Go Back   English Forum Switzerland > Help & tips > Finance/banking/taxation  
Reply
 
Thread Tools Display Modes
  #1  
Old 14.09.2019, 18:13
Junior Member
 
Join Date: Jul 2015
Location: Zurich
Posts: 89
Groaned at 4 Times in 3 Posts
Thanked 52 Times in 28 Posts
RoastedRhino has earned some respectRoastedRhino has earned some respect
Charles Schwab does not allow to buy U.S. ETFs anymore

I received a letter from Charles Schwab stating that starting on September 19th, E.U. residents will not be able to by U.S. ETFs anymore. Altough they don't state the reason, a quick google search suggests that this is caused by the implementation of the mifid 2 EU regulation.



However, my residence is in Switzerland!


I wrote them for clarification. In the meanwhile, does anyone know if and how Swiss residents could/should be affected?



Thanks!




Reply With Quote
This user would like to thank RoastedRhino for this useful post:
  #2  
Old 14.09.2019, 19:58
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 17,500
Groaned at 297 Times in 245 Posts
Thanked 16,514 Times in 9,123 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
I received a letter from Charles Schwab stating that starting on September 19th, E.U. residents will not be able to by U.S. ETFs anymore. Altough they don't state the reason, a quick google search suggests that this is caused by the implementation of the mifid 2 EU regulation.



However, my residence is in Switzerland!


I wrote them for clarification. In the meanwhile, does anyone know if and how Swiss residents could/should be affected?



Thanks!



It's true however thy will have some that you van buy S&P500 etc.
Reply With Quote
  #3  
Old 17.09.2019, 09:26
bonaire's Avatar
Member
 
Join Date: Feb 2012
Location: CH
Posts: 239
Groaned at 6 Times in 5 Posts
Thanked 368 Times in 117 Posts
bonaire has an excellent reputationbonaire has an excellent reputationbonaire has an excellent reputationbonaire has an excellent reputation
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

When I asked the question via the Schwab live chat help desk, they gave the following response: "Although you do not reside in the UK, your account is domiciled at the London branch. In this event, this letter does apply to you."

They are (or will be) offering an alternative called Undertakings for
Collective Investment in Transferable Securities (UCITS). At this point, I am not sure what these are, outside some standard language on Google search. I'll post once I figure how similar they are to ETFs via a US investment firm (cost, tax implications, etc.).
Reply With Quote
This user would like to thank bonaire for this useful post:
  #4  
Old 17.09.2019, 09:48
Member
 
Join Date: Dec 2015
Location: Zurich
Posts: 191
Groaned at 2 Times in 2 Posts
Thanked 70 Times in 55 Posts
Dr Mick has earned some respectDr Mick has earned some respect
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
When I asked the question via the Schwab live chat help desk, they gave the following response: "Although you do not reside in the UK, your account is domiciled at the London branch. In this event, this letter does apply to you."

They are (or will be) offering an alternative called Undertakings for
Collective Investment in Transferable Securities (UCITS). At this point, I am not sure what these are, outside some standard language on Google search. I'll post once I figure how similar they are to ETFs via a US investment firm (cost, tax implications, etc.).
If I understand you correctly they are the European ETFs, e.g., see
https://www.justetf.com/de-en/etf-pr...n=IE00B5BMR087
Reply With Quote
  #5  
Old 17.09.2019, 10:03
bonaire's Avatar
Member
 
Join Date: Feb 2012
Location: CH
Posts: 239
Groaned at 6 Times in 5 Posts
Thanked 368 Times in 117 Posts
bonaire has an excellent reputationbonaire has an excellent reputationbonaire has an excellent reputationbonaire has an excellent reputation
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
If I understand you correctly they are the European ETFs, e.g., see
https://www.justetf.com/de-en/etf-pr...n=IE00B5BMR087
Yes, I think you are right. I'm not sure whether Schwab will create their own or use iShare (or similar).

