US ETFs no longer purchasable in Europe

Curious if anyone else has found any way to purchase the likes of VTI/VOO etc as an Irish citizen recently?

Have some VTI which I was hoping to build up over the next 16/17 years and use for the kids college fund. This is a bit of a kick in the teeth. Thought I was on to a winner with degiro with no fees for buying every month.

Is it likely degiro will overcome the issues anytime soon?

Shai wrote: »

you can buy them as an Irish citizen through firstrade.com

Thanks. That looks interesting. Do you fund by wire transfer? Reading their conditions it looks like normal bank transfer is only for US residents. They also charge 50 USD to withdraw via wire too?

Was thinking of using revolut to fund it in dollars but not sure if it would work.

PaulKK wrote: »

Shai wrote: »

you can buy them as an Irish citizen through firstrade.com

Thanks. That looks interesting. Do you fund by wire transfer? Reading their conditions it looks like normal bank transfer is only for US residents. They also charge 50 USD to withdraw via wire too?

Was thinking of using revolut to fund it in dollars but not sure if it would work.

Just having a chat with one of the reps for firstrade. Seems like the quote above is incorrect. The fee for the transfer out is 30USD.


Few other answers that others may find helpful


"[font=arial, sans-serif]Shares are held under our clearing firm Apex's street name. We do not charge maintenance fees. We only charge commission for trades. For commission rates, please visit: [/font][font=arial, sans-serif]https://www.firstrade.com/content/en-us/pricing[/font][font=arial, sans-serif]. There is no limit on ETF tradings. International outgoing wire is $30."[/font]


From what I can see on PTSB a transfer to the US is €31.50 unless I am mistaken. For my portfolio size, this is a non runner. Guess I need to look at moving into direct holdings instead of ETFs.

Sparxy wrote: »

I've been using Interactive Brokers for a short while now. Their offering is very comprehensive (far more complex than I require!), so that takes a bit of getting used to.

On the plus side: no restrictions on trading of ETFs (most of my holdings are US-based ETFs), low trading costs, and I can transfer directly from my PTSB account to them for no cost, or use a swift transfer in branch for larger amounts (at a cost of 50 cents).

Account maintenance costs are non-trivial but are waived depending on the size of your positions.

I'd certainly recommend them based on my experiences so far.

As of a few days ago, IB no longer offer US-based ETFs to EU customers. Would like to figure out how to actually going about doing this now, saving cash which is just sitting there that i would usually pump into a vanguard fund via DeGiro but don't want to be exposed to the 8 year deemed disposal as it will kill compounding in the long-run.

First trade seems the only option then? Anyone actually transferred money to them and bought US ETFs? Experiences?

Shai wrote: »

yes, I have. Not sure what you wanna know, but feel free to ask away. The entire thing was pretty straightforward.

Cheers. Is it the same as DeGiro? Just transfer across from bank account, purchase shares using what you transferred over directly? Any transfer fees or anything?

jive wrote: »

Cheers. Is it the same as DeGiro? Just transfer across from bank account, purchase shares using what you transferred over directly? Any transfer fees or anything?

Unfortunately not. You'll need to do a wire transfer to transfer money across, which costs me (through AIB) $25. Then, if you want to get Firstrade to send money back your way, it'll cost ya $50. There'll be a EUR to USD currency conversion fee on top of that as well. I only do one or two transfers to Firstrade a year to keep the account funded, and I'm lucky enough to have access to dollars without having to deal with currency conversion fees.

I got my bank (AIB) to do a wire transfer. I'm not sure Transferwise is accepted for funding US brokerage accounts due to some laws with regards to illegal money transfers (I'm being super vague, I know).

If you can get it to work, please let us know, cause I'd be interested in using it instead of doing wire transfers.

International Swift. ACH is only available if you're sending from a US bank.

Dardania wrote: »

excitementcity wrote: »

Dardania wrote: »

I've setup a spreadsheet to try understand this issue over 24 years, starting from a notional E1,000 - feel free to twiddle the numbers, and let me know if I've made a bad assumption: https://docs.google.com/spreadsheets/d/e/2PACX-1vSeQni67A5rcgf8drQP8KgQIntNSibeG5KSKHX5PgR1TXnsvQ8jymFVGvvvD87f8SYJ0AuAoppVz6mu/pubhtml 

In some cases, the difference isn't so much, and in other cases it is disastrous for the UCITS scenario.

Having Accumulation type ETFs is essential in the UCITS world to be competitive from what I can see - in order to get a big spread compared to income type ETFs from the US.

