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Options for buying basic 'mutual funds' in the UK

Options for buying basic 'mutual funds' in the UK

Old Jan 9th 2020, 12:27 am
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Default Options for buying basic 'mutual funds' in the UK

I recently inherited about 35k GBP in the UK. After much fun and games (being a non-UK-resident), I was able to open a basic bank account in the UK (HSBC) where I deposited this money. So today the money sits there in a 'current account' earning essentially zero interest. In the US, meanwhile, I have almost all my money (retirement and non-retirement) held in 'brokerage' accounts with Schwab and Fidelity. The money is invested in a mixture of stocks, bonds, and mutual funds. I can buy/sell/trade in both these accounts with very low commissions at the click of a mouse. Basically, I'd like to take the 35k GBP that I have in the UK and dump it into a similar type of 'brokerage' account, and buy a bunch of mutual funds with the money. Is there some type of account I can open to do this in the UK? My alternative is to take the hit on exchange rates (and commissions) and simply transfer the money over here and then add it to my existing brokerage accounts. I was hoping to keep the money in the UK in case I ever need it over there, and/or for my family, but keeping it in a checking (or saving) account just isn't going to cut it as it won't even keep up with inflation.
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Old Jan 9th 2020, 12:30 am
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Default Re: Options for buying basic 'mutual funds' in the UK

Try AJBell. I have my SIPP there and they know I'm in the US.
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Old Jan 9th 2020, 1:52 am
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Default Re: Options for buying basic 'mutual funds' in the UK

Originally Posted by cranston View Post
Try AJBell. I have my SIPP there and they know I'm in the US.
Just tried to open an account with them (thanks for the tip). Failed once I said I was a US citizen (and later, a US resident for tax purposes):


It allowed me to say 'no' to the first question - '...solely a UK citizen and also solely resident in the UK for tax purposes'; I then chose 'UK' for country of birth; I chose 'UK' as country of citizenship and then added US for 'second country of citizenship' - at that moment, I got the big red error as shown ("we are sorry but we are unable to open this account for you if you are a US citizen or US resident for tax purposes"). I then tried deleting the second country of citizenship (playing the game of 'not telling them I'm a US citizen'), but the question after that is, 'Country of residence for tax purposes' and as soon as I chose 'US' for that, I got the same red box.

This is essentially the same struggle I ran into when opening a bank account over there. It seems like, if you have these accounts before moving here you are ok to keep them but they won't let you open one if you are already a resident here.
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Old Jan 9th 2020, 2:02 am
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Default Re: Options for buying basic 'mutual funds' in the UK

Originally Posted by Steerpike View Post
Just tried to open an account with them (thanks for the tip). Failed once I said I was a US citizen (and later, a US resident for tax purposes):


It allowed me to say 'no' to the first question - '...solely a UK citizen and also solely resident in the UK for tax purposes'; I then chose 'UK' for country of birth; I chose 'UK' as country of citizenship and then added US for 'second country of citizenship' - at that moment, I got the big red error as shown ("we are sorry but we are unable to open this account for you if you are a US citizen or US resident for tax purposes"). I then tried deleting the second country of citizenship (playing the game of 'not telling them I'm a US citizen'), but the question after that is, 'Country of residence for tax purposes' and as soon as I chose 'US' for that, I got the same red box.

This is essentially the same struggle I ran into when opening a bank account over there. It seems like, if you have these accounts before moving here you are ok to keep them but they won't let you open one if you are already a resident here.
I think it's the reporting requirements that the IRS/feds impose that makes it more hassle than it's worth for them to service US citizens.
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Old Jan 9th 2020, 6:57 am
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Default Re: Options for buying basic 'mutual funds' in the UK

Originally Posted by Steerpike View Post
My alternative is to take the hit on exchange rates (and commissions) and simply transfer the money over here and then add it to my existing brokerage accounts. I was hoping to keep the money in the UK in case I ever need it over there, and/or for my family, but keeping it in a checking (or saving) account just isn't going to cut it as it won't even keep up with inflation.
The total charge for transferring the money here and back (with Transferwise) is only 6 months' interest. And you can hold a UK fund here which is like having one there. And you won't need to do FBAR (if you have nothing else over $10,000).
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Old Jan 9th 2020, 7:01 am
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Default Re: Options for buying basic 'mutual funds' in the UK

You obviously won't want to buy any UK unit trusts/ ETFS/ OEICs/investment trusts because of the PFIC rules. If you file Form 8938 with the IRS do remember to report the foreign estate as a financial asset.
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Old Jan 9th 2020, 6:36 pm
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Default Re: Options for buying basic 'mutual funds' in the UK

