policy to never deal with Citibank or Fidelity, even if they change their policies in the future.
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Re: Why can US citizen expats not invest w/Vanguard?

Postby manwithnoname » Sun Sep 08, 2013 4:45 pm

Despite what the SEC tells you there are securities laws which prevent us citizens from owning securities not registered with the SEC and US brokerages dont want to deal with the hassle of regulations applying to US residents living in foreign countries. See link P 3.

http://www.overseasamericansweek.com/do ... Denied.pdf

There are also restrictions on US citizens living abroad from opening bank accounts in the US and cases where existing accounts have been closed. FIDO, Citi and VG are 3 of the companies listed as not allowing accounts by US citizens living abroad. P2 top

"Organizations representing Americans overseas, as well as the State Department, are receiving reports that a significant
number of American citizens residing overseas are denied new accounts with American banks; in some instances,
accounts that have existed for years are closed by the bank over the objections of the account holder. Financial
institutions mentioned include Ameriprise, Bank of America; Bank of New Hampshire; Citibank; Citizens Bank; Edward
Jones, St. Louis; E-Trade; Fidelity Investments; INGDirect; JPMorganChase; Morgan Stanley; National City Bank in
Riverview, Michigan; Provident Bank, Maryland; Smith Barney; T. Rowe Price; USAA Federal Saving Bank; Vanguard
mutual fund; Wachovia; Washington Mutual; Washington Mutual Investment, Spokane; WellsFargo; Zions Direct."


Unless you have a retirement account of over $500k US financial institutions don't want your retirement accounts if you live abroad because of Know your customer rules. KYC also applies to bank accounts.

http://www.international-adviser.com/ne ... retirement

And then there is FATCA which effectively prevents US citizens living abroad from opening accounts with foreign banks.

http://www.freedomworks.org/blog/jborow ... erican-exp
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Re: Why can US citizen expats not invest w/Vanguard?

Postby bpp » Mon Sep 09, 2013 4:38 am

I'm intimately familiar with the banking and investing problems faced by US citizens who live outside the US, and I appreciate ACA's efforts to improve the situation, but on the narrow question of SEC rules I think that letter of theirs has a factual error.

They state: "SEC restrictions and regulations prohibit U.S. citizens to invest in certain securities which have not been filed with the SEC. Of course, these restrictions apply to all Americans, not just overseas Americans."

I am pretty sure there is no blanket rule against US citizens buying non-SEC registered securities. There are PFIC taxes which can make some of them extremely painful to own, but no outright ban on owning them. Some can even be purchased through US brokerages. Perhaps there is some sub-set that US brokerages are not allowed to offer, though?

As for SEC protections in general extending to Americans living overseas, all I can say is that the SEC told me they consider that outside their jurisdiction.

Note that the problem I was talking about was not with a brokerage in the US (I can understand if they would not want to run afoul of, say, Japan's version of the SEC by marketing to residents of Japan), but with Japanese branches of US brokerages/banks. There should be no KYC issue in that case, and they did not cite KYC as being the problem. When I told them that the SEC said there should be no problem as far as the SEC regulations are concerned, one of them (I forget which) replied, "We don't care if there is no US law against it now, there is no telling what laws the US will pass in the future, and we just don't want to take any chances."

So I went with Japanese banks and brokerages -- which was never a problem until the QI and now FATCA rules started closing off that avenue as well... Basically, all of the lower-cost options are closed off to me now, and I'm just praying things don't get any worse than they already are. (Though I confess to pessimism on that score.)
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