I am a US citizen, Thai resident for many years. Per Vanguard, my mutual fund account which I opened when I was a US resident will no longer be available to me by the end of this year due to new US regulations. Appears I will be unable to continue using Vanguard's services under current policies. Has anyone out there received the same bad news and what are the options?

AI describes the why:

 

Non-U.S. residents are restricted from owning U.S.-based mutual funds primarily due to complex regulatory and legal burdens for the fund companies, not because of a U.S. government ban on foreign investment. 

Major U.S. fund companies, such as Fidelity and Vanguard, have created internal policies that block non-residents from purchasing funds to manage compliance risks related to foreign laws and U.S. tax and securities regulations. 

Foreign securities regulations

• Compliance challenges: Many countries have their own securities and investment laws designed to protect local consumers. A U.S. mutual fund would have to register and comply with the regulations of every foreign country where its investors live. For a major fund that serves customers in dozens of countries, this would be a complex and expensive undertaking.
• European Union (EU) rules: The EU's Markets in Financial Instruments Directive (MiFID) requires specific disclosures, including a "Key Information Document" (KID), for retail investment vehicles like ETFs. U.S. securities laws often prohibit the kind of performance forecasts required for a KID, creating a "catch-22" that makes it nearly impossible for U.S. funds to comply with European regulations. 

In recent years, many expats have faced account closure by their US stockbroker or mutual fund company due to this. It isn't new.

 

Has Vanguard only recently learned that you reside in Thailand? 

 

Many mutual funds have restricted their sale to US residents for a long time., although it may not always have been enforced as strictly as it is now. Some brokerages and mutual fund companies will allow the account to remain open, but only allow sales of mutual funds and no purchases, provided there are no regulations in the accountholder's country of residence that makes even this difficult or impossible. 

 

 

 

 

Years ago Fidelity notified me that I could no longer trade mutual funds… They recommended and allowed me to move to any ETFs and bond funds or individual stocks or CD/Treasurys no problem…

This kind of thing really sucks

1 hour ago, tilac01 said:

I am a US citizen, Thai resident for many years. Per Vanguard, my mutual fund account which I opened when I was a US resident will no longer be available to me by the end of this year due to new US regulations. Appears I will be unable to continue using Vanguard's services under current policies. Has anyone out there received the same bad news and what are the options?

 

I had similar with Fidelity years ago when they realized I was residing in Thailand.  Account was restricted, can not purchase new or add to existing mutual funds, although could retain the ones already in my brokerage account.

 

That was years ago, and still have the Fidelity account, now solely ETF's.  Also have Chinese friends who opened accounts while in the US, no problems for them maintaining their accounts (ETF's only) from China.

 

Have also recently opened Schwab International accounts for wife and myself.  No problem using Thai address and cell number.

Most of Vanguard’s mutual funds now have equivalent ETFs that mirror their mutual fund profiles and are also managed by Vanguard. You can simply open a brokerage account with a firm like Interactive Brokers and invest in those Vanguard ETFs through that account, with no downside or loss in doing so.

When I retired in Thailand over 6 years ago, I anticipated all kinds of challenges. I didn't suspect that banking could become problematic beyond things like transferring money and receiving credit cards abroad etc. Now I live as an expat with one big Damocles' sword over my head: my banking & brokerage arrangements outside Thailand. It feels like living on borrowed time and I hate it.

I lived in Thailand for 26 years using my daughter's stateside address.   On the few occasions I had to talk to VG, I always told them I was just visiting Thailand.   No problem.

Maintaining a stateside address should be a prerequisite for anyone considering living overseas

UK and EU citizens  can still buy and invest in vanguard funds if you have EU or UK address

Thanks for the feedback.

A tax lawyer advised me to transfer my funds to Schwab, I shouldn't encounter any tax liability. So, that's the plan.

You can have a Vanguard account if you live on Thailand but you can't trade online. You have to call to make trades. It's the most unfriendly brokerage for expats 

10 hours ago, FriscoKid said:

Most of Vanguard’s mutual funds now have equivalent ETFs that mirror their mutual fund profiles and are also managed by Vanguard. You can simply open a brokerage account with a firm like Interactive Brokers and invest in those Vanguard ETFs through that account, with no downside or loss in doing so.

How easy is it to open an Interactive Broker account and invest in Vanguard ETFs from Thailand? I am a UK citizen.

Aren't there all kinds of tax forms to fill in ect?

4 minutes ago, jaywalker2 said:

You can have a Vanguard account if you live on Thailand but you can't trade online. You have to call to make trades. It's the most unfriendly brokerage for expats 

I was under the assumption that was Thailand specific, due to online security issues regarding this country. Although, yes, they might tag other countries too. Unfriendly yes, but understandable.

13 minutes ago, hunkidori said:

How easy is it to open an Interactive Broker account and invest in Vanguard ETFs from Thailand? I am a UK citizen.

 

It's very straightforward.  Usual proof of identity and address required.  All done online.  The account will be with their US entity.

