Best Steps for Moving Shares and ETFs from Fidelity When Relocating Abroad in 2023

Moving shares and ETFs from Fidelity when relocating abroad presents unique challenges and requires a comprehensive understanding of Fidelity’s policies and international regulations.

This process involves navigating through various restrictions, tax implications, and regulatory compliance.

If you want to invest as an expat or high-net-worth individual, which is what i specialize in, you can email me (advice@adamfayed.com) or use WhatsApp (+44-7393-450-837).

This article is not formal advice, and the facts might have changed since we wrote it.

Step 1: Understanding Fidelity’s Policies on International Relocation

Restrictions and Limitations

Country-Specific Regulations

When moving shares and ETFs from Fidelity internationally, it’s crucial to recognize that Fidelity’s services for customers residing outside the United States are limited.

Fidelity does not open accounts for new customers living abroad and imposes restrictions on discretionary asset management services for existing customers who relocate outside the U.S.

Depending on your new country of residence, you may face limitations such as the inability to open new accounts like 529 Savings Plan Accounts or Health Savings Accounts, or continue contributing to existing ones.

After August 1, 2014, Fidelity also prohibited customers residing outside the U.S. from purchasing shares of mutual funds.

Types of Accounts and Assets Affected When Moving Shares and ETFs from Fidelity

Customers residing in certain countries may only be able to sell their existing holdings and withdraw proceeds, without the ability to make deposits or buy additional securities.

In other countries, while less restrictive, customers might still experience limitations like prohibitions on margin lending or options trading, or specific account types facing trading restrictions.

Procedures for Notifying Fidelity

Documentation Required

If you’re planning to move your shares and ETFs from Fidelity due to international relocation, you must provide Fidelity with adequate documentation.

This could include proof of your new address, identification documents, and any other paperwork that Fidelity deems necessary to process your relocation.

Timeline and Processing

The time required for processing your request to move shares and ETFs from Fidelity when moving abroad can vary. It’s advisable to initiate the process well in advance of your relocation date to allow sufficient time for all necessary verifications and adjustments in your account.

Step 2: Tax Implications of Moving Shares and ETFs Abroad

Capital Gains Tax Considerations

When moving shares and ETFs from Fidelity while relocating internationally, investors must be vigilant about the potential capital gains tax liabilities.

The moment you decide to sell your investments, it may trigger capital gains tax. Countries like the United States automatically withhold a tax of 15% on investment income, though this rate can vary.

Notably, if you hold your assets for more than 12 months, you could be eligible for a capital gains tax (CGT) discount, where only the remaining gain is added to your assessable income for the year.

However, if capital gains tax is paid in the country where you’ve invested, you might be eligible for an offset against the tax payable in your home country.

This measure helps in avoiding double taxation. It’s imperative to recognize that the tax implications when moving shares and ETFs from Fidelity to an overseas location can be complex.

Taxes may be withheld in the origin country, and exchange rate considerations become crucial for tax declarations.

For instance, in Australia, any income earned from international investments must be declared in Australian dollars, using specific exchange rates based on whether the income is received into Australia or kept in an international account.

Tax Treaties and Double Taxation

Understanding the nuances of tax treaties and the intricacies of double taxation is crucial when moving shares and ETFs from Fidelity abroad.

Many countries have tax treaties in place, which can affect your tax liabilities. These treaties determine which country has the right to tax specific types of income and can provide relief for double taxation.

For example, if you are an Australian investor, a foreign tax offset is available to limit double taxation, where the withholding tax from the investment’s country of origin can be claimed as a credit against the Australian tax payable on foreign income.

In navigating different jurisdictions, it’s essential to research and understand the tax reporting requirements and potential tax liabilities in your new country.

Tax residency rules vary across countries, impacting how your income and investments are taxed. Compliance with reporting requirements for foreign assets and income is crucial to avoid penalties and legal complications.

You should also be aware of any investment restrictions or regulations in the new country. These rules can significantly impact the types of investments foreigners can make or limit foreign ownership of certain assets, thus influencing your decision to move shares and ETFs from Fidelity.

Step 3: Evaluating the Financial Landscape of Your New Country

Currency Risks and Conversion Rates

When evaluating the financial landscape of your new country after moving shares and ETFs from Fidelity, currency risks and conversion rates stand out as critical considerations.

The value of your investments can fluctuate significantly due to changes in exchange rates, affecting the purchasing power of your investments and potentially influencing returns and income.

This variability underscores the importance of understanding how currency exchange and exchange controls may impact your investments.

Some countries have exchange control regulations that limit the movement of money in and out of the country, affecting your ability to transfer funds or repatriate investment proceeds.

Additionally, the impact of currency exchange rates on the value of your investments should not be overlooked, as these can present both risks and opportunities.

