Accessing US ETFs

Cormac

Registered User
Messages
20
I'm interested in accessing US ETFs. If anyone is able to advise on how this might be done (in the wake of the PRIIPs legislation placing barriers on access to US ETFs from Europe), I'd be interested to hear in the process. I am led to believe that it can be done, but with perhaps some more complications than in the past ....
I would want to invest in ETFs and re-invest dividends (as far as I am aware, all US ETFs must distribute, there are no Accumulating US ETFs)
My questions would be
1) Which broker allows Irish clients to deal through them?
2) How reputable are such brokers? (I'm not looking for some fly-by-night start-up)
3) How onerous is the foreign exchange process, changing my Euros into dollars?
4) Will the broker do the foreign exchange, or do I need to use a third-party? Again, I'd only be interested in reputable organistaions for this.
5) If a third-party foreign exchange company is used, will the US broker allow this? I have a feeling that some will not allow lodgements from such a third-party ....
6) How straightforward is it to get money out of the US?
7) Is it a lot of hassle to go the US ETF route, or would I be as well investing in an Accumulating EU UCITS ETF? I am thinking here of the added hassle of re-investing dividends.
8) Is there a danger that the broker may decide, in the future, that they are no longer allowing EU clients to trade with them? I think some may have decided, in the wake of PRIIPs, to do this, changing the goalposts overnight, as it were.
9) Any more observations/thoughts?

Thanks!
 

inkpot

New Member
Messages
8
I have and still am investing in Vanguard ETFs via Firstrade. You can register with them as a non-resident. I've not yet withdrawn funds back to my Irish bank ac. The transfer process to fund a Firstrade account is by wire transfer.

The main drawback is that the only way (as far as I have been able to figure out - would welcome any correction!) to wire transfer to Firstrade is to suck up the typical Irish bank foreign exchange rate, which is usually about 2.5% off the market. So you will lose that on the way in and on the way out. However, by my reckoning, even taking that extortion into account, if you are investing for the long term (i.e., retirement) and retirement is a long way off, the benefits still outweigh most pension returns, even when taking pension tax benefits and current Revenue ETF tax regime into account.
 

SBarrett

Frequent Poster
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3,056
I don't know why they are doing that if all other US providers only open accounts if you are resident in the US.

2.5% is quiet a haircut too!

Irish discretionary fund managers can offer US ETFs but you'll be looking at needing €200k+ to talk to them. As they are a DFM, their target market is someone who wants a manager to mange their money, not just someone who wants to buy the S&P 500.



Steven
www.bluewaterfp.ie
 

inkpot

New Member
Messages
8
2.5% is quiet a haircut too!
2.5% is definitely quite a haircut, certainly - but if it's purely investing for retirement, then its effectively a one-off haircut (two-off - again on the way out). But compare that to the typical 1 - 1.5% per annum management fee that pensions will take off you every single year for the futile attempt of trying to beat the market, and it's a bit easier for me to swallow.
 

Cormac

Registered User
Messages
20
Thanks for the replies.
Andrew365: As far as I know, US ETFs are taxed differently, basically as a share, so not subject to 8 year gross roll-up. However, all Irish and EU UCITs ETFs are subject to 8 year gross roll-up. Revenue have a Guidance Note on the Exchange Traded Funds.

Inkpot, I actually contacted Firstrade last month and was told;
"Currently, Ireland is not on our list of Authorized Countries. Therefore, you will not be able to open an account with us."
Perhaps they are not taking new clients .....

It would gall me somewhat to give up 2.5% on each trade, before a ball is even kicked ...
Have you looked into Currency Fair or some of the specialised currency transfer companies? But again, I have a feeling some brokers won't 'deal' with them (they being a third-party) and want the money to transfer direct from your bank account ... which leaves one at the mercy of the bank's fees.

Perhaps I would just be better off in a UCITs ETF .... anyone have any thoughts on this?
 

inkpot

New Member
Messages
8
You are correct about Currency Fair and similar - they don't open accounts in your name, and so aren't viable for wire transfers.
 

inkpot

New Member
Messages
8
Though I should add - you aren't giving up 2.5% on each *trade* per se, as you buy and sell shares from/to your USD Firstrade account. You take the hit when you first fund the account / return your funds to Euro. So, again - if you were planning on maintaining the USD account long term, it's effectively a one-off hit.
 

Cormac

Registered User
Messages
20
I was hoping to regularly invest, so I'd be hit with the bank fees every time ...
 

Gordon Gekko

Frequent Poster
Messages
3,610
I have and still am investing in Vanguard ETFs via Firstrade. You can register with them as a non-resident. I've not yet withdrawn funds back to my Irish bank ac. The transfer process to fund a Firstrade account is by wire transfer.

The main drawback is that the only way (as far as I have been able to figure out - would welcome any correction!) to wire transfer to Firstrade is to suck up the typical Irish bank foreign exchange rate, which is usually about 2.5% off the market. So you will lose that on the way in and on the way out. However, by my reckoning, even taking that extortion into account, if you are investing for the long term (i.e., retirement) and retirement is a long way off, the benefits still outweigh most pension returns, even when taking pension tax benefits and current Revenue ETF tax regime into account.
Are you declaring the income?
 

