Vanguard closing accounts? [sudden closure with a Non-US address]

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jefmafnl
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Vanguard closing accounts? [sudden closure with a Non-US address]

Post by jefmafnl »

Vanguard seems to allow accounts with a foreign address, if the accounts were opened when the account holder lived in the US.

Sometimes one reads horror stories about Vanguard suddenly closing accounts with a foreign address.

Does anyone have firsthand experience with this? If so, did Vanguard allow time for IRA's to be rolled over to another brokerage?

Thanks!

J
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Re: Vanguard closing accounts? [sudden closure with a foreign address]

Post by Pops1860 »

Added clarification to title to help focus responses. Moderator Pops1860
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student
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Re: Vanguard closing accounts? [sudden closure with a foreign address]

Post by student »

I think one company that people who have a foreign address like is Interactive Broker.
lynneny
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by lynneny »

When I told Vanguard I was retiring to Mexico, they said I could keep my account, with some restrictions. Living outside the U.S., I can keep or sell any of my holdings, but can´t buy more, except for dividend reinvestment. That´s fine with me because I´m retired, so I´m taking money out rather than adding money. I do, however, still use a U.S. mailing address on the account. I´m not trying to conceal where I live, which Vanguard already knows, but Mexico has a dysfunctional postal service that´s only slightly better than just throwing mail out the window. So I use a U.S. address in order to actually get mail.
You only asked about Vanguard, but I´ve had much the same experience with Schwab, too. Although Schwab will let customers outside the U.S. buy ETFs, just not mutual funds. I use the Schwab account more because it comes with an ATM debit card that doesn´t charge transaction fees, and refunds all ATM fees.
I opened both the Vanguard and Schwab accounts long before I left the U.S.
Faith20879
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by Faith20879 »

lynneny wrote: Mon Mar 20, 2023 12:31 am ...I could keep my account, with some restrictions. Living outside the U.S., I can keep or sell any of my holdings, but can´t buy more, except for dividend reinvestment. ...
This is exactly what Vanguard said when I asked in a secured email a couple of years ago.
plats
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by plats »

Are there any expat Bogleheads out there that have had restrictions put upon their accounts or frozen without first contacting VG and asking them to clarify their policy?
lynneny
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by lynneny »

Although there are horror stories about unnamed expats who had their accounts frozen or closed by Vanguard, I´ve never heard of any by name, whereas I know a lot of expats with VG accounts who haven´t had their accounts closed.
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by whodidntante »

It's painful for companies to comply with the anti-terrorism requirements imposed by the USA government, and foreign banks don't really want to deal with it, either. So ex-pats can become unbanked if they aren't careful. When I was living as a nomad during the chip and PIN era, I had to go to great lengths to get a foreign credit card because no one wanted to do business with an American.

My advice: apply the rules of fight club to your foreign address. Also, stop sending pieces of paper through the mail for financial transactions. That wasn't covered in the fight club rules, but we could sub it for rule #3 without any issues.
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snackdog
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by snackdog »

Just keep a US address and no issues. Can be a friend, forwarding service, whatever.
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truenorth418
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by truenorth418 »

snackdog wrote: Tue Mar 21, 2023 12:21 am Just keep a US address and no issues. Can be a friend, forwarding service, whatever.
Sure, but what happens when your “friend” moves while you are overseas, and you have to scramble for a new strategy?

For financial accounts, a “forwarding address” needs to be a legal domicile, cannot be a PO Box.

There are services that can provide these, and there have been many posts about this issue so search away.
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typical.investor
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by typical.investor »

jefmafnl wrote: Sun Mar 19, 2023 8:50 am Does anyone have firsthand experience with this? If so, did Vanguard allow time for IRA's to be rolled over to another brokerage?
Yes, Vanguard froze my accounts when I gave them a foreign mailing address (while keeping a US address). I panicked ... as an expat with most holding in taxable.

Frozen meant that assets could be sold, cash or stocks transferred out, and dividends were reinvested. No purchases were possible. Not even money market funds.

I had time to move out an IRA and taxable. I also kept a 529 plan and annuity for a few years there since I was making no new contributions.

I was a new customer to Vanguard which I think influenced it. I had a chance to provide a utility bill to my US address, but a relative was living in the home and I didn't have one.

