Charles Schwab has confirmed that it is "making changes" in certain international jurisdictions, as it continues to incorporate the business of its former rival, TD Ameritrade – and that this means that although American clients in certain countries will be allowed to keep their existing accounts, they will "not be able to open new accounts, make deposits, or place 'buy' orders."
In a statement, the company said that the four countries where this change is taking place are New Zealand, the Dominican Republic, St. Kitts and South Africa.
At least one South African TD Ameritrade client has confirmed this to be the case, and has told the American Expat Financial News Journal that he is looking at moving his account to Interactive Brokers, another U.S. brokerage company that has been willing to accept American expat account-holders.
"This is all part of our ongoing effort to deliver a more unified experience as we work to integrate TD Ameritrade with Charles Schwab," a company spokesperson told the AXFNJ.
Acquisition in 2019
As reported, Schwab – which is listed on the New York Stock Exchange, and which recently moved its headquarters from San Francisco to Westlake, Texas – agreed to acquire TD Ameritrade at the end of 2019.
The news about TD Ameritrade's departure will come as a blow to some expats, since TD Ameritrade has been one of the few brokers in recent years that American expat clients could still turn to when they wanted basic brokerage services, as opposed to wealth management services.
As reported here in November, 2019, Schwab at that point was contacting clients in certain European countries to inform them that they needed to take certain actions with respect to their accounts before the end of that year, due to a “change [in] its business model…mostly due to the UK’s decision to leave the EU”.
Schwab clients in Italy and France who didn't custody their accounts through a U.S.-based adviser were told they needed to transfer their assets to another financial services firm as soon as possible, or else close or sell their positions, while the rest were told they could remain with Schwab if they were comfortable with the fact that their accounts would be moved to Charles Schwab & Co Inc., the firm's U.S. operation.
Earlier that year, in August, Schwab was having to inform its clients that after Sept. 19, those who were resident in the EU would no longer be able to purchase U.S.-registered exchange-traded funds (ETFs) and exchange-traded notes, as it adopted to new EU regulations known as the Markets in Financial Instruments Directive (MiFID II).
Tom Zachystal, founder and president of International Asset Management, which specializes in looking after American expats out of offices in the San Francisco Bay area, says that for individuals as well as companies, it is "becoming increasingly difficult to find U.S. brokerage firms that will accommodate non-U.S. [American] residents."
Zachystal adds that since the FATCA regulations were introduced 11 years ago, "and with increasingly complicated regulations in jurisdictions like the EU, UK and Australia" also coming into play,as well as increasing compliance costs, "many U.S. brokerage firms are finding it uneconomic to deal with non-U.S. residents living in certain countries."
Adding to the pressures, Zachystal notes, there has been an ongoing "pricing war" in the area of investing and wealth management, fueled by various factors including competition between brokerage firms, technological innovations and the emergence and growth of 'robo-adviser' firms, "to the point where it’s difficult to turn a profit just offering transaction services.
"Some firms, like, most recently, Wells Fargo, have decided simply to exit their non-U.S. businesses altogether, whereas others maintain a list of specific countries in which they will continue to deal with clients.
"The result, for many US citizens living overseas, has become a continuous game of musical chairs, where, every few years, an expat may have to find a different firm to deal with, when whichever firm they're working with now decides to exit their country."
At least one now former TD Ameritrade client in South Africa, who is American, says he isn't thrilled to hear this.
"Apparently many, many years of loyalty, and a lot of money, didn’t matter to Schwab years ago, and now doesn’t matter to TDAmeritrade either," said this American expat, who requested anonymity.
"If they can’t find a way to meet the legal requirements for South Africa-based American clients of long-standing, with money, then they are not as smart as they think they are.
"As for me, I’m angry. I hope their merger fails."
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