I’m a dual US-Swiss citizen living in Vaud, and I’ve been thinking about renouncing my US nationality to simplify my financial life. FBAR, FATCA, Pillar 3a not being tax-exempt in the US, PFIC treatment on funds: it all adds up to a real administrative and financial burden.
Before I pull the trigger, I want to understand what I’d actually be giving up on the investment side.
In his book, Marc writes about how many US ETFs block foreign investors, and how that pushed his strategy toward Vanguard and others that do allow it. As a US citizen living in Switzerland, I currently have access to the full US ETF universe: the cheaper, more liquid domestic versions of funds that Swiss residents typically can only reach through UCITS equivalents.
My question is straightforward: for those of you who have been investing from Switzerland without US citizenship, are there specific ETFs or securities you wished you could access but couldn’t? And do you think that gap is worth anything in practice, given that solid UCITS alternatives exist for most major indices?
I’m trying to figure out whether investment access is a real reason to hold onto the nationality, or just a theoretical perk that doesn’t move the needle much.
Curious to hear from anyone who has thought this through.
I do not know his book, but noticed in his other writing a certain propensity to be inprecise or uninformed. Perhaps he meant US index funds, which indeed can have limited access. ETF are publicly traded on bourses and no such limitations are known to me.
I’ve never heard and can’t recall any differences in marketability or access to securities or exchange-traded products based on citizenship of (developed market) countries. It’s “always” based on jurisdiction of residence.
For less developed markets, India comes to mind as an example, as I believe that non-resident Indians can access some products that others can’t (if I’m not mistaken). Sanctions or embargoes may complicate things for citizens of some countries - but the U.S. is, so to speak, one of them, given how many financial service providers don’t want to deal with U.S. citizens in particular.
Citizenship may make a difference when it comes to opening of brokerage or bank accounts (familiarity or assumption of ties with said country). But again, given how there’s IBKR, Schwab etc, they’re accepting noncitizens, and the U.S. is a country taking in many immigrants, lack of U.S. citizenship doesn’t seem to be a real issue.
I’m sure there’ll be exceptions where citizenship does matter, and I’d be curious to hear about them. But for exchange-traded products? Unlikely and not that I knew of it.
I assume you have never lived or worked in the US. Do you have examples of such US ETFs that you have access to?
I think the UCITS universe has evolved quite a bit since Marc wrote his book. It would be interesting to look at concrete exmples. My gutt feeling tells me that the differences between US ETFs and UCITS are not as big anymore as they used to be.
Probably not the case of OP but I think it’s common for US migrants to keep a US address on file (relative, etc).
I don’t think buying mutual funds is a legal restriction from US side, but rather risk management from the fund provider.
If you switch address I think most of them eould restrict buys (but can keep holding/selling).
(If it’s not a legal restriction, I’d assume with sufficiently large amounts they might unrestrict if your residence country doesn’t have problems with you being invested in the funds, I think it would be the case for CH, but probably not for EU).
That said for OP: I don’t think there are really financial benefits to US citizenship, mostly reporting trouble (tax déclarations) and restricted access (eg due to pfic, investment in non US funds is usually a hassle, this means no equity 3rd pillar), also hard to do tax optimization like 2nd Pillar (not tax advantaged for the US) and might be forced to use low interest bank account on vested benefits accounts.
To me the only tradeoff is access to the US (job market etc), those days it’s pretty hard to get a visa and green cards are even harder, so you’d kinda forgo this option.
One argument for keeping your citizenship is political diversification (no one can predict how any one country or region might look, politically, in 20 years).
But from a purely-financial perspective, the benefit of being able to invest directly in US-domiciled funds as a private investor would have to at least offset (if not outweigh) the premium you likely pay in the form of US taxes. That premium can be reduced by claiming FEIE, foreign housing exclusion, and other tax deductions.
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Not every bank/broker is willing to spend energy on fatca.