I had also complained pretty unhappily as they misreported my cash balance for a while which caused a number of trades to fail and I was unhappy about being out of the market until I could replace them. Between that and my being new, they just axed me. I was so happy to move assets without being sold out and facing gains tax that I just left without pressing my claim further.

None of it would have happened if mail hadn't been sent when I requested electronic delivery only. It was family but I didn't want my account info going someplace I wasn't so I thought the mailing address would be fine. I'd not had trouble using a foreign address for my bank, previous broker or the 529 plan before moving to Vanguard, so I didn't know.
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typical.investor
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by typical.investor »

truenorth418 wrote: Tue Mar 21, 2023 4:22 am
snackdog wrote: Tue Mar 21, 2023 12:21 am Just keep a US address and no issues. Can be a friend, forwarding service, whatever.
Sure, but what happens when your “friend” moves while you are overseas, and you have to scramble for a new strategy?

For financial accounts, a “forwarding address” needs to be a legal domicile, cannot be a PO Box.

There are services that can provide these, and there have been many posts about this issue so search away.
They are pretty savy about catching mail forwarding services even if the service claims to provide a street address.

If I wanted to be at a broker who didn't accept a foreign address, I'd use a friend or relatives AND a mail forwarding service. The broker would be happy with a legal street address and I'd be happy getting my mail (new debit cards, change of tel. number notifications, or even the occasional mistake on mailing statements).

I'd probably use Schwab International (again) or International Brokers if I was an expat again though. Unless I was in Europe which sorta requires one to have a US broker to buy US domiciled ETFs.
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Maple
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by Maple »

I've been using Vanguard as a non-US resident for many years. I filed a W-8BEN which has a foreign residence address and a US mailing address (at a mail forwarding company). Vanguard, so far, has been completely ok with the circumstances and has not imposed any account restrictions. Hopefully this will continue.
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by TedSwippet »

Maple wrote: Tue Mar 21, 2023 6:05 am I've been using Vanguard as a non-US resident for many years. I filed a W-8BEN which has a foreign residence address ...
Similar, UK based US nonresident alien with W-8BENs at Vanguard.

However, I have run into several restrictions with my Vanguard account, many/most of which are difficult to connect logically to not being a US resident. No voice identification; no checkwriting; no access to the Vanguard app; and restricted to mutual funds only, with no brokerage option or way to hold Vanguard ETFs. (The latter is particularly weird, since the UK has unfavourable tax rules that capture Vanguard mutual funds but not most Vanguard ETFs.)

As for 'policy' ... it's unclear if Vanguard, or for that matter any provider, has one. Results reported anecdotally here and elsewhere are all over the place, from 'absolutely no problems' to 'summarily evicted' and everything in between. I suspect some of it may revolve around the tax treaty (or treaties) with the countries involved. For some reason, perhaps a regulatory spat, Canadian residents seem to report more in the way of significant problems than residents of other countries, although that may just be selection bias, and perhaps only one or two providers. Also, I can imagine it is harder to evict a customer with a megacorp 401k than one with, say, only a small-ish taxable account.

The only thing investors can reliably do is ask their provider before moving outside the US, while at the same time accepting the likelihood that they might have been told entirely the wrong thing -- frontline customer service are almost never clued up on expat tax issues, and often reflexively provide the most available answer rather than the most correct one -- and that even if they did receive the right information, things could well change in future, perhaps drastically.

Overall pretty unsatisfactory. Unfortunately though, that's the reality.
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happyisland
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by happyisland »

Why not switch to a provider that doesn't put these restrictions on you, or make you hide your address from them? IB seems to work almost everywhere, and Schwab works in some countries.
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jefmafnl
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by jefmafnl »

Thanks to all who replied!

Just to double-check: for those of you who notified Vanguard of your new (non-US) address, did they forbid ANY purchases, including additional purchases of mutual funds and ETFs in which you already owned shares? Or did they only forbid purchases of funds and ETFs that were "new" to your account?

J
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by Hyperborea »

happyisland wrote: Tue Mar 21, 2023 7:16 am Why not switch to a provider that doesn't put these restrictions on you, or make you hide your address from them? IB seems to work almost everywhere, and Schwab works in some countries.
IB does not honour the tax treaty withholding rates and instead withholds at the default 30% for everyone.

https://www.interactivebrokers.com/en/t ... mation.php
We do not support reduced (treaty) tax rates for distributions from US IRAs to foreign beneficiaries.
Schwab will apparently honour tax treaty withholdings - I've been informed by my ex-employer's Schwab "concierge" that this is so. I haven't got to the point of making withdrawals yet.

