Evicted by E*Trade

Aug 15, 2013 by

Uncle SamPermit me please to devote a post to a personal money challenge.

As I’ve written about before, Ms. Money Counselor and I—both U.S. citizens—moved to Canada in 2009. I know our move greatly offends certain FOX News-watching ‘Mare-kins (including certain members of my family) who think believe only traitors would choose to live outside of the U.S. when they could instead live in God’s greatest gift to humanity: the USA. But increasingly I feel like the Congress and President are ticked off at us too, because they’re making our financial lives increasingly challenging, bordering on impossible.

We’ve Been Kicked Out of E*Trade

For years—including many before we moved to Canada—we’ve maintained most of our IRA account money with E*Trade. But recently I got a phone call from E*Trade customer service. The very clear message: We’ve got 60 days to move our accounts out, or else. I’m not sure what the “or else” would be, and I’m tempted to find out by simply ignoring E*Trade’s ultimatum.

The reason for our eviction? Though it’s been handling our accounts for over four years since we moved to Canada, E*Trade’s evidently now decided that all of its clients (or maybe it’s just those with account values below seven figures) must have a U.S. residential address. Or maybe E*Trade’s clients cannot have a Canadian residential address, I’m unclear on that point. I gather this has something to do with the onerous requirements of the Patriot Act and other regulation, including Canadian regulation. Being a U.S. citizen isn’t good enough—we must provide E*Trade with a U.S. residential address or take our money elsewhere.

I’m speculating here, but I believe E*Trade simply does not want to spend the money or accept certain legal liabilities it perceives as associated with doing business with suspicious characters. And in modern America, everyone who lives outside of the USA is more suspicious than everyone who lives in the USA, a sadly ignorant and dangerous prejudice.

I should say here that I’m not talking about a piddly (in E*Trade’s world) $10,000 IRA account. All of our E*Trade IRA accounts combined total less than $1 million, but on a good day push well into six figures. Apparently business of this size isn’t much valued by E*Trade. I guess the company’s recovered from its brush with vaporization during the 2008-09 meltdown. It’s all too bad because I like E*Trade and have no reason of my own to take our business elsewhere. But I’m not sufficiently knowledgeable about E*Trade’s business to critique its internal business decisions, so I’ll just quietly (except for this post) move on.

I’ve wondered about the ramifications—on both sides of the border—of using, say, a brother’s address for our E*Trade accounts. But the issue is too complex for me to risk that approach. I’m pretty sure I wouldn’t like living in Guantanamo, nor do I care to be kicked out of Canada and back into the costly and inhumane catacombs of the U.S.’ health insurance plutocracy.

Searching for a place—any place—where we could transfer our IRA accounts, I got the same story from TD Ameritrade: a U.S. residential address is required.

At last I found Charles Schwab International. A VP there has told me that Schwab International will accept our account transfer. I do have to buy him a new car though. 🙂

Though it looks like the Schwab option will work, I wonder if one day soon the toxic mix of America’s dimwitted lawmakers and Wall Street’s fatcat lawyers will eliminate all options for Americans without U.S. residential addresses to have IRA accounts. If so, then what? I guess all we expatriates will be moving in, on paper, with a U.S.-residing relative, consequences be damned!

Our Second and Unsolved Challenge: Opening a U.S. Bank Account

For years, and again dating back to well before we moved to Canada, we’ve had an account at EverBank. So far we haven’t been told to get out, and I sure hope this post doesn’t attract the bank’s attention. But EverBank keeps cutting our interest rate, and I’d like to open another account at, say, Ally Bank or CIT because each pays a relatively high rate these days. But I get the same story from both: we must have a U.S. residential address to open an account.

Here’s Where I Need Your Suggestions

I’d really like to open a second bank account at some U.S. bank besides EverBank. Does anyone out there know of a U.S. bank or credit union that accepts account applications from people like us: U.S. citizens living full time outside of the U.S.? My friends at DepositAccounts.com have suggested that smaller institutions may be more open to making exceptions in the application process, and that I should talk directly to a branch manager. A welcome suggestion, but one that may cost me another new car. 🙁

Any other ideas?

