Friday, 13 March 2015

5 Cheap US Stock Brokers who accept UK-resident Account Holders

America is big. Really big. And what it offers to dividend hunters is equally huge: innumerable dividend aristocrats.

Ever since I started investing, there have been a number of stocks which have caught my eye across the pond.

However, I was reticent to dive into foreign stock ownership. It was all just a little more complicated and expensive.

As I have discussed previously, foreign exchange charges at my broker are not only delivered at the point of purchase but also levied on the dividend income as well.

At 1.5% this is not a small amount. Not being able to hold foreign currency in my brokerage account means that this could become--potentially--an expensive enterprise over the number of years I plan to invest for.

Eventually, I will likely yield and look to add some North American stock to my portfolio. However, whether or not it will be directly through individual shares on a US exchange or through a London-listed Investment Trust or ETF I do not yet know.

However, with the possibility of buying and holding US shares directly and over the long term I have started to investigate the best method by which to do this.

US Brokers Open to UK residents

As part of this, I have sought to find some US discount brokers who accept foreign residents as customers. The idea would be to hold US equities in this account and UK ones in my UK account.

Another possibility (perhaps more straightforward) would be to open another UK-based brokerage account which is more international investment friendly. But this is a post for another day.

(NB: This information is a work in progress. If you know of or discover any additional brokers--discount or otherwise--who accept UK-resident investors please do comment below or contact me by another method. I will happily update this creating a dynamic record of the options available to UK (and indeed other foreign) investors!)

So far, I have only found five brokers who explicitly state that they are willing to accept investors from overseas. Here they are with their statements--in their own words--regarding foreign customers:
  • ChoiceTrade--"I am a foreign citizen, is it possible to open an account with ChoiceTrade? Yes, foreign citizens may establish accounts with ChoiceTrade. You may print out the new account form from our Forms Download page or submit a request online for an application to be mailed to you. All foreign citizens are required to complete a W-8BEN Form, which is available on our Forms Download page. Additionally, all foreign citizens who do not have U.S. resident alien (green card) status must submit a photocopy of the identification page (this photocopy must contain a photo of the applicant) of their passport or other government-issued ID. If you are a legal resident of the United States you are not required to complete the W-8BEN Form. For more information regarding foreign citizenship status, please visit the Internal Revenue Service and read the Tax Information for Aliens and U.S. Citizens Living Abroad, specifically Publication 519."
  • eOption--"eOption requires a low minimum initial requirement to open an International account. We accept unsolicited accounts from non-U.S. residents from...the United Kingdom (England, Northern Ireland, Scotland and Wales). Cash accounts can be opened with a minimum of $5,000.00 in any combination of US Dollars and/or US/foreign exchange traded securities."
  • FirstTrade--"Can a foreign resident open a Firstrade account? Yes. Although, all funds must be deposited in U.S. Dollars. All Foreign Account Applications MUST include a W8-BEN Form and Online Service Agreement.... A copy of your valid passport (photo and signature pages) is required for all foreign residents."
  • Just2Trade--"Can I open an account as a non-U.S. citizen? Yes, you may open an account as a non-U.S. citizen who is not residing in the U.S. In addition to the required account application documents, you will need to submit a copy of your unexpired passport and a W-8 BEN Form. Certain foreign accounts may be limited to certain offerings (i.e. no margin)."
  • LowTrades--"Can I open an account with LowTrades if I am a resident of a foreign country? Non U.S. citizens or resident can open an account by simply filling out the proper forms noted on our site. However, Success Trade Securities is currently not registered to operate in Canada and cannot accommodate accounts for Canadian residents at this time."

Cost Comparisons

So which offers the better deal? Here I have a little table for you breaking down some of the key things:

Discount Brokers
TradeMin. AccountDRIPAccount FeesInactivity Fees
ChoiceTrade$5NoneNo (?)None$20 per quarter (charged if account is worth less than £50,000 and fewer than 5 trades are done per quarter)
eOption$3$5,000Yes (Free)None$50 annually (charged if fewer than 2 trades occurred in last 12 months or if there is less than $10,000 in credit or debit balances)
FirstTrade$6.95NoneYes (Free)None$19.95 per year (charged if no trades have occurred in last 24 months and equity value is below $2,000)
Just2Trade$2.50$2,500Yes (Free)NoneNone (?)
LowTrades$4.95NoneYes (Free)None$50 per 6 months (charged if no trade has occurred during the trading periods, Jan-Jun and Jul-Dec).

Other US Brokers (Quietly) Open to UK residents?