I also received a letter from Thun Financial that they are working with Schwab as a way to provide access. I thought it was just a fishing expedition by Thun to get a new client, but this article seems to suggest that they truly are working with Thun:

https://www.americanexpatfinance.com...tfs-for-europe

I am generally very averse to using financial consultants and their not cheap fees. So I am concerned that we may be forced into using a Thun to continue to invest. We'll see how this shapes out and the expense involved. If it is high, I'll have to take another deep dive to find the best way to continue investing in ETF type vehicles. Sigh.
Reply With Quote
  #6  
Old 17.09.2019, 13:38
Member
 
Join Date: Dec 2015
Location: Zurich
Posts: 191
Groaned at 2 Times in 2 Posts
Thanked 70 Times in 55 Posts
Dr Mick has earned some respectDr Mick has earned some respect
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
I am generally very averse to using financial consultants and their not cheap fees. So I am concerned that we may be forced into using a Thun to continue to invest. We'll see how this shapes out and the expense involved. If it is high, I'll have to take another deep dive to find the best way to continue investing in ETF type vehicles. Sigh.
I think you may be making your life more difficult than it is.
UCITS ETFs/mutual funds are the way to go for European investors
https://www.justetf.com/uk/news/etf/...tfs-ucits.html
https://www.ft.com/content/9551561c-...6-1610983d4ee5

Quote:
Ucits, which stands for “undertakings for the collective investment in transferable securities”, provides a single European regulatory framework for an investment vehicle. This means that a fund can be domiciled in one country but sold across the bloc and is seen as an international gold standard of fund regulation.
Also, as far as I know Interactive Brokers still allows one to invest in US domiciled ETFs/funds. Perhaps it is time to depart ways from Schwab?
Reply With Quote
This user would like to thank Dr Mick for this useful post:
  #7  
Old 17.09.2019, 14:39
Jim2007's Avatar
Forum Legend
 
Join Date: Jun 2006
Location: Kt. Bern
Posts: 3,825
Groaned at 133 Times in 116 Posts
Thanked 5,836 Times in 2,704 Posts
Jim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond repute
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
I am generally very averse to using financial consultants and their not cheap fees. So I am concerned that we may be forced into using a Thun to continue to invest. We'll see how this shapes out and the expense involved. If it is high, I'll have to take another deep dive to find the best way to continue investing in ETF type vehicles. Sigh.
There is nothing stopping you in investing in funds that meet the EU standards in terms of providing the required investment information. Why would you go out of your way to circumvent that law to invest in funds that deliberately have taken the decision not to meet the higher standards required for investor protection.
Reply With Quote
This user would like to thank Jim2007 for this useful post:
  #8  
Old 17.09.2019, 16:07
Junior Member
 
Join Date: Jul 2015
Location: Zurich
Posts: 89
Groaned at 4 Times in 3 Posts
Thanked 52 Times in 28 Posts
RoastedRhino has earned some respectRoastedRhino has earned some respect
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
Why would you go out of your way to circumvent that law to invest in funds that deliberately have taken the decision not to meet the higher standards required for investor protection.

In my case, mostly because I am lazy and I had my recurring investment plan already setup. Plus, I have the impression that the market for ETFs in the US is much more competitive and I am somehow doubtful that I will find European ETFs with 0.03% expenses, but let's see.


In terms of investor protection I am not sure what kind of risk I was facing (that I am not facing with a European ETF) wit my ETFs, which are some of the extremey popular passive trackers.



I'll have a look and decide in a couple of days.



Reply With Quote
  #9  
Old 17.09.2019, 17:09
Forum Veteran
 
Join Date: Jan 2016
Location: Lugano
Posts: 706
Groaned at 14 Times in 12 Posts
Thanked 770 Times in 360 Posts
LuganoPirate has an excellent reputationLuganoPirate has an excellent reputationLuganoPirate has an excellent reputationLuganoPirate has an excellent reputation
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

I have 2 US brokerage accounts, including one with Charles Schwab, and have not received any such letter from any of them, and I do buy ETF's. My accounts are registered with my Swiss address so maybe that has something to do with it.
Reply With Quote
  #10  
Old 17.09.2019, 17:09
Jim2007's Avatar
Forum Legend
 
Join Date: Jun 2006
Location: Kt. Bern
Posts: 3,825
Groaned at 133 Times in 116 Posts
Thanked 5,836 Times in 2,704 Posts
Jim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond repute
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
I am somehow doubtful that I will find European ETFs with 0.03% expenses, but let's see.
One of the reasons for not complying with EU requirements, is that how such a reducibly low expensive ratio is achieved. Usually between retros and commissions for trade routing...

You need a lot more information about how this is done, if you want to do a fair comparison.
Reply With Quote
  #11  
Old 18.09.2019, 08:30
Meadow's Avatar
Senior Member
 
Join Date: Jul 2016
Location: Zurich
Posts: 272
Groaned at 6 Times in 5 Posts
Thanked 95 Times in 63 Posts
Meadow has no particular reputation at present
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
Why would you go out of your way to circumvent that law to invest in funds that deliberately have taken the decision not to meet the higher standards required for investor protection.
Could you share the information on how exactly the UCITS/European ETFs are superior to US ETFs? I'm genuinely interested.

