Merrill Lynch has 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 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) and/or credit facilities effective _________.
The letter goes on to offer two options:
1. Transfer the accounts to another financial institution
2. Have the assets distributed to you
Not all US expat clients of Merrill Lynch are getting these letters, only those whose accounts are below a certain threshold. Basically Merrill Lynch cannot be bothered to do the reporting and due diligence necessary to maintain these accounts even for people who have sometimes been their clients for many years and have paid them thousands or even tens of thousands in commissions and fees over those years.
The two options in the letter are easier said than done. The second option may not be very attractive if it is a tax-deferred account like an IRA because there may be substantial tax and possibly early withdrawal penalties should the money simply be distributed. The first option may not be so easy either because there are fewer and fewer US brokerage firms willing to deal with American expats. Charles Schwab recently sent a letter to their US expat clients in five countries that their accounts would be closed, and other US brokerage firms have varying policies with respect to accommodating Americans living outside the USA.
So what can you do if you have received this letter or a similar one from another brokerage firm?
The best solution is the first option that Merrill Lynch suggests because if you can find a US brokerage firm or investment advisor who will work with you then the accounts can simply be transferred electronically without tax consequences and without having to sell the underlying investments. The key though is to find a broker or advisor that specializes in US expatriate clients because otherwise you risk having to go through the process again at some point in the future when maybe there will be even fewer options available.
At this point I will happily insert a blatant advertisement for our services – we have specialized in investment management and financial planning for US expats since 2002 and over 80% of our clients are Americans living outside the USA.
The fact is that there are maybe three or four US firms that say they specialize in dealing with US expatriate clients but for most of them these clients do not constitute the majority of their business.
If investment management is important to you, then you should look for a firm where your investments will be managed or advised by a Chartered Financial Analyst (CFA). This designation is the most widely accepted portfolio manager designation in the world, and the only global portfolio management credential.
If financial planning is important to you then you should look for the CFPTM designation. This denotes a Certified Financial PlannerTM, which is the most widely accepted, and again the only global, financial planning designation.
It may also be important to you whether the investment accounts offered are multiple currency and whether money can be wired in and out in non-US currency and exchanged at a good rate if you spend your money in something other than US Dollars.
Also, does the investment account offer access to non-US investment markets and are the trading fees competitive? Many brokers advertise non-US market access but placing trades on non-US exchanges carries a hefty fee or currency conversion cost. If you are a non-US resident, international investments may be an important part of your portfolio.
Another important consideration is whether the investment advisor, if you choose to use one, charges a reasonable fee and actually does something on an ongoing basis to earn that fee. These days most advisors charge ongoing fees rather than commissions but if all the advisor does is park your money in a range of passive investments and collects his fee every quarter for doing not much then you might as well just pay a one-off fee for a financial plan and do it yourself or use one of the new roboadvisor offerings.
Finally, you should choose an advisor who has been in the US expat business for a while because they will most likely also understand non-investment related issues such as cross-border taxation and estate planning and will have an extensive referral network for such resources. They should also understand how non-US investments and assets may impact on your US tax and estate planning picture.
If you are an American expat and are being forced to close your US investment account, or would simply like to consider the services of a financial advisor specializing in US expatriate clients, I encourage you to contact us for a free, no-obligation, consultation by completing the form below. We have been serving clients like you since 2002 and would be happy to propose solutions to put your mind at ease regarding the cross-border financial issues you face.
Tom Zachystal, CFA, CFP©
Individual Asset Management (IAM)
Tom Zachystal is President and Chief Investment Officer of Individual Asset Management, a Registered Investment Advisor specializing in investment management and financial planning for Americans living abroad. He is also President-Elect of the San Francisco chapter of the Financial Planning Association.
This article is for informational purposes only; it is not intended to offer advice or guidance on legal, tax, or investment matters. Such advice can be given only with full understanding of a person’s specific situation.