My post on my foreign transaction broker's fees did result in an interesting post from There's Value:
I too have opened a foreign account with TradeKing for US, and am considering Lynx for Euro... but can't really justify the Euro one yet, until I have much more to invest. TradeKing makes sense as it's dirt cheap and allows foreign nationals to have an account.
This is interesting as it raises the prospect that, actually, many US brokers accept foreign account holders but without making this clear. Certainly, TradeKing's site does state that:
All customers including US citizens must be living in the USA to maintain a TradeKing account.
There's Value has since added that since opening an account with TradeKing the company has undergone a merger which may have affected its policies.

However, I wonder whether anyone else has had experiences in which they have opened accounts (from the UK or the rest of Europe) with US brokers who do not specifically state they do or indeed explicitly state they don't.

Can you help?

Of course, this is a relatively tiny number of brokers included above. I searched many, but these were the only discount brokers I found which explicitly stated they accept foreigner held accounts.

You may be able to help me build on this:
  • Do you know any more discount brokers which accept non-US investor accounts?
  • Have you had any experience with these brokers above? What was your opinion of them (positive or negative)?
  • What about non-discount US brokers which accept UK-resident customers?
  • Thinking beyond the US, do you know any European accounts which accept UK investors as account holders?
  • Also, of course, if you discover any of this information is incorrect, please do inform me. I want it to be as accurate and up-to-date as possible. However, I must stress that I do not and cannot claim that all this information is 100% correct.
I hope some of your found it useful.

[Creative Commons image reproduced from Flickr user Skippy]

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19 comments:

  1. I know an Australian lady who has an account with ChoiceTrade, I think she's fairly happy with it but was not impressed with the no activity fees!

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    1. Interesting. It certainly is quite a shocker if you're a buy and hold investor rather than trader!

      First Trade, I think, looks my favourite from the list. The transaction fee is not too high (though obviously the highest on the list), the inactivity fees are the lowest and have the easiest conditions to satisfy to avoid them. And there is no minimum account size.

      I still think there must be better ways to do it though. My research continues!

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  2. yeah, researching them took me a fair bit of time for the Euro ones, but they all pretty much wanted high minimum opening deposits

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    1. I know. It is not an easy task! It is one of those things, though, that you are better to get right the first time round! Saves all sorts of hassle later!

      Which ones did you come across for European brokers? I have actually found it harder to root them out, to be honest.

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  3. as (bad) luck would have it, I actually threw out my brochures about 2 days before you posted this... the only one I could remember off the top of my head was Lynx, and I think I kept it so long because it was the cheapest and they gave me a free pen and free page marker type thingy.... haha sorry i'm no use!

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    1. Argh! Just too late!

      A free pen? Well worth the hassle! Reminds me of the AXA SunLife advert...

      Delete
  4. Hi DD,

    I looked at the brokers I'm familiar with and 3 of the 4 require a US address and tax number (Fidelity, Vanguard, Scottrade).

    There may be some options at Charles Schwab based on their UK site and Schwab One International Account.

    Computershare may be another option. They run a large number of company DRIP plans in the US and have a UK presence too. For example, their Proctor and Gamble Direct Share program states that it allows "Non-US Investor participation".

    Best wishes,
    -DL

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    1. Hi DL,

      Thanks for this. Yes I looked at them with little luck. I was particularly saddened by the fact Scottrade did not allow non-US residents as customers.

      Schwab does seem to allow UK investors. I think there are others I may add to the list in time. This particular post was focusing on discount brokers (which, it did seem, were MORE likely to allow non-US residents to invest...strangely).

      Computershare is very, very interesting. I am not quite sure how that would work from what their documents say. I can't fathom whether they allow you to invest in the companies first or whether it is just in handling DRIP investments after the share have been bought. It is not the clearest bit of writing I have seen.

      Do you have any idea? Or has anyone else done a similar thing with Computershare (or the like)?

      It seems an interesting possible route.

      (PS: I came across this link on buying stock without a broker which is linked to your Computershare note: http://abt.cm/19KwDv8. Sort of clarifies things a bit!)

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    2. Just looked into the Direct Stock Purchase Plans a bit more. That looks a very good idea. as I don't plan to invest hugely in America but only very selectively in some US heavyweights it seems rather logical looking at the costs!

      Thanks for nudging me in this direction!

      Delete
    3. Hi DD,

      Many US companies offer DSPP where you can buy stock regularly - the purchases are made en-mass on a given day so you can't control the price of the purchase. So it's different from a low-cost broker in that sense but similar to how Sharebuilder / Loyal3 works.