Economic Stability and Market Trends

Another aspect to consider when moving shares and ETFs from Fidelity to a new country is the overall economic stability and market trends.

Countries may have different levels of political stability, economic growth rates, and regulatory environments, all of which can impact the performance of your investments.

A sudden shift in political or economic conditions can create uncertainties in financial markets, affecting the value of your investments.

Living abroad might also necessitate changes in your personal circumstances, such as adjusting your investment strategy to align with the higher cost of living or different investment goals in your new environment.

Therefore, it’s crucial to stay informed about local regulations, tax policies, and economic indicators to make informed decisions and adapt your portfolio to mitigate potential risks or capitalize on new opportunities.

Step 4: Deciding Whether to Transfer or Liquidate Your Assets

Pros and Cons of Transferring Shares

When considering moving shares and ETFs from Fidelity as part of an international move, it’s crucial to weigh the benefits and drawbacks of transferring these assets.

A key advantage of transferring shares is maintaining your investment strategy. If your shares and ETFs are performing well and align with your long-term investment goals, keeping them intact can be beneficial.

By transferring, you retain the potential for continued growth and dividends, depending on the performance of the underlying assets.

This continuity can be particularly important for those who have a well-defined investment strategy focusing on long-term gains.

However, there are challenges too. The process of moving shares and ETFs from Fidelity to an international brokerage involves navigating different market regulations and potential limitations on the types of stocks and ETFs you can hold in certain countries.

Fidelity’s international trading allows for most common stocks and ETFs listed in numerous countries to be traded online directly in the local market.

Another consideration is the tax implications of transferring your shares. While your assets are moving across borders, they remain subject to U.S. tax laws, including capital gains taxes, which can complicate your financial situation.

Liquidation Strategies and Timing

The decision to liquidate shares and ETFs from Fidelity before moving abroad is a significant one. Liquidation refers to selling your assets for cash.

This strategy can be advantageous if you foresee difficulties in managing your investments from abroad or if the tax implications of transferring are unfavorable.

When you liquidate, you must report any capital gains or losses along with cost basis information to the IRS.

The tax liability is determined by the cost basis of your security and the sales price. Fidelity typically uses the first in, first out (FIFO) method when selling shares, although other methods are available and can be chosen based on your financial goals.

However, liquidating can disrupt your long-term investment strategies and lead to a less diversified portfolio.

Diversification is crucial for managing risk, and selling off assets might leave you overly concentrated in fewer types of investments or currencies. Additionally, if you’re not careful about the timing of your liquidation, you could sell during a market downturn, potentially incurring losses.

Step 5: Navigating the Transfer Process

Selecting a New Broker or Investment Platform

Moving shares and ETFs from Fidelity to an international broker requires careful consideration of various factors.

The choice of broker or platform will significantly influence your investment experience abroad. Compare fees, services, and the range of investment options available. It’s crucial to choose a broker that aligns with your investment goals and strategies.

When selecting a new broker, consider the commissions charged, which vary by market and are charged in the local currency.

Also, be aware of currency exchange fees if you choose U.S. dollars as the settlement currency for your international stock trade, as these can impact the overall cost of transactions.

Transfer Mechanisms and Procedures

The mechanics of moving shares and ETFs from Fidelity involve two primary methods: in-kind and cash transfers. An in-kind transfer involves moving your securities directly to the new broker without converting them to cash.

This method maintains your current investments but requires both brokers to support the same securities. On the other hand, a cash transfer involves selling your securities and transferring the cash proceeds.

This method might be simpler but can have tax implications and impact your investment strategy. When transferring foreign currency from Fidelity, you can use their Outgoing Foreign Currency Wire Form and contact a Fidelity International Trader for assistance.

Conversely, to transfer foreign currency to Fidelity from another institution, begin the process at the financial institution holding the currency.

Step 6: Compliance with International Regulations and Reporting

FATCA and CRS Requirements

When moving shares and ETFs from Fidelity internationally, understanding and complying with the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) is paramount.

FATCA, primarily governed by the United States, mandates that foreign financial institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders.

The CRS, developed by the Organization for Economic Cooperation and Development (OECD), is a global reporting standard for the automatic exchange of financial account information (AEOI).

While it draws on the approach of FATCA, it differs in several aspects, including its broader scope, capturing tax residents in over 100 jurisdictions. For investors moving shares and ETFs from Fidelity, compliance with these regulations is critical.

Under CRS, financial accounts are defined broadly, encompassing depository and custodial accounts, including brokerage accounts like those at Fidelity.

This means that when you transfer your shares or ETFs, you are subject to CRS’s reporting requirements.

The key differences between FATCA and CRS lie in their governance, withholding, account scope, thresholds, and documentation requirements.

CRS is governed by the competent authority of each participating jurisdiction and enforced through a variety of penalty schemes, some of which may imply criminal prosecution.

