Tax Advisers Don’t Want To Know US Expats

US expats are fast becoming the untouchables of the financial world as tougher regulation limits who can give them advice and handle their money.

Banks have already pulled the plug on many US expat accounts around the world due to the impositions required by the Foreign Account Tax Compliance Act (FATCA).

Now US based financial advisers claim they are waving goodbye to offshore clients because many consider they cannot keep up with the ‘know your customer’ rules for retirement savings.

American financial institutions, like banks and pension providers, are managing the wealth of their richest clients, but are allegedly quietly telling the rest that they are not wanted.

The requirement demands US advisers managing individual retirement accounts (IRAs), 401(k) plans and Keogh accounts must risk assess their clients attitude to investment and understand their personal financial needs and objectives.

FATCA compliance

Although the rules were introduced in 2003, FATCA has led many advisers to revisit their compliance – and many cannot see how the can know enough about their offshore clients to comply with the regulations.

The international financial landscape is changing for all expats, not just Americans, with the advent of closer technology ties between the leading industrial nations and offshore financial centres that were once suffered but are now becoming ‘legitimate’ by opening their secrets to outside scrutiny.

Advisers say banks and pension providers will keep customers with at least $500,000 in their retirement savings accounts, but will bid the rest farewell.

Some big American financial names, like Merrill Lynch, Morgan Stanley, PNC Bank, Vanguard and Fidelity are allegedly contacting expats and asking them to move on.

No problem, says FIRA

US Financial Industry Regulatory Authority (FIRA) claims expats and advisers may be exaggerating the problem as few complaints have been made about expat retirement accounts.

FIRA says this would indicate to them that there is no problem – or expats do not know FIRA can look into these complaints.

Other cite rising numbers of US taxpayers handing back their passports to avoid FATCA and tax problems – but although the number renouncing citizenship has increased, from around 850 to 1,400 a year, as a proportion of the 7 million US expats across the world, the total is minimal.

Tax advice is the issue that splits providers – those offering advice consider the know your customer rules prevent them from offering a full service, while financial firms offering no advice have no problems with expat customers.

So the message for US expats seems to be self-managed retirement investments are OK with most financial firms – but the options are disappearing fast if tax advice is wanted as well.