Dardania just wondering if you have a downloadable version of this spreadsheet? Many thanks

Sorry, try this one: https://drive.google.com/file/d/1TgG5Oj_cq7dL8BJoeX8IMiAdk9XPYer5/view?usp=sharing - or if that doesn't work PM me

So, after a detailed analysis of this spreadsheet by Sparxy (many thanks on that!) - I had some errors in the spreadsheet. They don't change the overall guidance (UCITS isn't as bad as everyone thinks, and in fact now our analysis suggests UCITS might perform better when dividends above 1.75% are considered):
[font=Open Sans, Arial, Helvetica, sans-serif]- I had wrongly carried some of the gain from the first 8 years to the subsequent 8 years, which means that the exit tax was being paid twice[/font]
[font=Open Sans, Arial, Helvetica, sans-serif]- A small error with how dividends were calculated on the non UCITS case (they were wrongly shown in year one presuming year one's capital growth has already occurred)[/font]
[font=Open Sans, Arial, Helvetica, sans-serif]- I had wrongly cal'd the CGT on the non-UCITS case in year 24, by not including the increasing principle presuming re-investment of dividends[/font]

[font=Open Sans, Arial, Helvetica, sans-serif]I would be obliged if interested people could look over this (the links above are still valid)  - is it true that the UCITS situation is not as bad as many here think?[/font]
[font=Open Sans, Arial, Helvetica, sans-serif]I have added some more scenarios, where it is possible to see how in a low dividend world, non UCITS works best, whereas when dividends are 2% and above, UCITS is the clear winner (presuming of course one goes for an Accumulating ETF)[/font]

Cute Hoor wrote: »

All stock trades on Firstrade now $0. Not sure when they went to $0, didn't see any communication about it.

emm, so how do they make money now?

iknorr wrote: »

Will do. I have been dealing with transferwise most of the day so, hopefully they will come back with a solution. I sent Firstrade a mail also. Lets see what they say.
 I see that there two options on the transfer wire info.  Domestic or International 
For domestic it uses ABA (ACH) and for International its using Swift . Which one do you send via? Domestic ABA or International Swift?

Any luck with this?

At this point I'm considering subjecting myself to EU-domiciled ETFs and the 8 year deemed disposal rule... can already imagine how sick I'll be assuming the market keeps humming along for another 8 years with the tax bill I'll have to pay I'd much rather set it and forget it with a US ETF.

iknorr asked a question from me via PM regarding my spreadsheet and why there is a tax calculation every year on the dividends from the US funds, and why there are no dividends shown for the UCITS case. 
I tried answering via PM, but it keeps giving an error message - I am living outside Ireland at the moment and think boards have PM blocked outside Ireland...so I'll answer here:

In the UCITS case, I am assuming that people are investing in Accumulating (also known as Capitalising) ETFs. This is where the dividneds received from the constituent stock is reinvested to the fund, optimising the compound interest effect. Some good reading is here: https://forum.mrmoneymustache.com/investor-alley/accumulating-vs-distributing-advantages-and-disadvantages/ & https://www.justetf.com/uk/news/etf/avoiding-etf-performance-pitfalls.html

With the US scenario, I have shown dividends being paid, and accordingly, income tax due on them. I understand from reading around in the past that US ETFs are obliged by law to pay out all dividends to the investor. This is the equivalent in the UCITS world of a Distributing or Income share class ETF. That means that the investor is obliged to complete the form 11 from ROS every year.
I have furthermore shown that the investor in US funds re-invest manually any dividends. In practice, that can be hassle but is doable (there might be transaction fees, and also trying to match ETF unit cost to the dividends you have, however with a larger portfolio that grief is lessened)

Does this make sense? Your summarisation is spot on:
Is it a case that the Irish domiciled case, you only pay tax when you cash out and at every 8 years (and no dividends are taxed?) . Versus the US where you must pay yearly tax on any dividends received by the ETF?

From doing this exercise, I really feel that the factors at play in choosing the UCITS or US path are: the TER of the fund (US are slightly lower than UCITS), whether likely dividend income will exceed say 2%, and the investors honesty in declaring dividend income.

Almost all US brokers will reject transfers from TransferWise as third party, the problem is they don't come from your account but from TW's account, and brokers usually require any incoming transfers to come from a bank account in YOUR name. Transfers with TW in the US, even if you have their Borderless account, do not appear to come from your account but from TW. I believe in Europe they may work, as first party with your name on it, but they don't in the US.

FirstTrade like most brokers will reject attempted third party transfers, they say this on their site.

It's nothing to do with TW being illegal, it's just the technical way that their system is implemented, a broker does not see the transfer as coming from your account and the default position is to reject any third party transfers over money laundering concerns. If TW ever manage to fix this so transfers appear to come from an account in YOUR name, they should potentially work with any broker. But that's not how it is right now unfortunately.

