US alternative to non-EU ETF investment?

Discussion in 'Investments' started by DarLev, 4 Dec 2018.

  1. DarLev

    DarLev Registered User

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    3
    Hi,

    I have a large lump sum saved and looking to invest in a buy and hold 30+year strategy, taking full advantage of compound interest.

    I have recently discovered that US brokers no longer allow EU residents to buy US domiciled ETF's.

    Just wondering if anyone on the ABM knows of any other alternatives for buying non-EU domiciled ETF's that are good for a long term buy and hold strategy to get exposure to SP500?

    Thanks
     
  2. nodo

    nodo Frequent Poster

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    35
    Interactive investors have an Irish web site which still seems to be selling the ETFs you require. You will need to sign up for an account with them . Best of luck. Nodo
     
  3. inkpot

    inkpot New Member

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    Hi - When did this happen? I've a firstrade account and hold US ETFs - didn't get any notification about any change in regulation / policy...
     
  4. Zebedee

    Zebedee Registered User

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    32
    I think it’s due to the PRIIPS regulation which came into force at the beginning of the year. As far as I am aware ETFs have to produce a key investor document. American etfs are not bothering. There may be other reasons (eg MIFID 2 also came into force this year) but I’m not sure about the effect of this.

    Interactive investor are blocking purchases. Other platforms are blocking non UCITS.
     
  5. RobFer

    RobFer Frequent Poster

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    Did anyone confirm this? I was hoping that transferwises new Borderless accounts would allow at lot of the charges from sending money into Firsttrade to be reduced.
     
  6. SBarrett

    SBarrett Frequent Poster

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    Correct. US ETF's are obviously for the US market and so are not subject to EU regulation. The fund manager is not going to comply with legislation in countries they are not targeting. They have European versions of all the funds which are all in the gross roll up, deemed disposal regime.


    Steven
    www.bluewaterfp.ie
     
  7. DarLev

    DarLev Registered User

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    3
    Hi Steven,

    If I have a large enough lump sum to invest - is it possible to purchase US domiciled ETF's without requiring the key investor documentation?

    Investing in European domiciled ETF's - with deemed disposal every 8 years - is not able to take advantage of the power of long term compound interest buy and hold investing.

    Thanks
     
  8. Marc

    Marc Frequent Poster

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    964
    Last edited: 19 Dec 2018
    Hi,

    I posted on a long thread on this subject recently setting out how we can provide this service for clients looking to invest in low cost tax efficient portfolios.

    https://www.askaboutmoney.com/threads/switching-from-us-etfs-to-uk-investment-trusts.206760/

    Unfortunately it descended into a mud slinging session but there are some important points made:

    But you will need an adviser like Stephen to assess the suitability for you.
     
    Last edited: 19 Dec 2018
  9. SPC100

    SPC100 Frequent Poster

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    You mentioned you wanted compound interest effect, and tax free growth. The best answer for this is to use a pension vehicle. That is the closest way to have you cake and eat it, but you also encounter the pension vehicle charges.

    If you can't do this in a pension, there are several DIY options. Remember that stocks give you the return via dividends, and price increase, and different options tax these two differently.

    IIUC, Even if you can could buy a US domiciled ETF, they are all forced to distribute dividends at least annually, which would be taxable at your marginal rate, and these dividends will have a withholding tax already applied. And you would need to re-invest these dividends in order to get your full compounding effect. So you would get tax free growth on the 'price' of the share, but annual tax on the dividend.

    If you buy a distributing eu domiciled etf you will get annual tax on the dividend, and 8 year tax on the 'price'

    If You buy an eu domiciled accumulating fund, you would only pay tax on the dividends and capital growth at every 8 year anniversary of your purchase (the dividends and the price increase are all rolled up into the 'price' of an accumulating etf), i.e. you get tax free growth for 8 years. And you would get 'auto' re-investment of any of the dividends.

    You could also buy a large set of shares directly, you would get tax free growth on price, and annual tax on dividends, but a lot of paperwork...

    Which regime gives you the best return depends o the future tax rate, and the future distribution of returns via dividends or capital growth.

    Note Marc was one of the first on aam to point out a few years ago, that there are US estate tax dues if you are holding US equity above a certain value when you die.
     
    SBarrett likes this.
  10. SPC100

    SPC100 Frequent Poster

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  11. SBarrett

    SBarrett Frequent Poster

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    Institutions can buy them but individuals can't.

    It is not as if they are not available in the Irish market but with the PRIIPS legislation, an advisor can't sell them to you as they would be breaking regulations and are open to fines by the Central Bank.



    Steven
    www.bluewaterfp.ie
     
    Sarenco likes this.
  12. landlord

    landlord Frequent Poster

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  13. Gordon Gekko

    Gordon Gekko Frequent Poster

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    As I understand it, institutions are buying US ETFs for their clients on a discretionary basis.
     
  14. inkpot

    inkpot New Member

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    Folks, are you sure it isn't just the case that EU brokers can't sell US ETFs to EU customers (e.g., Degiro - where I was able to buy Vanguard ETFs up until New Year's eve last year...) and not US Brokers (e.g,. Firstrade, which I was able to open an account with this year, and am still buying US ETFs)? I'm fairly certain this is the case...
     
  15. chatan

    chatan New Member

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    3
    Last edited: 5 Jan 2019
    That is my understanding too, ie an Irish citizen with a US broker account is not restricted from using it to buy US ETFs. As I have only just opened an account for this purpose and haven't completed funding of it yet I can't say this authoritatively right now.

    EDIT: Seems I have it wrong. 'regular' EU-based investors cannot buy these unless KIDS are provided, according to an FAQ on my IB account portal. I think the fact that some brokers were slower to enforce this than others hasn't helped.
     
    Last edited: 5 Jan 2019