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  • Joe

    Oh wow, I didn’t even think about that problem. There is a ton of ex pats out there with no US address. I guess they must use their parent’s address or something like that.
    My mom has a BofA account and she use my address. It only has like $500 in it though.

    • Hi Joe–yes it’s tempting to just make my address in E*Trade’s records a U.S.-residing relative’s address. If I could imagine every conceivable consequence of doing that–and then decide I’m okay with those consequences–I’d do it. But I can’t, so I won’t. Also, seems silly to take that risk when we can move our money to Schwab and stay ‘legal.’

  • John S @ Frugal Rules

    Man, that sucks Kurt! Sorry to hear about that. As someone who worked in the brokerage industry, up until early last year, I had many conversations with people in this very exact situation. As opposed to writing a whole post about it, I will say that it likely comes down to a Patriot Act issue and their lack of willingness to take on the “risk” they see, albeit it minor at best. I will say that with the firm I was at that the tactics were the same, except that it was 30 days and not 60 days. In the case of where I was, the “or else” meant that your account would be liquidated and the funds usually sent to the address of record if they could not reach you prior. I spoke with numerous individuals in this situation, and as you can imagine, they were incredibly p!ssed we did something like this. It really is a shame that it’s handled in such a way as this. I understand wanting to mitigate risk, assuming it’s genuine, but giving clients such a small window of time PLUS an ultimatum is shoddy at best. I’d write more, but I’d risk getting on a soapbox about my previous employer and write another post! 😉

    • John, thanks so much for your perspective as a former ‘insider,’ that’s really helpful. I sure don’t want my accounts liquidated and the funds sent to me–then I’d probably owe the IRS a huge 10% tax penalty! I think I’ll get that transfer paperwork in tomorrow’s mail…

      My larger concern is whether the day comes that NO company will handle our IRAs. Then what? I’m sure not going to liquidate and pay all the tax, so the only option I can think of would be to use a false address, which I’m guessing many thousands of expatriates do today. I hope our esteemed Congress and President give us the opportunity to keep an IRA account. I don’t understand why it’s okay to treat us like second class citizens only because we live outside of US borders.

      And we expatriates do still have the right to vote in the US, a right I diligently exercise!

  • AvgJoeMoney

    I wish I knew of a bank to help, but I don’t. I’ll 2nd John’s Patriot Act comment. I remember how difficult things got before I left the industry a few years ago. The paperwork flippin’ nightmare that companies must complete to hold accounts (not to mention all the hippa regulatory requirements) make it nearly impossible.

    Sometimes I think that companies do a horrible job telling customers where the blame really lies so that they can aim their anger cannon toward the appropriate people/institutions.

    ….which is what frustrates me about many companies. How come they couldn’t have better communication around this issue? E*Trade just lost your business for good with the way they communicated this mess….something that didn’t need to happen if they’d done a better job.

    Good luck with the switch. I hate those types of hassles…..

    • Thanks Avg Joe, and I hold the lawmakers responsible, mostly. Rarely do they appreciate the full consequences of their actions for regular people just trying to live their lives. Comes from being separated from “the real world” for too long, I think.

      I assume E*Trade is simply making a business decision, considering costs & benefits, and I don’t mean to question that decision because I don’t have the info to make my own judgement.

      As you say though, it’s just a pain in the ass for me. Spent about 4 hours on the transfer paperwork yesterday. That said, I am grateful we’ve got SOME place to which to transfer! Who knows, once it’s all done, maybe I’ll like Schwab better than E*Trade!

  • guest

    I’m sort of new to this, so maybe I’m just missing something but I’m curious re: why you would even want an account in the US if you’re living in Canada.

    • That’s a very good question which I should have addressed!

