If you receive a letter from Vanguard this year stating that your mutual fund account is with their legacy platform and that you are not a US Resident, you might be wondering what this means and what to do about it. The letter suggests that Vanguard will discontinue the legacy platform used for the account on or before the end of 2025 and you will no longer be able to add new investments, liquidate, or make trades in your account. The account cannot move to a new platform as they do not accept non-US residents in their new platform.
Vanguard says that accounts on the old platform will need to be transferred over to a brokerage account if they want to continue to trade and manage their Vanguard mutual funds. But, as the letter points out, you may not actually be eligible to open a Vanguard Brokerage Account if you are not a permanent US resident. That means that a lot of expats and international investors could now be in a pretty unique situation, unable to continue using Vanguard’s services directly under current policies.
Your Vanguard mutual fund account needs attention
You’re receiving this notice because your Vanguard mutual fund account remains on our legacy investment platform, which will be retired for retail investor accounts by the end of 2025. Going forward, Vanguard retail investors will need to use a brokerage provider (e.g., a Vanguard Brokerage Account) to purchase, redeem, and trade Vanguard mutual funds.
According to our records, you are not a permanent U.S. resident and, therefore, under Vanguard policy, are ineligible to open a Vanguard Brokerage Account. Because of this constraint, we’re unable to move your current investments to a Vanguard Brokerage Account.
Options for your account
You have a few options for the management of this account moving forward, including identifying an alternative investment provider or redeeming your assets. You can also visit our website for non-U.S. investors at global.vanguard.com for information about other available products and services.If your account remains open on our legacy investment platform by the end of 2025, it will be restricted to prevent any transactions other than withdrawals or transfers of assets to another firm.
Extract from the email/letter non-residents receiving the Vanguard USA
What This Change Means for Vanguard’s non-U.S. residents
For non-U.S. residents, Vanguard’s policy means:
- Unable to Open a Vanguard Brokerage Account: if you don’t live in the US, Vanguard will not be able to offer an account.
- Account Access Restricted After 2025: You will no longer be able to make any new investment, trading or fund adjustment activities after 2025, and your account’s activity will be limited to withdrawals and transfers.
- Need For Alternative Option: You might have to look for different investment platforms or financial consultant to manage your funds.
Exploring options for Vanguard’s US legacy platform closure
Given these limitations, here are some practical steps to consider for managing your investments:
- Identify Alternative Brokerage Providers: If you’re not a resident of the United States, you can find yourself restricted by regulatory requirements on US-based investment platforms. Make sure your brokerage is set up to serve international investors, especially those with dual citizenship or expatriate needs.
- Consider Redeeming Your Investments: If you can’t find an appropriate brokerage provider [for your overseas fund], your other option is redeeming your mutual funds. However, if you do this, you must be aware that you incur certain tax liabilities in the United States and in your resident country. A tax advisor or financial planner can advise you on the tax consequences (especially if you have capital gains that could be taxable both in the US and overseas).
- Seek Financial Advice for Cross-Border Investments: Dealing with investments as an expat can be challenging with the added considerations of US capital gains, foreign account reporting requirements, and currency exchange exposure. An advisor who specialises in expat and cross-border financial planning can tailor a solution to your situation. Edale can advise on accounts for dual citizens, including those with US-based accounts such as IRAs and 401ks, so they could be a good resource for you to explore as you work on your Vanguard account.
- Monitor Your Account and Set a Timeline: As Vanguard’s legacy platform sunsets in 2025, it may be a good idea to map out a timeframe to resolve the status of your account. Whether it involves transferring to another provider, redeeming your funds or seeking advice from a financial advisor, setting the wheels in motion early can ease the burden. Keeping track of these key dates and setting reminders for each of the required steps can help you avoid a last-minute decision. This can also help minimise the financial disruption that many couples experience.
Considerations for U.S. and Non-U.S. Taxation
These are crucial factors to being a taxpayer abroad and operating a US-based account. Here is a list and some explanations.
- U.S. Capital Gains Tax: Any realised gains from redeeming holdings in your mutual funds may be subject to tax, depending on the length of time that you’ve held the mutual funds. This would apply at either a short- or long-term capital gains rate, depending on your holding period.
- Foreign Tax Credits: There is no clear rule about whether or not foreign tax jurisdictions recognise taxes paid in the US. Take advantage of a tax advisor who is well-versed in cross-border tax treaties. When asked about the potential risks, I always say that the more complex the asset, the more likely it is that something can go wrong.
- Foreign Reporting: Do you have accounts outside your residence country? In that case, you might have to report them to your local tax authority – an additional filing, and potentially an additional layer of complexity to your reporting.
- Foreign Tax Treatment: There could be adverse tax treatment for sold investments. For example in the UK,
Can I continue to invest in Vanguard mutual funds if I live outside the U.S.?
If you’re not a U.S. resident, you may be restricted from opening a Vanguard Brokerage Account. Your options may include finding an alternative brokerage that allows international investors or redeeming your current investments.
What happens if I don’t take action before the end of 2025?
If you don’t take action, your account may be restricted to withdrawals and asset transfers only, meaning you won’t be able to make new investments, trades, or changes to your funds.
Are there any tax consequences if I redeem my investments?
Redeeming investments may trigger capital gains tax in the U.S. and possibly in your country of residence. Consulting with a tax advisor can help you understand the implications based on your specific situation.
Who can I speak to for guidance?
Vanguard can provide clarity on what is happening and what to do. Additionally, Edale and other financial planning firms offer services specifically for expatriates and dual citizens. A professional with experience in cross-border financial advice can help you navigate these complexities.
Our thoughts on what to do
If you have received this communication from Vanguard, it’s important to act well ahead of the 2025 expiration date. Giving yourself plenty of time to explore alternatives allows you to make clear-headed decisions at your own pace and minimise the impact of disruptions to your investments. Should you need additional assistance or guidance from a financial advisor, Edale’s advisers specialise in the unique financial needs of expatriates and dual-citizens.
For those interested, Edale’s expatriate financial advice services are specifically tailored for individuals facing similar challenges with U.S.-based investments. Whether you’re dealing with Vanguard or other investment accounts, planning ahead can make all the difference.
Does Vanguard work with expats?
Vanguard doesn’t work for non-residents in most markets. If you leave the US or the UK they will usually freeze your account. As a global organisation, they are principally set up to service local markets where people reside there. If you’ve a 401k or IRA with Vanguard US and live outside the USA, you should let them know to comply with terms and conditions. Vanguard US will tell you they will not allow non-residents to invest more with them.