Do US institutions get it worst?
It’s tough for US financial firms to do business abroad on behalf of their US clients. Firms like Charles Schwab are understandably concerned that they don’t meet the US Securities regulations in given countries and are therefore are not comfortable opening accounts for persons (of any nationality) living in these countries.
They need to be following Finra’s Anti-Money Laundering (AML) procedures including the “Know Your Client” initiative — which US companies find difficult to observe when their client is a US expat and, therefore by definition, out of the country.
What’s likely to happen in the future?
Fewer and fewer companies will deal with Americans. The compliance risk and cost is probably making it no longer profitable and worth their time.
There’s talk of US citizens renouncing their citizenship in the face of overwhelming Fatca pressure. Four thousand citizens did renounce last year. But this won’t be a trend. Expats who cut links completely tend to be “accidental Americans” whose parents worked in the States maybe for a short time when they were born. The mounting financial issues are frustrating but, for most Americans, it won’t cause them to give up their citizenship — although the situation is unlikely to suddenly get better.
US expats have no meaningful representation with our Congress; we’re not a big concern. So the problems being caused for us by Fatca are largely ignored by our government.
What is the impact on your business of this pressure on US expats?
In the short-term, there’s the practical issue of transferring client accounts to other providers when existing providers announce they won’t take US citizens any more. This is frustrating, both for us and our clients.
In the light of this mounting pressure on the US expat, we have to give very nuanced advice for each individual financial situation.
What’s the bigger picture?
A gap is emerging between what expertise US expats can get in the area of asset management and tax planning and what they actually need.
There’s a business opportunity here for more highly-qualified CFPs (who, like me, are US expats too) to tackle both the strategic and administrative demands facing Americans overseas. The pressure just doesn’t stop mounting.
We (50,000 US expats in the UAE) have always known that we’re under special pressure from our own government. We have been one of only two countries globally that demand income tax from expats and now that already-intense pressure has been ramped up. On the one hand, providers are acting now to insulate themselves against the risk of falling foul of Fatca and/or simply losing money by banning American clients. And, on the other hand, the IRS are pressuring those same American clients with reporting regulations which originate from the same legislative source ie Fatca.
