First week after Brexit leaves thousands of expats in the cold
When we thought there was enough chaos this week something a little less known but also chaotic was the impact of Brexit on many expat investors. This is the first week after the implementation of Brexit that disturbingly shocked many professional traders and investors that they suddenly could no longer access cross-border markets, investments, and banking products.
London's success of being a financial center of the world had much to do with its free access into European markets. Many global transactions went through the UK and into the EU freely, known as passporting. This was suspended as a result of the no-deal Brexit impact with regard to financial services.
Interactive Brokers, a mutli-national investment firm, this week started migrating European clients’ accounts to their new Ireland office from London which therefore puts them back into accessing European markets but as a consequence puts them under EU regulations. As a negotiation failure in the last hours of Brexit, the EU declined to renew “equalization”, where UK/US regulators could substitute EU regulator authority.
The Financial Times this weekend reported optimistically, however, that the EU may reconsider equalization in the coming months. Many financial institutions have already opened offices in Dublin, Paris, and Frankfurt but have not closed the doors on their London headquarters apparently still hoping for a deal to come through. “‘Clearly that has been an impact, a bit of a day one shock,’” said Mr Ricci, the largest individual investor in pan-European exchange Aquis.^1
“‘Let’s not forget that for financial services this is a no-deal Brexit,’” said one brokerage chief executive, referring to the lack of an agreement around regulatory equivalence, which has stopped UK-based firms from operating freely in the EU.”^1
For expats who bank in the UK, they have already been notified that their accounts may be closed. “For customers living in certain EU countries, however, we will not be able to provide some UK banking products and services after 31st December 2020” as written on the Lloyds UK Bank website.
Interactive Brokers will not liquidate or close accounts but they’ll prevent future investment purchases unless accounts migrate to the EU branch by Jan. 17. Investment advisers, such as myself, can no longer provide investment advice on EU-based accounts unless equalization is agreed to by the EU and/or I obtain regulatory approval by an EU member country, something I’m planning to get. “Brussels and UK officials are working towards a regulatory equivalence deal, but there is no certainty of an agreement.”^1
At Eureka Wealth Management, I will continue to work with my expat clients’ with their financial planning and offer advice on retirement, insurance, and US tax & estate strategies. I will also help coordinate the transition of investment accounts, research alternative solutions, and help manage risk as much as I’m allowed to do. If you have any questions or would like to book a consultation, please call (760) 537-0791 or online at eurekawealthmanagement.com.
^1 FT 1/9/21 “City of London hopes stars will align for growth and prosperity outside EU”