Additionally, the thresholds for account review under CRS are stricter compared to FATCA. Compliance involves ensuring accurate reporting to tax authorities.

This includes identifying and documenting reportable accounts and adhering to the specific onboarding, remediation, and reporting enhancements required under CRS and FATCA.

Therefore, when moving shares and ETFs from Fidelity, it is crucial to understand the specific requirements of the jurisdiction you are moving to and ensure your investment portfolio aligns with these international standards.

Anti-Money Laundering Checks

Anti-money laundering (AML) checks are another critical aspect to consider when moving shares and ETFs from Fidelity.

AML regulations, primarily aimed at preventing money laundering and terrorist financing, require financial institutions to monitor and report suspicious activities.

These regulations apply globally, and when moving shares and ETFs, you must ensure that the transfer complies with AML standards in both your current and new jurisdictions.

For Fidelity and other financial institutions, AML checks involve scrutinizing the source of funds, the nature of transactions, and the background of the parties involved in the transaction.

This includes conducting due diligence on customers, monitoring transactions for unusual patterns, and reporting suspicious activities to relevant authorities.

As an investor, you may be required to provide additional documentation or information to facilitate these checks when moving your shares or ETFs.

Ensuring that your transfer of shares and ETFs from Fidelity adheres to AML regulations is crucial for a smooth transition. Non-compliance can lead to legal complications, financial penalties, or the freezing of assets.

Therefore, it is advisable to work closely with Fidelity and other relevant financial institutions to navigate these checks and ensure that all aspects of your transfer are in compliance with international AML standards.

Step 7: Continual Management of Your Investment Portfolio Abroad

Adjusting Investment Strategies for New Markets

When moving shares and ETFs from Fidelity while relocating abroad, adapting your investment strategies to new market conditions is crucial.

The landscape of global finance is continually shifting, influenced by major macroeconomic trends like deglobalization, decarbonization, and changing demographics.

These trends are compelling investors, particularly in the U.S., to reassess their investment strategies to align with the evolving economic policy and market behavior.

According to a study by Schroders, an overwhelming 91% of U.S. investors acknowledge the emergence of a new regime in economic policy and market behavior, mainly driven by global inflation and interest rates.

In response to these changes, 73% of U.S. investors have altered their investment strategies due to the prolonged high-interest rates and persistent inflation, a figure significantly higher than the global average of 54%.

This reevaluation typically involves assessing the impact of these economic shifts on their portfolios and recalibrating to account for the new realities.

Adam Farstrup, Head of Multi-Asset, Americas at Schroders, notes that investors are increasingly adaptable, exploring new asset classes such as private assets and commodities to generate returns in the face of these ‘three D’s’ – decarbonization, demographics, and deglobalization.

This adaptability is key when you are moving shares and ETFs from Fidelity into international markets, which may have different economic drivers and risks.

Another critical aspect of adjusting your investment strategy involves sustainability. A significant portion of U.S. investors (59%) strongly believe that encouraging companies to adopt sustainable practices will help generate long-term value.

Investors increasingly prefer personalized investment strategies that align with their sustainability preferences, with 67% indicating that the ability to choose investments aligned to their personal sustainability preferences would encourage them to increase sustainable investments.

This approach is increasingly relevant in international markets, where environmental, social, and governance (ESG) factors may differ significantly from those in the U.S.

Moreover, the emphasis on the ‘E’ in ESG, particularly climate change, has grown among U.S. investors.

A notable 47% ranked climate as the top area for asset managers to engage with companies, reflecting an increased focus on renewable energy alternatives and a decrease in investing in high emissions companies.

Regular Review and Rebalancing

Regular review and rebalancing of your investment portfolio is a vital aspect of managing your investments, especially after moving shares and ETFs from Fidelity to an international setting.

Market movements can cause your asset allocation to drift from your intended targets.

For instance, if you originally had a balanced portfolio of 60% equity and 40% fixed income, strong equity markets might increase your equity allocation, thereby increasing your portfolio’s volatility beyond your risk tolerance.

Rebalancing is essential to realign your portfolio with your risk tolerance, which, in turn, helps you adhere to your investment plan over the long term. Rebalancing involves periodically adjusting your portfolio to maintain its original asset allocation.

This process can be challenging as it often means selling assets that are performing well and buying those that are underperforming. Despite the difficulty, rebalancing has been shown to enhance returns and reduce volatility over the long term.

Implementing rebalancing “rules” can aid in maintaining discipline in your investment strategy. Common rules include rebalancing quarterly or annually, or whenever your portfolio deviates significantly from your target allocation.

These rules help minimize the impact of emotional decision-making in investment, a common pitfall among investors. By adhering to these rules, you essentially sell high and buy low, optimizing your investment returns.

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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.