Friday, May 24, 2013

Just when we thought things were looking up...

Before leaving the US, my wife and I invested what little monies we have in financial institutions that were clear about being able to provide services to us while we lived abroad. One institution, in fact, seemed to roll out le tapis rouge to us and actively helped us organize our resources.  Each letter and correspondence we received was printed on beautiful ecru colored 90 pound letter stock with all the fancy frilly trimmings.

Yesterday that all changed.

Printed in fading black on cheap pure white 40 pound letter stock...

"Thank you for choosing Fidelity Investments as your financial services provider.  Unfortunately, because one or more of the addresses associated with your accounts(s) are located in a certain country outside the United States, we can no longer continue to provide investment services for your accounts(s) listed below.  This change will take effect on July 1, 2013...  

...We regret any inconvenience caused by these changes.  We encourage you to find an investment firm that is able to provide a full range of services for you, and we will be more than happy to assist with the transfer of your accounts.  Sincerely, Fidelity Investments"

The only comment on what changed turns out to very likely be a lie.

"Fidelity operates in an ever-changing regulatory environment, and a recent review of our business has led us to the conclusion that we can no longer continue to provide investment services to customer residing in certain countries."

The announcement took my breath away.

How could money made in the US, taxed in the US, and managed in the US be subject to such drastic changes in a company policy and services offering?

With a hornet in my hat, I called them.  I was only able to work my way up the ladder to a supervisor. Unsurprisingly, what I got was a broken record about how sorry they were, but there would be no exception.  Not that I'd even asked for an exception.  They claimed to have called me on May 1st (Labor Day here in Europe) but we never received a call nor a left message at any of the phone numbers this formerly tapis rouge company has on file.  I didn't push all that hard, hornet in my hat or not.  That's how stunned I was and how concerned I became for where to go and what to do next.  Yes, I realize I could easily have called one of their VPs, but to what end?  Register my anger?  Nothing would change, so why bother?

When they no longer want your business, they know what to do.

My wife Judith did a little research on possible regulatory changes in international banking.  She found three Bloomberg articles that might apply (one, two, three).  Yet, when I read them, I had a hard time seeing how the world being angry at the US and English banking systems for the AAA rated junk they sold everyone could impact ex-pats in the way the Fidelity letter described.

A very quick bit of research led me to contact four investment houses and a state-side family member offered to contact a fifth for us.  What we found is that there is no common approach to how US-based investment houses treat US ex-pats and their US-hold monies.  This led me to wonder what regulatory changes were being offered as an explanation for wanting us to take our monies and leave?

At one end of the spectrum is the company T.Rowe Price.  I cold called them to see if they provided services to US citizens living aboard.  Their answer was an unflinching "NO!"  In fact, if you held an account with them prior to leaving the US, you could not change your investment positions in any way, except to sell your positions or move your account to another institution.  Further, this policy of non-service has been in effect for years.

Discovering a slightly different position on the topic, our family member was told that all we needed was a US address and the investment firm would be able to help manage our resources.  There are unanswered questions about taking this approach.  When I asked Fidelity about changing our address, I was told we needed to prove we actually lived at the "legal" address they had on file.  It's unclear what kind of legal responsibilities the other firm that was contacted would be willing to take on.  I'll call them myself and see what they have to say.

Somewhere else along the full range of possibilities are services provided by Charles Schwab.  Their website declares that they can and do service US citizens living abroad.  Depending on the county you live in, there will be restrictions.  I cold called their international group.  I found someone who seemed to have a wealth of information to share.

While they are not licensed to trade and have no store-front in France, they say they would allow us to buy, sell, and manage investment instruments, and, at the same time, do what is required by both countries.  The wrinkles and nuances described include, and I'm sure are not limited to:
  • Charles Schwab withholds 10% of any investment sale for US tax purposes
  • France prohibits new investments being made into mutual funds
  • However, if you already hold a position in a mutual fund, you can trade it or invest further into it
  • France seems to have no concerns, however, for the purchase and management of investor bonds, Exchange Traded Funds, commodities, or equities
  • France treats prospectus' as solicitations and are strictly controlled
The thread of our conversation led me to ask a lot of questions. 

Specifically, why would France take such a strong position against mutual funds?  The question went unanswered. 

How is France's position on solicitations related to prospectus distribution, since it's simply information about a fund or company?  Again, the question went unanswered. 

Is Charles Schwab facing regulatory changes or a hostile regulatory environment that will drive them to change their services to overseas clients?  This was answered with "...we see nothing that will change our current client services offerings.  In fact, we are seeing increased business from clients being driven away from investment houses that no longer offer such services..."

The answer led me back to something the Fidelity supervisor shared.  Apparently, they are driving away 16,572 of their clients.

My final question to the Charles Schwab international group was why might an investment house shut down services like this?  The answer was pretty clear, and was one my wife would have easily anticipated:  COST

It appears that, even as large as Fidelity is, they feel they can no longer "afford" it's US citizens living off-shore.  Staffing and managing off-shore client groups had become too "expensive".

Such is the nature of greed, isn't it?  Not "making" enough?  Get rid of the most costly elements of your corporate system and you'll instantly be seen as "Wall Street profitable" again.  Even from here I can fully experience the Wonderful Glories of Unfettered Capitalist Banking.

What I've written here comes after three hours of research and phone conversation late last night.  The final chapter is far from being written in this story.  I have a mountain of research to do and a fair number of investment houses to talk with before I feel more comfortable with the topic and know where we'll be moving our limited resources.

We have five weeks to get this sorted out.


  1. Actually these regulatory changes cut both ways. Try to maintain a French bank account with a US address and you will see what I mean.

    In any case, the world of cross border banking is never easy and should be taken into account (no pun intended) whenever moving to a new country.


    1. I agree, completely.

      This is why we took such pains prior to leaving the States to make sure we understood what we needed to understand, and to work with the financial institutions that had a good grasp of what is required to service and support ex-pats.

      Fidelity seems to have made a rather swift (60 days to "clear out") decision based on profit, which shouldn't be surprising, and causes no end of issues for their soon to be former clients.

  2. Jeesh - major bummer! Can you 'move' to your state-side relative's address and then transfer your accounts to another broker? Or maybe to an international bank?

    Plan Z might be to cash out your accounts, pay the penalty, then move your funds to Europe...

    Too bad you have such a limited time to study this...

    1. Fortunately, there are plenty of good resources for sorting this out... after the initial surprise that we're being tossed out, that is. :-)