From what I know, the EU regulation requires that packaged retail and insurance-based investment products (PRIIP) provide investors with key information documents (KID). For some reason, the US ETF providers are reluctant to meet this requirement.

And now for why it is worth it to invest in US ETFs over the Irish-based UCITS:
  • ability to reclaim up to 15% of the dividend via DA1. If dividend is 2%, that's 0.3% per year
  • lower stock exchange fees: 0.1% cheaper
  • lower TER: on average 0.1% cheaper
  • higher trading volume, lower spreads: 0.01%
  • bigger choice of ETFs, bigger AUM of those ETFs (stability)

In total, this could add up to 0.5% higher return per year. Just compound that over 30 years and you get yourself a brand new car.
Reply With Quote
  #12  
Old 18.09.2019, 09:29
Newbie
 
Join Date: Apr 2019
Location: Zurich
Posts: 3
Groaned at 0 Times in 0 Posts
Thanked 1 Time in 1 Post
rouleur has earned some respectrouleur has earned some respect
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

https://forum.mustachianpost.com/t/t...nvesting/67/35 is a good read on dividend taxation. The summary is that for world/US funds, US-domiciled funds are more tax efficient, assuming the holder files both W8-BEN and DA-1.

Downsides of US-domiciled funds include being subject to US estate tax. For non US persons the estate tax limit is $60,000 (i.e. the IRS will tax the value of any US-situated assets over this limit). However, there is a tax treaty between the US and Switzerland that (as I understand it) effectively lifts the limit for Swiss investors to $11 million, the same as US citizens, but using it will likely require some IRS wrangling by the heirs of the estate.

Quote:
Why would you go out of your way to circumvent that law to invest in funds that deliberately have taken the decision not to meet the higher standards required for investor protection.
Sounds like a rather sweeping statement. The EU rules regarding the KID etc are pretty new and prior to their introduction I doubt anyone really thought that US products were unsafe. As for "deliberately have taken the decision not to meet the higher standards" —I'd assume that non-US investors in these funds are a relatively small chunk of the overall market and that it's not worth the cost of complying with this additional legislation, not that their products are inherently unsafe.
Reply With Quote
This user would like to thank rouleur for this useful post:
  #13  
Old 18.09.2019, 09:31
Junior Member
 
Join Date: Jul 2015
Location: Zurich
Posts: 89
Groaned at 4 Times in 3 Posts
Thanked 52 Times in 28 Posts
RoastedRhino has earned some respectRoastedRhino has earned some respect
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

I think the link provided before gives a decent summary
https://www.justetf.com/uk/news/etf/...tfs-ucits.html


To me it's mostly about risk in the case of synthetic ETFs, or very specialized ETFs that are not so diversified. This is something I check anyway, so it does not affect me.


What I find more surprising is that, to be compliant, the issues needs to *guarantee* liquidity, in all events, which must carry some costs (and makes ETFs less "exchange traded"). Also this one does not affect my ETFs substantially, but I can see why some issuers are not happy.






Reply With Quote
This user would like to thank RoastedRhino for this useful post:
  #14  
Old 18.09.2019, 09:57
bonaire's Avatar
Member
 
Join Date: Feb 2012
Location: CH
Posts: 239
Groaned at 6 Times in 5 Posts
Thanked 368 Times in 117 Posts
bonaire has an excellent reputationbonaire has an excellent reputationbonaire has an excellent reputationbonaire has an excellent reputation
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
I have 2 US brokerage accounts, including one with Charles Schwab, and have not received any such letter from any of them, and I do buy ETF's. My accounts are registered with my Swiss address so maybe that has something to do with it.
I'm not sure why you haven't received the letter. We also use our Swiss address. I do know that when we setup the account, we had to use the UK branch of Schwab (but our Swiss address) It will be interesting to see if you can still purchase ETFs after September 19th.
Reply With Quote
This user would like to thank bonaire for this useful post:
  #15  
Old 18.09.2019, 09:59
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 17,500
Groaned at 297 Times in 245 Posts
Thanked 16,514 Times in 9,123 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
I'm not sure why you haven't received the letter. We also use our Swiss address. I do know that when we setup the account, we had to use the UK branch of Schwab (but our Swiss address) It will be interesting to see if you can still purchase ETFs after September 19th.
I originally set up in the USA with a Swiss address, account became a UK account about a year ago.
Reply With Quote
  #16  
Old 18.09.2019, 11:28
Jim2007's Avatar
Forum Legend
 
Join Date: Jun 2006
Location: Kt. Bern
Posts: 3,825
Groaned at 133 Times in 116 Posts
Thanked 5,836 Times in 2,704 Posts
Jim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond repute
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
Could you share the information on how exactly the UCITS/European ETFs are superior to US ETFs? I'm genuinely interested.
Nobody said that they were superior or inferior. But the additional information enables you the investor to make a better comparison between funds when choosing between providers.

