Our first interview here at IsraTransfer is with personal finance and investment expert, Doug Goldstein. Doug is an accomplished author, Certified Financial Planner in the US and Israel, and has over twenty years experience in finance starting from his days on Wall Street.
Thank you for giving us your time today, Doug. Please tell us a little bit about yourself, Profile, and your new book.
I’ve been a financial advisor since 1992. I began my career at Dean Witter on Wall Street, and today, I’m the founder and director of Profile Investment Services, Ltd., in Jerusalem. Since 1997, Profile has provided financial and retirement planning services, including oversight of U.S. brokerage accounts. We work with Israelis (mainly American olim) to help them plan their retirement, and maintain an American brokerage account. There are many compelling reasons for an American living overseas to keep an American brokerage account, and as a Certified Financial Planner™ professional, licensed both in Israel and America, I help dual citizens maintain an investment account that helps them meet their financial goals.
My latest book, The Expatriate’s Guide to Handling Money and Taxes, describes the financial difficulties of American expats and suggests potential solutions, both with tax reporting issues and investments in general. International tax lawyer, Dave Wolf, and CPA Ron Zalben contributed chapters. We discuss solutions to the problems Americans living overseas face with buying mutual funds, tax filing, and being compliant with increasing filing regulations.
What drives your passion to assist American expatriates in Israel with their foreign holdings?
One of the fundamentals of financial success is a solid financial education. My goal is to educate clients about their money, investing, and other financial issues. Finances become more complicated when you need to report to multiple governments, and the financial penalties for non-compliance can wipe someone out.
I wrote The Expat’s Guide with the wish of better educating American expats about the steps they can take to protect their finances and their future.
It’s crucial that people know and follow tax laws – think of it as an additional insurance policy.
In your book you discuss some common financial difficulties Americans deal with when living overseas. Can you please provide a brief overview of the main issues?
There are three main problems: opening a brokerage account, funding your account, and reporting your account to the American government.
The first difficulty is finding a firm that will do business with you: many foreign firms don’t want to open accounts for Americans, and many American firms don’t want to work with Americans who have an address overseas.
Once you a find an agreeable firm, there are additional challenges in purchasing the specific investments. Many fund companies don’t want to sell American mutual funds to accounts with foreign addresses, and Americans living overseas face additional reporting requirements if they purchase offshore mutual funds.
That leaves the American expats in a bind if they want to invest in a mutual fund.
The third major problem faced by Americans living overseas is their reporting requirements to the American government. Even if there is a tax-reciprocity agreement with their country of residence, Americans are required to file income tax forms with worldwide earned income with the IRS. Additionally, American expats are required to file FBAR forms, reporting all of their foreign bank accounts and other financial assets. And now, FATCA regulations require additional forms to be filed. The penalties for non-compliance, even through honest mistakes, are steep.
How does opening a U.S. brokerage account solve many problems facing expats?
American brokerage companies comply with all the IRS requirements. They provide the end-of- the-year reports and tax documents you need. Not every country has the same definition of long-and short-term investments and gains, so a short-term investment in a foreign country may be considered a long-term investment in America, and may cause your accountant a big headache (and high fees for you) when it needs to be translated into IRS-friendly forms. Also, if your accounts are in America, there are fewer line items that need to be listed on FBAR and FATCA forms. Fewer accounts makes reporting easier, and reduces the chances of mistakes.
Maybe even more importantly, American brokerage accounts have SIPC coverage and you can buy FDIC insured bank deposits in those accounts. As of today, Israel doesn’t have comparable programs.
How can American expats living in Israel open a U.S. brokerage account without a US address?
We sometimes joke and call this “geographic discrimination,” but in today’s post 9/11 world, there are increasing regulations on financial accounts with foreign addresses. Still, there are many firms in America that take the “Know Your Client” regulations seriously, and continue to open accounts with Americans with foreign addresses. I am associated with a great company, Portfolio Resources Group, which takes the time to understand the regulations and also its clients, and doesn’t discriminate against people living overseas. [Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, SIFMA. Accounts carried by Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation.]
What are the first steps American expats living in Israel should take if they are considering investing in the U.S.?
Before investing in general, people should create a financial plan, so they can figure out the objectives of their investments, and choose them appropriately. If people just want to safeguard their principal for short-term use, maybe because they are planning on buying real estate and can’t afford to have their money lost in a market dip, perhaps a local bank would be a better solution…even if it means filing a FBAR form. Different goals, such as generating income or growth, require different portfolio structures, so before beginning an investment plan, people should clarify their own goals and objectives.
Where can Americans learn more about how to deal with investments and taxes from overseas?
The American Citizens Abroad is an association whose mission is to defend the rights of Americans living overseas. They do great work both representing overseas Americans to Congress and helping Americans living overseas with various issues that come up. They are at the forefront on issues that directly affect citizens living abroad such as taxation, social security, Medicare, etc.
In fact, both the ACA’s Executive Director and Finance Director have chapters in the newly published book, The Expatriate’s Guide to Handling Money and Taxes.
Doug is the Founder and Director of Profile Investment Services and has done extensive research into the art of handling taxes and finances for Americans living abroad. In his new book, The Expatriate’s Guide to Handling Money and Taxes, he takes us through the most common questions Americans have with money and tax filing overseas and presents answers that are easy for anyone to understand. We were fortunate to get a chance to interview Doug and learn more about him and this critically important subject.