Have you received a letter from your US investment firm telling you that on such and such a date you will no longer be able to purchase mutual funds or invest new money with them because you live overseas? Well if you have, you are not alone. Many firms have sent out similar letters over the last few years, and each time it sends surprised account holders scrambling to find a solution.

Fidelity Investments is the latest to join the parade.

According to Marketwatch.com, “Fidelity Investments is telling its clients who live outside the US that they can no longer buy or trade mutual funds in their brokerage accounts as of August 1.” While investors may be allowed to hold onto existing funds, the inability to make changes to their portfolio makes the new policy a nonstarter.

Nothing new


Many big-name mutual-fund families have set up a blanket rule that if you don’t have a US address, you can’t buy their funds. This applies even if you are a US citizen. Other firms have created special divisions and forcibly transferred client accounts to these new divisions, even if they had a long-standing relationship with their broker. I recently met with someone who had been working with his same adviser, in Seattle for 36 years, and got a letter that he had been transferred to a new adviser in Houston.

Why the change?

Since the terrorist attack on the World Trade Center, US firms have taken a very strict approach to non-US-domiciled accounts. With the Patriot Act and other new laws, it has become much harder for these firms to accept accounts from US citizens living abroad. Many firms have decided that they would rather not put themselves into this situation; they either won’t take any new business, or they have set up a new division to deal with these accounts.

While brokers on these accounts have fought tooth and nail to keep their clients, the compliance departments have won out, and this is their solution.

Israeli-born kids


I recently spoke to a friend of mine who is a stockbroker in the US and has quite a few clients who reside in Israel.

He told me he is being forced to get rid of his Israeli accounts under $250,000. Most of those accounts belong to children of olim; they were born here and hardly speak any English.

The issue of children having accounts in the US that their parents set up is a common one I deal with. Many of these children don’t even know how to dial the US, let alone handle a conversation about their finances in English. They would have a hard time trying to access the money that has been put aside for them. Not only that, but the adviser in the US doesn’t know them, and he is unfamiliar with their long-term goals and needs.

What to do?

I would recommend going local. I would find an adviser who is licensed both in Israel and in the US to handle the accounts. Not only would this professional be attuned to life in Israel, he would speak the language of the children and in general make things much easier for them going forward.

In addition, advisers who are local and have an arrangement with a US firm will not have the problem of not being able to buy certain investment products. They will have all their compliance in place, allowing clients to have access to the wide array of investment choices that they expect.

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc., or its affiliates.

aaron@lighthousecapital.co.il Aaron Katsman is a licensed financial professional in Israel and the United States who helps people with US investment accounts. He is the author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing.

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