Fidelity in Germany or USA?

[dmbartender 91]

Hey guys, I wanted to start some mutual funds for myself and our children, who are minors. Starting an American Fidelity account from abroad has been difficult (I think maybe it is not allowed, and geotracking is employed to stop this). Has anyone successfully started a Fidelity account in the USA? I think that as Americans, we need to have our accounts there for tax reasons, right? Or, are we allowed to have investment accounts here in Germany?

[jeba 4,347]

I have no idea about the rules for Americans but when I, being German, tried to open a US broker account I was rejected because of residing outside the US. However, some US brokers have European branches. E.g. Independent Brokers has a branch in Ireland, which you´ll become a customer of if you open an account with Lynx brokers (domiciled in Germany). There will probably be so-called introducing brokers for Fidelity, too.

Be aware though that working with a non-German broker will make your German tax filing more of a hassle.

[El Jeffo 42,120]

"I have no idea what I'm talking about but I'll write something anyway" is a popular theme for jeba's posts.

[HH_Sailor 3,532]

I clicked here hoping to read something racy about

infidelity in Germany or USA.

 

But seems to be something financial...

 

[Starshollow 6,069]

On 30.12.2021, 16:55:03, dmbartender said:

Hey guys, I wanted to start some mutual funds for myself and our children, who are minors. Starting an American Fidelity account from abroad has been difficult (I think maybe it is not allowed, and geotracking is employed to stop this). Has anyone successfully started a Fidelity account in the USA? I think that as Americans, we need to have our accounts there for tax reasons, right? Or, are we allowed to have investment accounts here in Germany?

US banks and plattform often reject (or cancel existing) accounts because the SEC enforces the "know-your-client"-regulation against money laundering quite sharply. And according to the SEC you can't "know" your client if he or she is not residing in the US.   Some folks are lucky to use US-addresses (parents, siblings, old properties they still own) but when found out, accounts have been cancelled swiftly by the banks/platforms.

 

Having said that: setting up European Fidelity funds is not a solution either for US-nationals (or Green-card-holders, for that matter, too):  the IRS considers non-US-domiciled funds (regardless if they be actively managed or ETFs, based on shares/stocks or bonds) as PFICS (passive foreign investment coprorations).

The tax reporting on such funds in the US is a nightmare and very, very expensive. You are bound to loose much more in tax-advisor hourly fees in the US than you can ever make profit with such funds.

 

Solution? Hmm...not easy.   You could use a Malta-based pension plan with a very narrow/cheap pension assurance umbrella on top of it (i.e. relatively low extra costs) because Malta has a very modern double-taxation-agreement with the US that could allow for that. There are some voices that say this would not work for non-Malta-residents but I am not convinced yet for lack of actual evidence.  Same could work with insurance umbrellas from Liechtenstein or Luxemburg. But obviously that only works costwise if you set up considerable investment accounts.

Which leaves you right now only with direct investment into stocks.  Just pick a few solid-but-boring stocks from EURO STOXX or MSCI Worldwide and buy them directly. Stocks are no problem with tax reporting in either Germany or US.

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.

[dmbartender 91]

On 1/17/2022, 3:53:10, Starshollow said:

US banks and plattform often reject (or cancel existing) accounts because the SEC enforces the "know-your-client"-regulation against money laundering quite sharply. And according to the SEC you can't "know" your client if he or she is not residing in the US.   Some folks are lucky to use US-addresses (parents, siblings, old properties they still own) but when found out, accounts have been cancelled swiftly by the banks/platforms.

 

Having said that: setting up European Fidelity funds is not a solution either for US-nationals (or Green-card-holders, for that matter, too):  the IRS considers non-US-domiciled funds (regardless if they be actively managed or ETFs, based on shares/stocks or bonds) as PFICS (passive foreign investment coprorations).

The tax reporting on such funds in the US is a nightmare and very, very expensive. You are bound to loose much more in tax-advisor hourly fees in the US than you can ever make profit with such funds.

 

Solution? Hmm...not easy.   You could use a Malta-based pension plan with a very narrow/cheap pension assurance umbrella on top of it (i.e. relatively low extra costs) because Malta has a very modern double-taxation-agreement with the US that could allow for that. There are some voices that say this would not work for non-Malta-residents but I am not convinced yet for lack of actual evidence.  Same could work with insurance umbrellas from Liechtenstein or Luxemburg. But obviously that only works costwise if you set up considerable investment accounts.

Which leaves you right now only with direct investment into stocks.  Just pick a few solid-but-boring stocks from EURO STOXX or MSCI Worldwide and buy them directly. Stocks are no problem with tax reporting in either Germany or US.

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.