Andrew365

Registered User
Messages
82
I lived in the US up to last year so I still have access to my US Bank account and broker accounts. However I am not permitted to trade per their policy although there does not appear to be any security barrier in the brokers system to stop me. I am more concerned about the tax implications in both the US and here and having a significant sum of money in a somewhat dubious legal situation.

P.s Revolut I doubt it as whilst the exchange rate is great I had to wire transfer between my chase US account into revolut to exchange to euro etc.
 

username123

Frequent Poster
Messages
1,415
Tax, UCIT ETFs, US ETF etc etc have been discussed at length on here. Some relevant threads include tax advice

https://www.askaboutmoney.com/threads/the-tax-treatment-of-etfs-for-irish-residents.199443/
https://www.askaboutmoney.com/threads/tax-treatment-of-etfs-and-investment-companies-trusts.175887/

8 year tax = UCIT (i.e. non-US funds only)
AFAIK US funds required to distribute dividends, so there are no accumulating US funds.
Estate tax in US is also an issue.

I started down this route and gave up. Instead, I put any money I wouldve invested into overpaying mortgage and into pension. ETFs should be simple but Irish revenue has made them a pain in the proverbial. IMO avoid.
 

SBarrett

Frequent Poster
Messages
3,056
I lived in the US up to last year so I still have access to my US Bank account and broker accounts. However I am not permitted to trade per their policy although there does not appear to be any security barrier in the brokers system to stop me. I am more concerned about the tax implications in both the US and here and having a significant sum of money in a somewhat dubious legal situation.

P.s Revolut I doubt it as whilst the exchange rate is great I had to wire transfer between my chase US account into revolut to exchange to euro etc.
Are you a US citizen? If so, it is nigh on impossible to invest in Ireland due to stringent IRS reporting rules. The different taxation rules makes it expensive too.


Estate tax in US is also an issue.
I looked into this for a client. There is a huge amount of non compliance regarding payment of estate tax by non US citizens. The estate just transfers the money back to their home nation and doesn't pay any tax to the IRS.



Steven
www.bluewaterfp.ie
 

Andrew365

Registered User
Messages
82
Are you a US citizen? If so, it is nigh on impossible to invest in Ireland due to stringent IRS reporting rules. The different taxation rules makes it expensive too.





Steven
www.bluewaterfp.ie

No I am an Irish Citizen but I was a US Resident Alien for 4 years which essentially means I was subject to the same Tax treatment as a US Citizen.
 

Cormac

Registered User
Messages
20
For the information of others who may be looking to purchase US-listed ETFs, this I what I came up with following some recent research (May ’19). It would seem that some brokers will deal with Irish clients who already have accounts with them, but will not open new accounts for new customers (I think this may explain some of the confusion/contrary opinions expressed on AAM and elsewhere on this topic). In any case, my query to the US brokers was about opening a new account.

I contacted a number of US based brokerages and got the following responses (I’ll paraphrase);
Schwab: Do not accept Irish clients.
Firstrade: Do not accept Irish clients.
eTrade: Do not accept Irish clients.
Merrill Edge: Do not accept Irish clients.
Ally Invest: Do not accept Irish clients.
RobinHood: I didn’t contact them directly, but I’m pretty sure I discounted them, so maybe information on their website led me to do this.
Interactive Brokers: Yes to Irish clients trading ‘normal’ shares, but ‘no’ to US-listed ETFs. This would seem to make sense; shares do not require a KID in Europe, ETFs do, hence Europeans can buy US ‘normal’ shares, but not US-listed ETFs. As an aside, there seem to be quite a few hoops to jump through to open an account.
DriveWealth: Will accept Irish clients. Will allow them to purchase US-listed ETFs. Will allow an account to be funded via TransferWise, Currency Fair etc.

Obviously, DriveWealth got my interest. However, I’d be hesitant for the following reasons (and these are only my own personal reasons);
DriveWealth was established in 2012 (or thereabouts). If they were to go to the wall, one might find oneself in ‘limbo’; the owner of US-listed ETFs, with no option to transfer them to a European brokerage account (no KID, remember) and no other US based brokerage willing to take you on. It might not happen, but it could be messy if it did. And if one did begin investing with DriveWealth and then they suddenly decide, in a year/two years/three years that they are shutting the doors on EU investors, that would be less than ideal. (I think I recall reading that some US brokers basically did this, stopped selling ETFs to their EU customers overnight, with no warning, back around when the KID legislation came out).

One of the US brokers I contacted mentioned the Patriots Act and Anti-Terrorism legislation as part/all of the reason for not accepting international clients; if this is the case and other brokers are flouting this, then it may be a reason to consider whether or not to go with them.

Hope this is of help. Again, this was my experience, perhaps it will be different for others.
 

RobFer

Frequent Poster
Messages
63
Thanks for the post. I think you are right. I joined FirstTrade a year ago. They allowed me to join no problem but that window has been closed. I still haven't added any money but I seem to have been grandfathered in. It is probably smart to register on DriveWealth before they close to Irish people.
 

joe sod

Frequent Poster
Messages
689
For the information of others who may be looking to purchase US-listed ETFs, this I what I came up with following some recent research (May ’19). It would seem that some brokers will deal with Irish clients who already have accounts with them, but will not open new accounts for new customers
I have had an etrade account for many years now so am ok, however I am concerned as to the future, could it be the case that US brokers like etrade will stop irish residents from trading on their platform?
 
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