Originally Posted by vespucci View Post
The total charge for transferring the money here and back (with Transferwise) is only 6 months' interest. And you can hold a UK fund here which is like having one there. And you won't need to do FBAR (if you have nothing else over $10,000).
I did also open a Barclays 'international' account, based in the IOM, but I haven't put anything into it yet and don't know if they offer any basic 'mutual fund' type purchase options (I set the ball rolling in Nov but it still hasn't quite fully opened yet!). But it's looking like I should just bring the money over here. I don't care to hold 'UK funds' specifically, just some typical Vanguard or Fidelity funds. The idea was to just keep the money in 'sterling' to avoid the lousy exchange rate and commissions. I hate the idea of locking in the current 1.3 exchange rate, but ... there's no indication that is going to change any time soon. My US accounts made an average of 19% last year so it's breaking my heart to see money sit there making nothing.

So ... I just looked at Transferwise. Looks like a transfer of 35k GBP will cost about 129 GBP (0.37%) in fees. Is that typical? Seems like I would register for an account, set up the destination account details (Schwab in US) then give them the 'source' account details (HSBC in UK) and then ... 'press go' ...?



I clicked on the 'compare price' button; they compare to Barclays as follows:


So Barclays shows a zero 'fee' but a lousy rate (1.27) while Transferwise shows the 129 GBP fee, but a much better exchange rate (1.30). So I'm guessing this is far better than what HSBC would offer me for a direct transfer from them to my Schwab account ... I guess I should ask ...
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Old Jan 9th 2020, 9:50 pm
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Default Re: Options for buying basic 'mutual funds' in the UK

Originally Posted by Steerpike View Post

So ... I just looked at Transferwise. Looks like a transfer of 35k GBP will cost about 129 GBP (0.37%) in fees. Is that typical?
Yes, 0.37% total charge for UK to US is typical.

A good thing about Transferwise is that you don't lose anything by not doing it in one go, so to be safe when I used it the first time I transferred 1,000 pounds, saw that it arrived, then I transferred the rest of the money, and got a similar rate to what you've mentioned for both transfers.
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Old Jan 9th 2020, 9:55 pm
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Default Re: Options for buying basic 'mutual funds' in the UK

Originally Posted by vespucci View Post
Yes, 0.37% total charge for UK to US is typical.

A good thing about Transferwise is that you don't lose anything by not doing it in one go, so to be safe when I used it the first time I transferred 1,000 pounds, saw that it arrived, then I transferred the rest of the money, and got a similar rate to what you've mentioned for both transfers.
Is it worth breaking up the transactions into smaller amounts to avoid triggering any alerts? I'm going to declare all this anyway, so I'm assuming not.
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Old Jan 9th 2020, 10:21 pm
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Default Re: Options for buying basic 'mutual funds' in the UK

Originally Posted by Steerpike View Post
Is it worth breaking up the transactions into smaller amounts to avoid triggering any alerts? I'm going to declare all this anyway, so I'm assuming not.
Yes I agree with not doing that.
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Old Jan 10th 2020, 5:03 am
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Default Re: Options for buying basic 'mutual funds' in the UK

Originally Posted by Steerpike View Post
IThe idea was to just keep the money in 'sterling' to avoid the lousy exchange rate and commissions. I hate the idea of locking in the current 1.3 exchange rate, but ... there's no indication that is going to change any time soon. My US accounts made an average of 19% last year so it's breaking my heart to see money sit there making nothing.
If you bring the money over to the US and immediately invest in a UK stock mutual fund or ETF, you really aren't "locking" yourself into a 1.30 exchange rate. If the pound strengthens then so will the dollar value of the mutual fund given it's invested in assets denominated in pounds. Of course, you're paying for two currency conversions to achieve it - one by you, one by the mutual fund - plus a third conversion if you cash out your holding down the road.
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Old Jan 16th 2020, 5:09 pm
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Default Re: Options for buying basic 'mutual funds' in the UK

Thanks for the trips regarding TransferWise. I chose to do a 'test' transaction of 5,000 GBP and it went through quicker than advertised. I initiated it Friday and it was available in my US account by Tuesday. This was their summary of the transaction: 6,506.68 USD is on its way to you. The money should be in the bank account by tomorrow, January 14.
The GBP to USD rate was 1.30635. The fee was 19.19 GBP.

So now I will transfer the rest.
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