Hey thanks for clearing that up. I have tried TradeRepublic, eToro, and Robinhood, as well as Fidelity and Vanguard. None of them offer accounts for US expats. This is what eToro says: "Please note: For regulatory reasons, we cannot provide our service to US citizens who reside outside the USA."

TradeRepublic says they cannot offer US citizens a Depot because of the FACTA agreement.

I guess I will just have to stick to Betongold (or rather Holzgold, since we CAN afford a house in the USA but not Bavaria).

[jeba 4,347]

20 hours ago, dmbartender said:

I guess I will just have to stick to Betongold

Why? You can still buy US stocks/CEFs/CEFs.  If you insist on a US broker, use e.g. Lynxbroker. They are a German company but are passing through your orders to Independent Brokers, a US brokerage. Accordingly though, they don´t deal with the German side of taxation.

[Namu 706]

On 1/2/2022, 6:59:13, HH_Sailor said:

I clicked here hoping to read something racy about

infidelity in Germany or USA.

 

But seems to be something financial...

 

Yes, that heading is a click bait 😂

[Namu 706]

When I opened my German account at my German bank to buy stocks my bank asked me (a German citizen) about 4 times if I am residing in the US or if I am a green card holder or US citizens. I thought the bank has gone mad but apparently the US requirements are quite strict. 

[Starshollow 6,069]

On 16.2.2022, 03:42:22, jeba said:

Why? You can still buy US stocks/CEFs/CEFs.  If you insist on a US broker, use e.g. Lynxbroker. They are a German company but are passing through your orders to Independent Brokers, a US brokerage. Accordingly though, they don´t deal with the German side of taxation.

We had tried to create an opportunity with Interactive Brokers but they won't, after carefull consideration, offer US-domiciled funds to clients who a residents in Germany (or other EU-memberstates for that matter).  I'll try Lynxbroker next, but am pretty sure that there will be the same outcome...

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.

[scook17 247]

On 17/01/2022, 15:53:10, Starshollow said:

US banks and platforms often reject (or cancel existing) accounts because the SEC enforces the "know-your-client"-regulation against money laundering quite sharply. And according to the SEC you can't "know" your client if he or she is not residing in the US.

 

Seriously? What mad logic says you can't 'know your client' if they don't have a US address????

So as a British guy, I can't open a bank (or share, fund, ...) account in the US because my UK passport is not sufficient to identify me, unless I also live there?

It's even a more stupid case where a US person can't do this because they live somewhere outside the USA, using the US issued passport document.

Surely this can't be the case?

 

Move outside the US and you can't have a US bank account. Try to open an bank account elsewhere in the world and no bank will want to know because of the US reporting requirements make it not worthwhile. You'd be completely screwed as a US citizen living abroad. I did hear many gave up US citizenship because of such issues.

[jeba 4,347]

49 minutes ago, Starshollow said:

We had tried to create an opportunity with Interactive Brokers but they won't, after carefull consideration, offer US-domiciled funds to clients who a residents in Germany (or other EU-memberstates for that matter).  I'll try Lynxbroker next, but am pretty sure that there will be the same outcome...

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.

Lynxbroker is using the Irish branch of Independent Broker for any transactions. Therefore, they accept EU-residents (not sure whether there is an exception for US persons, though).

[Starshollow 6,069]

Quote

You'd be completely screwed as a US citizen living abroad. I did hear many gave up US citizenship because of such issues.

Yep, this is about the long and short of it.... ;-)
 

Quote

Seriously? What mad logic says you can't 'know your client' if they don't have a US address???

Quite simple: the SEC does.

 

There are two rules which were implemented in July 2012 that cover this topic together: Financial Industry Regulatory Authority (FINRA) Rule 2090 (Know Your Customer) and FINRA Rule 2111 (Suitability). These rules are in place to protect both the broker-dealer and the customer and so that brokers and firms deal fairly with clients.

[...]

The U.S. Financial Crimes Enforcement Network (FinCEN) has set baseline requirements for KYC in conjunction with the core requirements for the due diligence program. To prevent money laundering, financial institutions are required to conduct deeper assessments of their clients' risk profiles.

Lastly, financial institutions must also maintain current and accurate customer information and continue to monitor their accounts for suspicious and illegal activities.

[...] this is where most US-based banks and plattform fold: they have no way of mainting this kind of up-to-date info and monitoring if you live outside the US.

 

 

Quote

 

What Is KYC in the Banking Sector?

KYC in the banking sector involves bankers and advisors identifying their customers, beneficial owners of businesses, and the nature and purpose of customer relationships, as well as reviewing customer accounts for suspicious and illegal activity. Banks must also maintain and ensure the accuracy of customer accounts.

 

What Are KYC Documents?

Requirements differ in different jurisdictions. However, account owners generally must provide a government-issued ID as proof of identity. Some institutions require two forms of ID, such as a driver's license, birth certificate, social security card, or passport. In addition to confirming identity, the address must be confirmed. This can be done with proof of ID or with an accompanying document confirming the address of the record.

