The announcement that some UK banks will close the accounts of expats living in the EU has been very concerning to Brits living in Europe.
Many have turned to their financial advisers for help; to understand what implications, if any, the move could have on their financial futures.
With just over two months left until the deadline, a deal between the UK and EU looks increasingly unlikely.
Coutts said it took the decision because of the uncertainty about what the end of the Brexit transition period will mean.
And banks are not the only financial institutions assessing their strategies.
From 1 January 2021, advice and wealth firms regulated solely in the UK will, in all likelihood, lose the passporting rights that allow them to do business in the EU.
Firms have a few options, including join a European network; become regulated in one of the EU27; strike a partnership with a local advice firm; or give up business in the bloc altogether.
But, that British expats in the EU have already received letters informing them of the imminent closure of their bank accounts, the final option seems to be gaining ground.
So, will this have an impact on their long-term financial plans?
‘Just a hassle’
According to James Pearcy-Caldwell, chief executive at the Aisa Group, and Shane Wood, business development manager at European network OpesFidelio, the account closures are mainly a retail banking issue and they should not impact any financial planning and advice, as retail investments should not be affected.
Pearcy–Caldwell told International Adviser: “Retail banking is affected due to licence requirements, although it does not actually stop banks in the UK keeping accounts open, but it is just a hassle a bit like the US’ Foreign Account Tax Compliance Act (Fatca) – it all comes down to reporting and tax.
“Retail investments and servicing are not really affected if the adviser and product is in the UK and the client is in the EU.”
He explained the only instance where expats would need to turn to the UK for help is if they wish to transfer out of their defined benefit (DB) pension, as regulation requires people outside of the UK to appoint a financial adviser in the country to receive advice on it.
A wider issue
But it seems that some institutions have not stopped at retail banking.
Christina Brady, associate director at Blacktower Financial Management in Costa Blanca, told IA that one of her clients received communication from Barclays saying that while their bank account will remain open, their investments through the wealth management arm won’t.
“Over the last month we have had at least 50 enquiries from worried expats regarding the closure of UK bank accounts and credit cards for expats based in Europe due to Brexit,” she said.
“In a large majority of cases, I have been able to put their minds a rest for now by confirming that, to-date, only Barclaycard and Coutts have confirmed that they will be closing all accounts for expats that can’t provide a UK residential address.
“HSBC, Lloyds and NatWest have said that they are looking at this issue but, to-date, no decision has been made to close accounts, however this view could change in the future.
“A client with Barclays has been advised that, whilst his bank account will remain open, his investment through Barclays Wealth Management will be closed on 4 December and that he needs to move this money elsewhere.
“He also uses a UK–based share dealing service and holds a sizable number of different shares with them, and he has been advised by them that if he no longer has a UK bank account, he will no longer be able to use this service, likewise with Premium Bonds and NS&I savings accounts and bonds, they stipulate that non-UK residents can hold these as long as they have a UK bank account.”
Seek financial advice
Brady added that although this may be a retail banking issue, it can have a “knock-on effect that impacts all areas of an expats financial affairs”.
She continued: “The most frustrating thing is that most UK banks have known about these potential problems for years but have waited till the last moment to tell their clients – most of them who have been loyal clients for more than 20 years – causing stress and anxiety for many.
“I am working with these clients and many others to find the best solutions for them, but in a number of cases it will mean completely restructuring their financial affairs, which can have tax implications, it takes time and expertise, but it can be done.
“The best advice I can give expats is don’t panic and act in haste, take advice from a financial adviser in the country that you reside in as to what course of action to take and when.”
Tom Goold, international financial adviser at Valiant Wealth, told IA this is purely a commercial decision taken by the UK banks because they “know that they cannot sell certain products to non-UK residents, and therefore have little interest in keeping them as clients”.
But he believes that there will always be alternatives available to expats.
Goold continued: “Brexit is quite often used as an excuse but, in reality, plenty of banks maintain relationships with clients even outside of the EU – such as the large populations of Brits who live in countries like Australia, New Zealand, the US, South Africa, Hong Kong etc.
“It is important for most British expats to maintain a UK bank account to handle UK–based financial interests such as receiving pension income or rental from properties, spending money on trips back to the UK and even just to save the inconvenience of opening a new account should they return one day.
“While many banks are dropping clients, there will always be alternatives. For example, HSBC has not, so far, made any noises about dropping clients and offers a range of services on their website aimed specifically at expats, so I imagine they will see this as an opportunity to grow business in this area.
“Nowadays, the convenience of online banks is ideal for clients, so the likes of Revolut should also do well from this situation.
“Our advice to clients is not to panic but to be prepared for change and, as always, consider decisions in the wider context of your financial plans which can be achieved most effectively by working with a good adviser,” he added.