Note: This post was most recently updated on 11/1/2019 to account for changes in Schwab's account holding practices as well as the addition of commission-free trading of ETFs in some brokerages.
One of the challenges for expats that leave the United States and want to invest elsewhere is that the traditional investment options available to them in the US may not be available. (For more information on this topic, read our white paper on the topic). As a result, there are some custodians in our experience that are more "friendly" than others. Please note that not all brokerages will accept clients internationally: It is best to ask your financial advisor or contact the brokerage house directly to do some due diligence on your particular situation before moving forward with any of these options. For instance, some expats believe that they can just use a P.O. Box or a friend's address, but in many cases, it is not that simple (and potentially not legal either!).
The following list of pros and cons originates from our perspective of financial advisors working with international clients. The tools may differ for someone that is trading on a "retail" platform rather than an institutional one. Because expat investing in many cases limits access to the use of mutual funds, often we are forced to use Exchange Traded Funds (ETFs). ETFs have grown significantly in popularity and offer in many cases a low-cost, tax-efficient, diversified manner in which to invest. Recently, regulations in the European Union have restricted access to ETFs for European Union residents. Consequently, we use a variety of strategies in an effort to ensure our clients remain invested.
If you need help choosing a brokerage or have further questions about investing as an American abroad, schedule a no-cost, no-obligation appointment here.
Pros: TD Ameritrade offers commission-free trading for ETFs. Their trading tools for financial advisors that custody assets with them, iRebal, is a robust rebalancing software for portfolio management. TD has rolled out a Model Market Center that helps advisors utilize model portfolios from investment managers at no cost. They also offer the ability to blend multiple models to help advisors diversify investments and customize the portfolio to meet their clients needs. TD is known for its integrations with other software programs, offering an open API that plugs in well with other tools. TD Ameritrade finished as the #3 online broker in Barron's 2018 rankings.
Cons: TD Ameritrade tends to be a bit more stringent in who they can take on as clients internationally, especially now in Europe. TD may have a more limited selection of international individual bonds. Paperwork can sometimes take a little longer at TD, as they generally take a little more time to clear out not in good order (NIGO) items.
Pros: Interactive Brokers (IB) is known for being a friendly platform in setting up accounts for expats. They offer a wide variety of funds across various countries as well as the ability to trade currencies at reasonable rates. Barron's ranked Interactive Brokers as the #1 Online Broker for 2018. IB is also known for having extremely low commissions relative to others in the industry. Additionally, IB allows multiple currencies meaning deposits can be made in many local currencies and do not need to be converted to dollars before deposit. If you have a unique situation and heard "no" from another custodian, there is a good chance that IB will get it done. IB promises a fully digital transfer process.
Cons: This platform, while robust, is difficult to navigate, as the user experience (UI) isn't as easy to use as TD Ameritrade or Schwab. IB has a very paltry commission-free ETF list. Trades may carry ticket charges on them through their more robust trading platform, IBKR Pro, although Interactive Brokers has released a commission-free platform recently called IBKR Lite, which is currently only available to “retail” investors. (Although it isn’t a certainty that commission-free trading is actually less expensive than paying ticket charges. Read more on that here!) The impressive amount of choice and offerings they have tends to be overwhelming for new clients on the platform.
Note: We have recently published a FAQ related to Schwab no longer offering ETFs to EU retail investors. Read that here.
Pros: Schwab offers a wide menu of ETFs and no commissions on ETF trades. They are generally fairly friendly towards expat investors, although not to the level of Interactive Brokers due to some recent changes in offerings. Although they have a more closed technological interface relative to TD Ameritrade, their own technology is impressive. Schwab finished with the #4 ranking in Barron's 2018 online broker rankings.
Cons: Although Schwab generally is a bit more friendly to opening accounts than TD Ameritrade, it still lags behind Interactive Brokers for ease of opening accounts for expats. Recently they have announced they are leaving select European markets including Italy and France. Additionally, it is a fully U.S. brokerage, which means they don’t allow deposits in foreign currencies and charge to convert assets from dollars to foreign currencies. Unlike Interactive Brokers, there is also a $25 dollar international wire fee. Moreover, like most mainstream brokerages, the list of permissible jurisdictions for account openings has shrunk in recent years.
Looking for help? Set up a no-cost, no-obligation appointment with Keith, our Director of International Advisory Services, to explore your investment and financial planning options.