Quote:
In total, this could add up to 0.5% higher return per year. Just compound that over 30 years and you get yourself a brand new car.
And do you know how much your fund lost because the operator:
- pocketed the retro payments
- pocketed the trade flow commission
- failed to mark the transactions at best price

These guys are not there to make you rich, if they are not making the profit on the fee, they are making it somewhere else.
Reply With Quote
  #17  
Old 18.09.2019, 11:30
bonaire's Avatar
Member
 
Join Date: Feb 2012
Location: CH
Posts: 239
Groaned at 6 Times in 5 Posts
Thanked 368 Times in 117 Posts
bonaire has an excellent reputationbonaire has an excellent reputationbonaire has an excellent reputationbonaire has an excellent reputation
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Quote:
View Post
I originally set up in the USA with a Swiss address, account became a UK account about a year ago.
I don't know if you are an ETF investor, but what's your plan if you are? Are you going to jump through the Thun financial adviser hoop or go over to a platform such as IB?

I've just started researching the IB idea but still haven't wrapped my head around tax implications, whether they can sale US based ETFs anymore (such as Vanguard VOO), or do they just sale the UCITS ETFs.....and whether the difference is really important. I know that expense ratio matters, but I'm in my early 50s, so it isn't quite a huge concern.
Reply With Quote
  #18  
Old 27.09.2019, 17:12
Junior Member
 
Join Date: Jul 2015
Location: Zurich
Posts: 89
Groaned at 4 Times in 3 Posts
Thanked 52 Times in 28 Posts
RoastedRhino has earned some respectRoastedRhino has earned some respect
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

FYI, in case people land here:
I called a Charles Schwab representative and they said it doesn't apply to me (EU national, Swiss resident). The letter was a mistake.


Cheers!




Reply With Quote
The following 3 users would like to thank RoastedRhino for this useful post:
  #19  
Old 01.10.2019, 10:51
Newbie 1st class
 
Join Date: Sep 2019
Location: Zurich
Posts: 14
Groaned at 1 Time in 1 Post
Thanked 4 Times in 2 Posts
refrigerator has no particular reputation at present
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

The US ETFs I have with dividend reinvestment enabled appear to still be reinvesting funds after the Sept 19th deadline mentioned in the letter. I was also able to go all the way through to placing an order for VTI without anything stopping me. Either Schwab isn’t doing anything to prevent Swiss residents buying US ETF or the letter was indeed a mistake.
Reply With Quote
  #20  
Old 07.10.2019, 19:06
Forum Veteran
 
Join Date: Dec 2012
Location: Aargau
Posts: 2,313
Groaned at 11 Times in 10 Posts
Thanked 3,037 Times in 1,374 Posts
Mullhollander has a reputation beyond reputeMullhollander has a reputation beyond reputeMullhollander has a reputation beyond reputeMullhollander has a reputation beyond reputeMullhollander has a reputation beyond repute
Re: Charles Schwab does not allow to buy U.S. ETFs anymore

Schwab has sent a letter dated September 20, 2019 titled "Correction: U.S. ETF/ ETN letter was sent in error". It contains this important sentence: "As a resident of Switzerland, you are eligible to purchase ETFs and ETNs."

Possibly Schwab discovered that Switzerland is not in the EU.

See attached scan for more details.
Attached Files
File Type: pdf Schwab ETF Correction Ltr 20 Sep 2019.pdf (221.8 KB, 58 views)
Reply With Quote
The following 3 users would like to thank Mullhollander for this useful post:
Reply




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
ETFs: Vanguard, Blackrock, Schwab Phil_MCR Finance/banking/taxation 4 23.01.2018 16:26
Charles Schwab and XE Trade gsthakur Finance/banking/taxation 0 29.06.2012 17:31
The guy does not rent room anymore. Do i need to hold his furniture? Mad_Dud Housing in general 13 17.06.2010 21:45
iphone not connecting to home network anymore Papa Goose TV/internet/telephone 5 12.12.2009 15:20
Does a B-permit allow one to work? radiant Permits/visas/government 6 26.10.2007 15:53


All times are GMT +2. The time now is 07:02.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2020, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0