 

As an US financial institution you simply can't properly identify a Germany based address nor can you confirm it. How would you? If you'll change your address within the city in Germany where you live now - how is the bank in the US got to know about this, able to trace this and have it confirmed.

 

 

 

Which is why they simply don't accept resident from abroad as clients anymore.  Sad, but somehow understandable... thank the US gov and the SEC for it.

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.

[jeba 4,347]

11 minutes ago, scook17 said:

Move outside the US and you can't have a US bank account. Try to open an bank account elsewhere in the world and no bank will want to know because of the US reporting requirements make it not worthwhile. You'd be completely screwed as a US citizen living abroad. I did hear many gave up US citizenship because of such issues.

It´s working the other way around as well. As an EU-resident and non-US-person I was denied to open an account with US brokers. When I wanted to use a US asset manager, they also declined my business.

 

[Starshollow 6,069]

1 minute ago, jeba said:

It´s working the other way around as well. As an EU-resident and non-US-person I was denied to open an account with US brokers. When I wanted to use a US asset manager, they also declined my business.

 

and - from their legal point of view - for the right reasons. KYC as defined by the SEC does not allow them, to.

 

Cheerio

 

I am a professional independent insurance broker, financial adviser, and authorised advertiser. Contact me.

[JG52 1,018]

57 minutes ago, scook17 said:

 

Seriously? What mad logic says you can't 'know your client' if they don't have a US address???

So as a British guy, I can't open a bank (or share, fund, ...) account in the US because my UK passport is not sufficient to identify me, unless I also live there?

It's even a more stupid case where a US person can't do this because they live somewhere outside the USA, using the US issued passport document.

Surely this can't be the case?

 

Move outside the US and you can't have a US bank account. Try to open an bank account elsewhere in the world and no bank will want to know because of the US reporting requirements make it not worthwhile. You'd be completely screwed as a US citizen living abroad. I did hear many gave up US citizenship because of such issues.

 

I have investment accounts with Vanguard and Ameritrade, and both were created while I was stationed in Germany (before I retired).  Because I had a U.S. military overseas address, I had to provide a Medallion Signature Guarantee for each account when I mailed the application forms back to the institutions.  The Medallion Signature Guarantee is unique to the U.S. banking industry and I doubt any foreign bank will know what this is.  Fortunately, banks and credit unions on U.S. military installations usually have at least one employee who can issue the Medallion Signature Guarantee, but may require the requestor to have an account with the bank (I did).  Now that I am retired, I changed my address for each account to my German address without any problems.

 

Living overseas as a U.S. citizen does not mean I cannot have a U.S. bank or investment account. It means I might not be able to start a new U.S. account unless I meet other requirements and leap through regulatory hoops.

 

I really doubt any U.S. citizen gave up their citizenship because they could not create a U.S. bank account while overseas.

[fraufruit 41,947]

Many U.S. citizens gave up their citizenships because their European spouses weren't willing to report their bank accounts/assets to the U.S. government. This began with FACTA.

[scook17 247]

And because they get US tax liability on non US income. Funny Story:

https://www.theguardian.com/politics/2017/feb/08/boris-johnson-renounces-us-citizenship-record-2016-uk-foreign-secretary

 

[scook17 247]

As an US financial institution you simply can't properly identify a Germany based address nor can you confirm it. How would you? If you'll change your address within the city in Germany where you live now - how is the bank in the US got to know about this, able to trace this and have it confirmed.

 

Really, what's that Anmeldung document everyone here needs to open a German Bank account for then?

It's and official document, which the UK seems to have no issue accepting.

If you change address, then surely I will inform the bank or else I someone else gets my replacement VISA card when it runs out, and statements don't get delivered by sent to someone else.

I actually wonder, do the German banks get told of a change of address when I move? I informed everyone I could think of the last time I actually moved.

 

As for monitoring accounts, surely this means the bank account with the current bank. If have account A with bank X, and account B with bank Y, then presumably bank X only knows about account A and is only required to monitor this. So if I open an account with an American bank, they care not about a German account.

[jeba 4,347]

8 hours ago, scook17 said:

I actually wonder, do the German banks get told of a change of address when I move?

No, at least not by authorities.

 

8 hours ago, scook17 said:

As for monitoring accounts, surely this means the bank account with the current bank. If have account A with bank X, and account B with bank Y, then presumably bank X only knows about account A and is only required to monitor this. So if I open an account with an American bank, they care not about a German account.

Monitoring may mean more than knowing which banks you´re dealing with. They can´t see any transactions occurring (such as the 100 million cash deposit following your latest sale of a nuclear weapon) in a foreign bank account and neither can US authorities.