One broker I know DOES take transfers via TW is DriveWealth. They are a relatively small broker but specifically target international investors and have a tech platform that they sell to third parties, they power for example Stake in Australia and Freetrade in the UK. They very specifically target international investors, and make an explicit point that they take TransferWise for Europeans.

You are going to lose a lot going the conversion with AIB, on larger amounts it's not the €20, it's the percentage they chop on the bad forex rate. Even TW is not fantastic for very large amounts for investing but it's better than AIB.

Interactive Brokers would have been ideal for this- they have fantastic forex and take SEPA transfers in EUR but I believe they stopped US ETFs to EU residents recently as well.

Dardania wrote: »

iknorr asked a question from me via PM regarding my spreadsheet and why there is a tax calculation every year on the dividends from the US funds, and why there are no dividends shown for the UCITS case. 
I tried answering via PM, but it keeps giving an error message - I am living outside Ireland at the moment and think boards have PM blocked outside Ireland...so I'll answer here:

In the UCITS case, I am assuming that people are investing in Accumulating (also known as Capitalising) ETFs. This is where the dividneds received from the constituent stock is reinvested to the fund, optimising the compound interest effect. Some good reading is here: https://forum.mrmoneymustache.com/investor-alley/accumulating-vs-distributing-advantages-and-disadvantages/ & https://www.justetf.com/uk/news/etf/avoiding-etf-performance-pitfalls.html

With the US scenario, I have shown dividends being paid, and accordingly, income tax due on them. I understand from reading around in the past that US ETFs are obliged by law to pay out all dividends to the investor. This is the equivalent in the UCITS world of a Distributing or Income share class ETF. That means that the investor is obliged to complete the form 11 from ROS every year.
I have furthermore shown that the investor in US funds re-invest manually any dividends. In practice, that can be hassle but is doable (there might be transaction fees, and also trying to match ETF unit cost to the dividends you have, however with a larger portfolio that grief is lessened)

Does this make sense? Your summarisation is spot on:
Is it a case that the Irish domiciled case, you only pay tax when you cash out and at every 8 years (and no dividends are taxed?) . Versus the US where you must pay yearly tax on any dividends received by the ETF?

From doing this exercise, I really feel that the factors at play in choosing the UCITS or US path are: the TER of the fund (US are slightly lower than UCITS), whether likely dividend income will exceed say 2%, and the investors honesty in declaring dividend income.

Thanks for the info.

So for example, where would an ETF like VOO fit in with regard % Growth & % Dividend yield?

blorg wrote: »

iknorr wrote: »

Thanks for the info. 
So for example, where would an ETF like VOO fit in with regard % Growth & % Dividend yield?

At the moment, it is quite low- 1.73%. Historically it has been a lot higher, as high as 5% in the 1980s, but it has been "low" in historical terms since the late 1990s, for 20 years now. Tech companies that tend to pay no dividends have come to make up a large portion of the S&P500 and this has dragged the dividend yield down. The last ten full years, 2008-2017, it averaged 2.13%. The last 20 years, most of the gain in the S&P500 has come from capital growth.

In a bull market, like we have had the last decade the stock price increases will tend to outstrip the dividend. In a bear market the dividend yield you would expect to go up substantially. Dividend yield is a function of the share price so if your share values all drop by half, and the dividend stays the same, your dividend yield will double. You'll still lose a load of money, but the portion that comes from dividends will increase. In practice, of course in a bear market companies will go bust and dividends will be cut but they usually are not cut enough to compensate for the dive in stock prices. So you will see a bump, and you can see that in the 2008 crash, the dividend yield of the S&P500 does bump up there- but not by a phenomenal amount, it got to 3.23%. Of course your capital appreciation will be negative in this scenario so all of your gains would be coming from the dividend then.

If you are looking for historical data on this, it may be easier to look for the S&P500 dividend, this will be essentially identical to VOO as it is the index tracked.  

http://etfdb.com/etf/VOO/#dividend
http://www.multpl.com/s-p-500-dividend-yield/

Very interesting stuff. It sets up for a bit of a philosophical debate - should we invest in equities which have aggressive capital growth (the higher they fly, the further they fall) or who have good dividend growth? On the one hand, capital growth is good, and they either invest their spare cash in R&D, or else they do share buybacks. Or maybe they have losses such that they don't pay dividends.
On the other hand, dividend growth is good and conservative, but doesn't necessarily show future promise of spending on R&D.
There's talk that the US will not have such good decades of growth compared to lately - the question is will the rest of the world result in taking on any engine of growth (and will that mean dividends or capital growth)...

Edit: Quite coincidentally, this was linked to from a feed I follow today: http://www.dividend.com/dividend-education/how-to-spot-a-dividend-value-trap/