Many Americans in Israel received a surprise letter from their U.S.brokerage firm letting them know that their brokerage accounts couldn’t be serviced because they had an Israeli address on file. The lawyers for the U.S. brokerage firm felt that their firm couldn’t conduct business inIsraeland, as such, clients were left in the lurch. Israelis who kept their assets in a dollar-based brokerage account were faced with the task of transferring to a different firm.
While change can be disconcerting, the good side is that it is a simple procedure to move your brokerage account to another U.S.-based brokerage company. By signing a few standard forms, all of the client’s stocks, bonds, mutual funds, etc. can be transferred in-kind and very quickly. Whether transferring brokerage accounts either because you’re being shown the door or transferring on your own terms, the paperwork should not be a deal-breaker.
Often immigrants initially continue their relationships with their American advisor, but after living in Israel they realize it is easier to work with someone in their own time zone who understands the Israeli lifestyle, global markets, and dollar investments.
It’s Easy to Switch Social Security
But what happens if you are receiving Social Security payments or other regular payments into your brokerage account? Moving those monthly benefits from one firm to another is also relatively easy. In fact, with a phone call to Social Security, you simply inform them of the new account details and they will move your deposits to the new institution with whom you are working. There is no reason to be concerned that you will be mired in bureaucracy if you want to switch from one brokerage firm to another.
Tax consequences of switching firms
A benefit of transferring all of your assets exactly as they are (without selling them) is that you do not create any tax consequence. On the other hand, if you were to sell everything at your old brokerage firm and if there were unrealized capital gains embedded in your positions, you might be subject to taxation. Unfortunately, many advisors who live outside of Israel simply do not understand what the dual tax situation is like, nor the financial lifestyle requirements for an Israeli, and they’re not able to structure portfolios properly.
Your best choice
If you live in Israel and wish to have your assets in an American brokerage firm, consider transferring your accounts to a licensed advisor (both in Israel and America), who understands your individual needs and the compliance and legal requirements of holding U.S. brokerage accounts from Israel.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published April 9, 2012.