EU restrictions on fund or platform?

NSG666

I queried with Hargreaves Lansdown, Vanguard and Interactive Investor regarding what I could do if I currently had an account with them resident in the UK but moved to Portugal. The responses were:

HL
For both the SIPP and the ISA, if you move overseas, you’ll no longer be able to buy new units in UK Authorised funds. You can check whether a fund (OEIC/Unit Trust) is UK Authorised by viewing the Key Investor Information Document (KIID) which is available via the ‘Key Features and Documents’ tab of the relevant funds factsheet on our website.
You won’t be required to sell any existing investments, including any existing units of UK Authorised funds, and can still purchase other investments in your account such as shares, investment trusts, ETF's, gilts and bonds.

Vanguard
You are able to keep your account open once you move abroad.
Once you relocate, you have a couple of options. You may sell down your portfolio entirely, instruct a withdrawal and close your account, or you may hold on to your portfolio. If you choose to hold on to your portfolio then restrictions will be placed which include no purchases or deposits. This effectively places the account into a frozen status. 

Interactive Investor (reply to my double checking their initial response as it was different to the other two)
I have checked with our global trading team and they have advised there are no restrictions on our platform in trading the mentioned investments (Vanguard LS). However, it is advisable to check the fund’s prospectus to see if the manager may impose any restrictions or additional charges on non-UK residents.

Question
Is it the platform provider who is limited on what they can offer to EU residents or is it the fund itself that's restricted? It seems like the former given II have a different stance (and charge £3.99/month for non-UK residents)?

For info only I gave II an example of currently holding LS80 and asked whether I'd be able to sell them then buy the LS60 as a EU resident

dunstonh

Question
Is it the platform provider who is limited on what they can offer to EU residents or is it the fund itself that's restricted? It seems like the former given II have a different stance (and charge £3.99/month for non-UK residents)?
For info only I gave II an example of currently holding LS80 and asked whether I'd be able to sell them then buy the LS60 as a EU resident

After Brexit, the EU hasn't granted the UK equivalency in any areas apart from those critical to EU.   So, this prevents UK firms from offering services to EU residents unless they open an office within the an EU state and apply for authorisations there and then passporting permissions or open an office in each EU state they wish to operate in.

It is only the EU that have this restriction.  If you became a resident of a non EU country, the platforms could still continue to offer services.

NSG666

Thanks dunstonh although your explanation seems slightly at odds with HL's who I queried it with at the same time as starting this thread. I'm not trying to catch anyone out but simply trying to understand.

"As you mentioned, unfortunately we're unable to comment on what other providers are advising.
However, I can confirm that it isn't a HL decision to stop overseas clients investing in UK authorised funds, but rather an FCA regulation."

HL say I can still trade via their platform from the EU as long as I've opened the account as a UK resident.

Thrugelmir

Would be clearer if you explained what you are hoping to do once you've moved abroad. 

dunstonh

Thanks dunstonh although your explanation seems slightly at odds with HL's who I queried it with at the same time as starting this thread. I'm not trying to catch anyone out but simply trying to understand.

I can only tell you what the regulatory position is from the interpretations given to us.

Before Brexit, UK financial firms could offer services to anyone in the UK under "passporting" arrangements".    After Brexit, the EU removed passporting permissions from UK firms and UK firms are not allowed offer services to EU residents unless they set up an office within the EU or if the EU resident returns to the UK and transacts face to face.

There has been no FCA regulation that prevents non-UK residents from investing in UK authorised funds.   There has been EU regulation that prevents EU residents if the firm has not set up a branch and applied for permissions in the EU.  Outside of the EU, US citizens and sanctioned states, non-residents can use UK firms (in theory US citizens can but providers/platforms usually chose not to).    Maybe they meant EU when they said FCA.

There are also some EU state-specific issues as well.  For example, France is more draconian than other EU states and refuses to allow most changes whilst some other EU states are more flexible with existing accounts/tax wrappers.

A number of platforms and providers have decided that given the inconsistency across the EU27 and the volume of their customers from outside the EU is low, they have just decided to stop offering services.

You also have some plans/tax-wrappers that don't fall under MIFIDII and some that do.   Some investments don't fall under MIFIDII but some do.   

So you should expect different positions with different providers/platforms.    And like any relatively new arrangements, there may be different interpretations.

NSG666

Thanks once again dunstonh, this time for your very detailed response. The part you said about the EU resident being able to transact 'face to face' did remind me that this was suggested to me previously and might be an option.

Thrugelmir said:

Would be clearer if you explained what you are hoping to do once you've moved abroad. 

It's more theoretical as I'm hoping to only need to hold existing funds and sell down as required (seemingly possible with HL, VG and II) for income which is why I'm looking at the VLS60 as my sole fund for both SIPP and ISA in their respective wrappers. However, I posed the question to the platforms, "could I sell the VLS60 and buy VLS40 should I feel the need to once resident in the UK"

I'd like to keep the ISAs so as not to lose the wrapper just in case we find living in Portugal isn't for us and return to the UK.

Thrugelmir

As a tax resident of Portugal tax treatment might be different for ISA's. . 

NSG666

Thrugelmir said:

As a tax resident of Portugal tax treatment might be different for ISA's. . 

It is. 28% on gains but it seems that the Portuguese don't tend to invest in their 'tax efficient' schemes as they are too limited and can probably be beaten elsewhere even after the 28% tax.

Some moan about UK taxes etc but we have far superior allowances and tax efficient schemes than many EU countries - although the taxes on inheritance might be better in many EU countries but sod the kids!

Albermarle

Some moan about UK taxes etc but we have far superior allowances and tax efficient schemes than many EU countries

Yes that is often not realised . It includes our neighbour over the Irish Sea , where saving rates and tax free allowances are poor as far as I know .

GeoffTF

dunstonh said:
Outside of the EU, US citizens and sanctioned states, non-residents can use UK firms (in theory US citizens can but providers/platforms usually chose not to).

I have a friend who has UK, US and Australian nationality. He says he has not been able to open any UK financial accounts. I believe that he has a UK bank account that dates back to the days when he had only UK nationality. He mostly settles his bills with a US issued credit card. He appears to be able to hold and sell his investments in all three countries, but not add to them.

dunstonh

GeoffTF said:

dunstonh said:
Outside of the EU, US citizens and sanctioned states, non-residents can use UK firms (in theory US citizens can but providers/platforms usually chose not to).

I have a friend who has UK, US and Australian nationality. He says he has not been able to open any UK financial accounts. I believe that he has a UK bank account that dates back to the days when he had only UK nationality. He mostly settles his bills with a US issued credit card. He appears to be able to hold and sell his investments in all three countries, but not add to them.

US is probably the problem.  Australia certainly isn't.   UK financial services often dont want to get involved with those that hold US citizenship.  Not because the US prevents it but because they dont want the troubles that can come when you serve US citizens.