In addition to our announcement regarding the account closures for Italy and France for retail customers, we wanted to include an additional FAQ regarding account closures for Charles Schwab retail clients.
Q: Why is Charles Schwab UK closing accounts for clients in France and Italy?
A: The initial claim is Brexit. While Brexit is not yet a fait accompli, indications are that it will mean the end of the passporting regime, which allows for companies registered in one EU country to be registered in all of them. However, it is also likely that Schwab is-- in the wake of their decision regarding PRIIPs and KIIDS and the decision to no longer sell ETFs to EU-based clients (which was much later than other brokerage firms)-- taking a closer look at European compliance and realizing that it is more complicated than they’ve originally anticipated.
Schwab is more flexible than many U.S. based brokers in their account closures as they are not yet at the stage where they are announcing they will close all accounts in a period of time, but they are now limiting actions in the accounts to sales and liquidation in terms of moving out the accounts by December 31.
Q: What can I do, where can I open accounts?
A: The number one resource for Americans abroad in our opinion should be Interactive Brokers, which is a truly international brokerage. The drawbacks of Interactive Brokers-- as we discuss in our piece on the topic-- are that it tends to be a bit more complex than a standard brokerage interface and generally the customer service is not as strong as other retail brokerages. That said, IB has made strides on both fronts and will likely continue to improve.
If you split time between the EU and the United States, maintaining a U.S. address is the easiest solution as well. However, individuals should resist those Advisors who push them to keep an American address or encourage other schemes to subvert U.S. and EU rules.
Q: How do we know that this won’t happen to IB clients?
A: As a truly global brokerage-- rather than a US brokerage serving international clients-- the incentives for IB to comply are much greater. First, they are generally listed as members of international exchanges in the various countries where they do business, so they were less reliant on “passporting” than Schwab. Additionally, IB has already taken steps to move operations to Lichtenstein for those clients in the European Union.
This issue is still ongoing and we will update clients and the public as we learn more. For investors that would like to discuss their specific situation, we welcome you to schedule an initial no-cost, no-obligation consultation with our Director of International Advisory services, Keith Poniewaz. Keith works with U.S. expats on financial planning and wealth management. You may also email Keith as well.