 

Be aware that if you invest in US stock (including Vanguard ETFs), if you have more than $60,000 in assets your estate will be subject to US death taxes.

 

If you invest in Vanguard ETFs listed on the London Stock Exchange you don't need to worry about US or UK death taxes since they are domiciled in Ireland.

6 hours ago, LomSak27 said:

I was under the assumption that was Thailand specific, due to online security issues regarding this country. Although, yes, they might tag other countries too. Unfriendly yes, but understandable.

In principle, you can't open an account if you live abroad. You can use a US address to open an account but if they detect that you're abroad or using a VPN, you won't be able to apply online. You'll have to send in an application and then they'll send you back a confirmation at your US address, which you have to sign and  return.  I inherited some money from my mother who  had a Vanguard account and the only way I could get it was by opening an account of my own and then transferring the money. It was a major headache. Each time I called, I'd get a different story from a representative. One told me Thailand on a banned list and i couldn't open an account if I lived here. So I tried using a US address but they detected I was using a VPN, so I couldn't apply online. I had to mail the application in. Then a confirmation came to my US address, which I was supposed to sign and return. One representative told I'd have to come into the offiice to open an account (!). Fortunately, I was able to talk to a manager who personally supervised the opening of an account and the transfer of the funds. But even though I was using an US address, the account remained restricted. So I just had Fidelity transfer the funds to my Fidelity account. Dealing with Vanguards was a major headache.  They're really set up for buy-and-hold investors using their mutual funds, so they don't really have the infrastructure for dealing witih expats.

 

In my opinion, Scwab or Fidelity is a much better choice.

12 hours ago, liddelljohn said:

UK and EU citizens  can still buy and invest in vanguard funds if you have EU or UK address

 

ETF's, yes.

 

Mutual funds, yes......if you purchase EU/UK-registered mutual funds.  US-based mutuals require US residency.  It's not necessarily not permitted by law, but mutual fund companies don't want to deal with the tax situation and set their policies accordingly.

 

The U.K. employs punitive tax rates on investment funds not registered within its borders. For investors subject to U.K. taxation (typically U.K. residents), most U.S. registered funds are deemed non-reporting funds, meaning they don’t adhere to U.K. accounting standards. Consequently, non-reporting funds are penalized within the U.K. tax system, as capital gains within these funds are subject to standard tax rates rather than the most favorable capital gains rates.

 

And from another source:

 

Mutual fund distribution agreements typically mandate that mutual fund owners reside domestically in the U.S. for two main reasons:

 

1. U.S. fund groups are not allowed to solicit overseas business for their SEC-registered funds, even from U.S. expatriates. Offering shares of mutual funds to non-domestic clients could potentially violate the laws of any country in which an investor or prospective investor in a fund is resident or domiciled.
2. Mutual funds may make tax treaty claims on their holdings, which require funds to certify all shareholders are resident in the United States.

 

https://creativeplanning.com/international/insights/investment/why-us-brokerage-accounts-of-american-expats-are-being-closed/

9 hours ago, tilac01 said:

Thanks for the feedback.

A tax lawyer advised me to transfer my funds to Schwab, I shouldn't encounter any tax liability. So, that's the plan.

 

Not great advice. Schwab places a number of restrictions on overseas account holders, whether they are American citizens or not. You cannot buy mutual funds or brokered CDs, and margin trading, options, and short trades are off the table. All trades must be fully paid with cleared funds since unsettled funds and margin cannot be used. There are also limits on certain instruments, account opening minimums, and cash balances. In my view, it is far from ideal and I would not use them while residing overseas.

9 hours ago, Zaphod Priest said:

 

 

 

Be aware that if you invest in US stock (including Vanguard ETFs), if you have more than $60,000 in assets your estate will be subject to US death taxes.

 

 

 

One of the main reasons in wanting to invest in US ETFs from Thailand is to use funds already in Thailand with the purpose of giving them to my half Thai son when I feel the time is right. I had thought of opening a joint account with him when he is 18 next year. I expect there would be more than $60000 to invest.

10 hours ago, Zaphod Priest said:

 

It's very straightforward.  Usual proof of identity and address required.  All done online.  The account will be with their US entity.

 

Be aware that if you invest in US stock (including Vanguard ETFs), if you have more than $60,000 in assets your estate will be subject to US death taxes.

 

If you invest in Vanguard ETFs listed on the London Stock Exchange you don't need to worry about US or UK death taxes since they are domiciled in Ireland.

I opened one few years ago.  I used my British passport and something with proof of address in in Thailand on.

That was it.

They will ask you questions about your investing experience, if you don't have enough they wont let you open it.  You can lie, and even take the test a 2nd time if you fail it the first time

21 hours ago, JackGats said:

When I retired in Thailand over 6 years ago, I anticipated all kinds of challenges. I didn't suspect that banking could become problematic beyond things like transferring money and receiving credit cards abroad etc. Now I live as an expat with one big Damocles' sword over my head: my banking & brokerage arrangements outside Thailand. It feels like living on borrowed time and I hate it.

That sounds stressful. Are there any solid plans or options for someone in this situation? Any banks or setups you’d recommend?