      After living in the US for our entire, multi-decade lives, all of our savings were of course in US dollars. We’ve converted some to Canadian dollars, but still have a lot in US dollars. We do have a US$ account at our bank here in Canada, but the interest rate is near zero, plus it’s not insured. (Our CDN$ accounts are insured here at our Canadian bank.) So we still want an account in a US bank to get the highest interest rate possible on our US$ savings and to be protected by FDIC insurance. At some point–or more likely at many points–if we live in Canada the rest of our lives, we’ll have to convert our US$ to CDN$ to pay living expenses here in Canada.

      With respect to our IRA, since those are uniquely American products, only US financial institutions handle them. In Canada there are RRSPs–a rough equivalent of IRAs–but it’s not possible today to move our IRA money to a RRSP.

  • Maybe USAA? They’re a military bank that’s open to all people now. With their military presence, they might work for out of country folk, although APO addresses are still considered USA so I don’t know.

    Do you know if you can get a UPS box? Those give you an address like an apartment so you could get a US address. If you’re close to the border, it might be worth investigating.

  • Wow. I have acquired a lot of information I’ve never heard of before from reading this post. Thanks so much for writing about this topic, Kurt.

  • Kurt, it is very informative. I’m not aware of bank or else i would have helped you. I have read that you can get USA address on rent with your name, all postal docs will be accepted and forwarded to you, just google it and you will see many. I have never tried but do your due diligence

    • Thanks Rita, another good suggestion. I wish I were as smart as Money Counselor’s readers. 🙂

  • Wow, I’ve considered moving abroad and this could really mess up my plans. I guess we could use a relative’s address, but if you have “residency” in the States, won’t that mess you up from a tax perspective?

    • Nick, you raise one of several questions that makes me nervous about using anything but my real residential address as my address of record with a financial firm. I don’t know the answer to your question, but I worry even more about the issues I may not even think of that could come back to bite me.

      The U.S. is bullying the heck out of foreign financial institutions with American customers and making life more burdensome for Americans living out of country. Google FATCA to get a sense of the chaos and anger.

  • jefferson @seedebtrun

    There has to be a strange tax situation with eTrade or something that forced their hand on this. Oh well.. I’ve been using Schwab for years and found that they are a solid company as well..

    • That’s reassuring to hear about Schwab, thanks. I’m hoping this short-term nuisance will turn out to be for the best in the long run.

      • But Schwabb will not open accounts for US expats in every country. For example, they won’t do it if the US expat lives in South Korea. I just called a few minutes ago to ask.

        • Thanks Gavin for that additional and useful information about Schwab. I guess each expat would have to contact Schwab to ask if will take them on as a customer.

  • Joe

    I’ve studied this issue extensively…
    Fidelity no longer will take expat money, either. For that matter, none will…I’ve checked. And getting around these company policies requires more than simply giving them a U.S. mailing address, it requires telling them you live there. This is a lie, and if your conscience isn’t enough to stop you from this, then maybe it getting around to the IRS will (assuming you’re telling the IRS you live abroad, for tax breaks). We get a tax break up to a certain amount, but the US is still the only country in the world that taxes foreign earned income on any level.

    The prob has gotten increasingly worse since Bush left office. Individuals expatriate due to tax hikes, and business leave due to min wage raises. In the U.S., Conservative administrations try to bring jobs back by attacking unions, lowering/stagnating min wage, lowering taxes, and offering incentives for return. U.S. Liberal administrations try to bring jobs back by making it difficult to earn a living and/or conduct business abroad. This is accomplished by strong-arming foreign banks into revealing their American clients’ holdings over $10k, disallowing foreign brokers from taking your business, levying taxes on ALL capital gains (even if a foreign platform is used to trade ONLY foreign companies), and raising penalties for brokers back home who get caught holding unreported income from clients. This threat to companies like Fidelity are to the point where it makes doing business with ANYONE living abroad a liability.

    The end result is you MUST return, you MUST put into Social Security, and you MUST be a part of the System. Did you feel that rumble? It was the sound of every founding father rolling over in his grave.

  • Joe

    …by the way, a few years ago M. Lynch sent me a 60K check three hours before my flight left for Egypt, saying… [Recent IRS changes have made it difficult to do business with expats. Have a nice day.]

    • Nice. At least E*Trade gave us some time to do an orderly transfer.

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