Yes, if you have more tax withheld than the treaty rates you will eventually get it back but it will mean filing a US tax return and then it will take anywhere from 6 months to a year and a half. On top of that, you will have the issues of having to have a US bank to take the deposit or trying to cash a US dollar cheque in your home country.
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Maple
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by Maple »

TedSwippet wrote: Tue Mar 21, 2023 7:03 am
Similar, UK based US nonresident alien with W-8BENs at Vanguard.

However, I have run into several restrictions with my Vanguard account, many/most of which are difficult to connect logically to not being a US resident. No voice identification; no checkwriting; no access to the Vanguard app; and restricted to mutual funds only, with no brokerage option or way to hold Vanguard ETFs. (The latter is particularly weird, since the UK has unfavourable tax rules that capture Vanguard mutual funds but not most Vanguard ETFs.)

As for 'policy' ... it's unclear if Vanguard, or for that matter any provider, has one. Results reported anecdotally here and elsewhere are all over the place, from 'absolutely no problems' to 'summarily evicted' and everything in between. I suspect some of it may revolve around the tax treaty (or treaties) with the countries involved. For some reason, perhaps a regulatory spat, Canadian residents seem to report more in the way of significant problems than residents of other countries, although that may just be selection bias, and perhaps only one or two providers. Also, I can imagine it is harder to evict a customer with a megacorp 401k than one with, say, only a small-ish taxable account.

The only thing investors can reliably do is ask their provider before moving outside the US, while at the same time accepting the likelihood that they might have been told entirely the wrong thing -- frontline customer service are almost never clued up on expat tax issues, and often reflexively provide the most available answer rather than the most correct one -- and that even if they did receive the right information, things could well change in future, perhaps drastically.

Overall pretty unsatisfactory. Unfortunately though, that's the reality.
Ted,

Geez, this really does highlight the idiosyncratic treatment of expatriates. I've observed extremely different treatment from one expatriate to the next at the same broker, different treatment of the same expatriate by different brokers and changing treatment over time with the same expatriate at the same broker. We can only wish rules were simpler and more consistent.

Schwab recently imposed new restrictive rules on expatriates in the Philippines (where I'm a resident). Found Tradestation as an acceptable backup (IB and Vanguard are also currently ok). Hopefully as some brokers become less attractive, other brokers become suitable.
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by TedSwippet »

Maple wrote: Sat Mar 25, 2023 9:25 pm Hopefully as some brokers become less attractive, other brokers become suitable.
For US citizens, maybe.

However, nonresident aliens with lingering/hostage US 401k and IRA accounts will very likely find that if their current provider chooses to evict them, they have absolutely no alternative options. I have confirmed directly that neither Interactive Brokers nor Fidelity will open and transfer IRA accounts for nonresident aliens.
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by Badinvestor »

There was a period in my life when I had hopes of retiring to my home country. During that time I stopped contributing to my 401k and IRA. My home country is not in the EU and is not as strong and stable as the UK. It also has no US tax treaty as yet.

It is my understanding that US financial institutions all have a "know your customer" policy, which they generate and run by regulators but can keep secret from customers. That can lead to the institution suddenly refusing to deal with a returned foreigner (or even a non-US resident American).
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by kojima »

If ones mailing address for their US brokerage is a US address while the mailing address for ones IRS tax return is a foreign one, would the brokerage ever find out? Does the brokerage and IRS share this sort of information together?

Also, will this situation incur penalities or different taxes with the IRS as they see that the filer is outside the US while receiving dividends and capital gains?
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Maple
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Re: Vanguard closing accounts? [sudden closure with a Non-US address]

Post by Maple »

TedSwippet wrote: Tue Mar 28, 2023 9:13 am For US citizens, maybe.

However, nonresident aliens with lingering/hostage US 401k and IRA accounts will very likely find that if their current provider chooses to evict them, they have absolutely no alternative options. I have confirmed directly that neither Interactive Brokers nor Fidelity will open and transfer IRA accounts for nonresident aliens.
That's unfortunate, hassles abound for us expatriates!

So far, Vanguard has not evicted my retirement account. Hopefully that won't change. 🤞
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