One of the best risk-free ways I’ve found to park cash, particularly US dollars, whether long-term or short-term while living in Thailand, is in brokered CDs through Interactive Brokers. Right now, I’m holding brokered CDs that I repurchased from other investors who are reselling them on the platform. It works like a normal trade, and the commission to Interactive Brokers is about $10 per trade when you buy them and no additional commission when they mature. Currently, I’m earning around 4% on the ones I bought recently. 

 

I stick to CDs issued only by the biggest major US banks like Morgan Stanley, Goldman Sachs, Wells Fargo, and Bank of America so I know they are FDIC insured. They are very easy to buy online. You just enter your preferred maturity date on the trading platform, and it shows a selection of available CDs, with the highest yields sorted at the top of the list. Then you scroll down to find one that matches an acceptable yield, bank, and maturity date. Trades are done in $1000 increments, so you can buy as little as $1000 or as much as you want depending on the units available from each brokered CD reseller. The platform also shows how many units are available for sale for each CD being offered so you can see right away if there are enough units available to match your desired investment amount. 

 

It’s straightforward, doesn’t require much thinking, and it’s a safe way to park money while earning a decent return if you want to avoid riskier assets. Plus, all interest earned in the US from these US bank CDs is tax-free for non-US citizens.

23 hours ago, JackGats said:

When I retired in Thailand over 6 years ago, I anticipated all kinds of challenges. I didn't suspect that banking could become problematic beyond things like transferring money and receiving credit cards abroad etc. Now I live as an expat with one big Damocles' sword over my head: my banking & brokerage arrangements outside Thailand. It feels like living on borrowed time and I hate it.

So glad, someone finally adresses a major problem for expats. 90% of posts in this sub-forum here are connected to Banking/Money Transfer problems. Increasingly also restricting "investement avenues".
Food for thaught.

 

Annually, polls emerge "what are the most desirable places to retire". To my knowledge, the freedom of unrestricted monetary self determination is not part of those criteria. If it were, Thailand would not rank very high.

 

Some posters here are having problems to even open a Bank account in Thailand. Makes me think, as I am sure I could open a Bank account in Eastern Timbuktu.

 

What about mutual funds run by Thai companies where the master fund is a US based fund, e.g. B-Innotech (Bualuang Global Innovation & Technology Fund), which is a fund operated by Bualuang Limited, but the master fund is Fidelity Funds - Global Technology Fund, Class YACC-USD?  

19 minutes ago, GarryP said:

What about mutual funds run by Thai companies where the master fund is a US based fund, e.g. B-Innotech (Bualuang Global Innovation & Technology Fund), which is a fund operated by Bualuang Limited, but the master fund is Fidelity Funds - Global Technology Fund, Class YACC-USD?  

Any fund where the underlying assets are denominated in US dollars is a poor choice to buy using Thai baht because you are taking on currency exchange risk in addition to the usual risk of asset price fluctuations. Even if the value of the assets in the fund stays the same, if the US dollar suddenly strengthens against the Thai baht, the value of your fund in baht will drop purely due to currency movements.

21 minutes ago, GarryP said:

What about mutual funds run by Thai companies where the master fund is a US based fund, e.g. B-Innotech (Bualuang Global Innovation & Technology Fund)

 

I presume you haven't looked at the costs of such a fund.  The TER (Total Expense Ratio) is 1.4297% which is daylight robbery.  That's on top of a 1% front end fee.

The investment in the master fund may be as little as 80%.

 

 

3 minutes ago, FriscoKid said:

Any fund where the underlying assets are denominated in US dollars is a poor choice to buy using Thai baht because you are taking on currency exchange risk

 

That's a very sweeping statement.  There are Thai funds where the currency risk is hedged.

19 minutes ago, Zaphod Priest said:

 

That's a very sweeping statement.  There are Thai funds where the currency risk is hedged.

Funds that are hedged or leveraged are typically viewed as being derivatives. Creates even more risk. No thanks for me. There are no free lunches. 

30 minutes ago, FriscoKid said:

Any fund where the underlying assets are denominated in US dollars is a poor choice to buy using Thai baht because you are taking on currency exchange risk in addition to the usual risk of asset price fluctuations. Even if the value of the assets in the fund stays the same, if the US dollar suddenly strengthens against the Thai baht, the value of your fund in baht will drop purely due to currency movements.

FYI all my assets and funds are Thailand based. I have no bank accounts anywhere else in the world, apart from here. And I will wait for the exchange rate to improve before cashing out, which won't be any time soon. 

22 minutes ago, Zaphod Priest said:

 

I presume you haven't looked at the costs of such a fund.  The TER (Total Expense Ratio) is 1.4297% which is daylight robbery.  That's on top of a 1% front end fee.

The investment in the master fund may be as little as 80%.

 

 

I have looked at the costs and can accept that (steep though they may be). As my money is all Thailand based, were I to invest directly in the US master funds, I would first need to convert my funds to USD I pressume and use the services of Interactive Brokers or other such brokers.