Wealth management in the US for non-residents: scope and limits

Private banks, brokers and RIAs: who manages wealth

Wealth management in the US relies on private banks, brokers and registered investment advisers, but non-residents face specific constraints, namely restrictions on funds, withholding taxes and federal estate tax. The manager's status, whether a broker-dealer regulated by the SEC and FINRA or an adviser bound by a fiduciary duty, determines its obligations to the client and how it is paid.

The US wealth management market mixes private banks of large groups, broker-dealers regulated by the SEC and FINRA, and Registered Investment Advisers bound by a fiduciary duty. The manager's status determines its obligations to the client and how it is paid.

High entry thresholds and selective international clientele

US private banks often set thresholds of several million dollars, and many have reduced their non-resident clientele since FATCA. Some only accept foreigners through international offices, notably in Miami, New York or Houston.

Discretionary mandate or advised brokerage account

A managed account delegates decisions to the manager for an annual fee on assets. An advised brokerage account leaves the client approving each order, the broker being bound by the SEC's Regulation Best Interest.

SIPC protection and segregation of securities

Securities held at a SIPC member broker are protected up to 500,000 dollars, including 250,000 in cash, if the broker fails. This does not cover market losses, and segregation of client assets remains the first safeguard.

US funds and PRIIPs rules for European clients

A client living in the EU generally cannot buy US funds that lack a PRIIPs key information document. Managers then build portfolios with individual shares, bonds or listed European funds, which comply with the European rules.

Federal estate tax on US assets of non-residents

US shares and US-situs property held directly by a non-resident fall into federal estate tax above 60,000 dollars, unless a treaty provides better terms. The France–US estate tax treaty changes this regime for French residents.

Withholding on portfolio dividends

Dividends on US shares paid to a non-resident face 30 percent withholding, reduced to 15 percent for a French resident with a valid W-8BEN. Capital gains on securities are generally not taxed in the US for non-residents.

Management, advisory and brokerage fees

RIAs mostly charge an annual percentage of assets, decreasing with the amount entrusted. Brokers earn commissions or platform fees, and the SEC requires delivery of Form CRS, the client relationship summary of these costs.

FATCA, form 3916 and home-country reporting

US securities accounts of a French resident are reported under the FATCA agreement, and the holder declares them and their income on form 3916 and the tax return. Since the US does not apply CRS, personal reporting remains essential.

Accessing the private bank of a large US group

At Bank of America, wealth management is delivered through specialised subsidiaries that set their own thresholds and accepted countries. A non-resident must evidence the source of wealth, tax residence and link with the United States.

Wealth management in the US: how to choose a manager

Choosing a manager starts with understanding their status. A private bank, a broker and a registered investment adviser do not have the same obligations or the same pay. For wealth management in the US, first ask whether the professional acts as a fiduciary, how they are paid and which conflicts of interest may exist between their recommendations and their income.

Then check the registration of the professional and the firm with the competent authorities, by consulting the public databases of the SEC and FINRA. This simple check shows the regulatory history and any sanctions. Also read the client relationship summary that the SEC requires to be handed over: it summarises services, fees and conflicts in a few accessible pages. Keep a copy of the results.

Finally, ask the manager about their practice with non-resident clients. Many institutions have reduced this clientele since FATCA, and some serve it only through international offices. Ask which countries are accepted, which products are available for your profile, and how restrictions on US funds are handled when you live in Europe. Note the replies you obtain. Do not skip this step.

Preparing a US private banking file

A US private banking file revolves around three ideas: who you are, where your wealth comes from and why you want to invest it in the United States. Gather identity documents, proof of tax residence and evidence for each source of wealth: professional income, sale of assets, inheritance or sale of a business. The clearer the documents, the more direct the conversation with the adviser. Keep the supporting papers together.

Next, prepare a statement of your objectives: investment horizon, need for income, risk tolerance, liquidity constraints and family plans. The manager must be able to justify that recommendations suit you. An honest profile protects both parties, whereas an artificially aggressive one exposes you to unsuitable products and to disputes that are hard to settle later. Keep a signed copy of the profile.

Plan for the applicable tax form, generally the W-8BEN for an individual non-resident, and check its validity. Entry thresholds depend on each institution and are often counted in millions of dollars; ask for them in writing before starting any procedure. If you do not reach the threshold, brokerage platforms or independent advisers can offer another route. This applies to any US private banking firm.

Common mistakes in US wealth management

The first mistake is to ignore federal estate tax. US shares and US-situs property held directly by a non-resident fall within its scope above 60,000 dollars, unless a treaty gives better terms. Many discover this too late. Ask a specialist adviser to review your situation before buying, and consider other holding vehicles if the burden looks disproportionate. Keep a note of the advice received.

The second mistake is to assume that every US fund is accessible. A client living in the EU generally cannot buy funds that lack a PRIIPs key information document. The portfolio then relies on shares, bonds or listed European funds. Check the list of available products before transferring large sums to a US account. Ask for the list in writing.

The third mistake is to concentrate wealth on a few US securities without considering dividend withholding, currency risk and the limited protection. SIPC protection does not cover market losses. Spread your investments, compare returns net of tax and fees, and keep the records that support the declarations in your country of residence. Keep these records for years. They may be needed later.

Following your US portfolio over time

Once the relationship is open, set a review rhythm: at least once a year, and at every significant event such as a move, a sale of assets or a change in family circumstances. This review checks that the allocation matches your profile, that the fees charged are in line and that the restrictions applying to non-residents have not changed since opening. These checks also apply to US wealth management mandates.

Read the statements, trade confirmations and tax documents sent each year. Compare performance with the agreed benchmark, spot the fees deducted and put your questions in writing. A serious manager answers clearly and keeps a record of explanations. Keep your own archives for as long as your declarations require, because statements serve as evidence in the event of a review. Keep your own file as well.

On the reporting side, the United States does not apply CRS but exchanges information under FATCA with many countries. This never exempts the holder from declaring accounts, income and, depending on the situation, investments in their country of residence. Check these obligations with a tax adviser and, for succession matters, with a professional familiar with both systems. Do not rely on one source alone.