      Depending on the company plans the stock / dividend purchases can be commission-free, although some plans charge a fee. Usually the purchase is a monthly direct debit from a bank account.

      A good site is www.dripadvice.com which compares fees between different company plans.

      Computershare is one company in the US that acts as an agent (there are a couple others) and it manages share plans from multiple companies. You would sign up through Computershare although I'm not sure how you'd get money to them from the UK - the small print suggests they need cheques drawn on a US bank which would be a problem.

      I used to have several DSPP plans when I first started investing, but I ended up consolidating them at an online broker and using Sharebuilder for regular share purchases.

      You may end up having to use a more expensive broker - companies like www.ig.com seem to offer US share purchases from the UK but I've no idea how good / reliable they are and this is by no means an endorsement.

      Best wishes,
      -DL

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    4. Thanks for the extra information!

      Yes, some look really good as plans. Overall, for smaller investments which mine would be (certainly at first) they look something worth finding out more about.

      That is the current issue I have come up against with Computershare: the US bank drawing detail. However, I emailed them a couple of days ago to ask what is in place for non-US investors to be involved. No reply yet, but we will see!

      Of course, it is possible to open a US bank account, I believe, or one that operates in the US (I think HSBC has one) but it is quite some hassle I think!

      Thanks for the link. That is very useful.

      I will keep investigating!

      Delete
  5. I had a Schwab account and had 4 trades carried out with 9 $ commission per trade. I am surprised not to see interactive broker which is very cheap and no activity fees if ur portfolio had $100000 worth shares or cash in it.

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    1. Thanks for the comment. I kept this list to a more manageable review of discount brokers and used a modest portfolio size in putting together the list.

      IB certainly do look good in many regards. However, the minimum funding size of $10,000 put it beyond the limited scope of my article here. I am looking (at some point) to raise the scope of my research in which IB will almost certainly feature.

      Schwab was also a victim of the same thing. For UK investors they would have to have $10,000 straight away to open the account. As I say, when I get time to put together a fuller list with others included they will take pride of place!

      How did you find Schwab? Was there a reason you only had four trades with them?

      Thanks again for your comments. Much appreciated.

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    2. Schwab is good. Only thing is that they eat your 1pc in fx transaction but again drip is free of cost. Just 4 trades till now is because You put 10k $ initial account opening minimum deposit. If your ticket size is small, better to use us focussed ETFs or IT which gives you exposure. I just got influenced by blogs like dividend growth investor or dividend mantra and after lot of prolonged procrastination, I zeroed into Charles Schwab which got office in London. Pepsi,coke,p&g and j&j are first 4 buys. General Mill will be the next.

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    3. I see. The FOREX charge is not as steep as in the case of my current broker which is 1.5%.

      Yes, that is my main thought at the moment. Something along the lines of the North American Investment Trust.

      Your selections certainly seem sound. I am 100% with you regarding J&J and P&G. General Mills is also a very good company.

      I will seriously consider Schwab if I decide to open a US brokerage account. It does have good reviews.

      Thanks for the input. Really very interesting.

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  6. Hi DD,
    a very interesting broker is Loyal3. They charge no fees and you can easily do DRIP by buying "fractional " shares. I have asked them already if they are open for foreign investors (I am from Germany) but unfortunately they are not (till now).
    Maybe you and your blog readers could write them to speed up their internationalization.
    Best regards from Germany
    rickrack

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    1. Yes, I have looked at them a couple of times. They have quite an interesting idea which I think is fundamentally sound. I did not realise they do DRIP and fractional shares as well. I like the fact that most of the main companies I am interested in investing in are included.

      I wrote a little post on a similar fee-free US broker--RobinHood--but I don't think they do DRIP at the moment. That being said, they are currently in the process of expanding internationally. So maybe they will emerge in Europe sooner than Loyal3!

      Sounds like an interesting idea. If anyone is reading this from Europe and they like the look of it, do contact them and ask for them to consider internationalising their service. It will be worth their while!

      Thanks for your comment, rickrack. If anyone does contact them, please do feel free to say what they said in response. Be very interesting!

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  7. DD

    Its much easier to just hold US and / or European stocks in a UK online brokerage account that doesn't charge a ridiculous FX commission. Take a look at www.share.com.

    TEA

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    1. Thanks for that, TEA. In general that is likely to be my course of action. What I really looked for is a SIPP which has decent charges for international purchases. Not researched hugely into that yet though!

      Very interesting about the Share Centre. The fact that the SC deals with CDIs is very interesting. This is not something I have seriously looked into. I will do after this, however!

      Thanks very much indeed!

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