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Earn in USD, invest in USD, avoid GBP exchange?

Financial discussion for any financial queries for Expats
TheDrop
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Earn in USD, invest in USD, avoid GBP exchange?

#86158

Postby TheDrop » October 5th, 2017, 10:03 pm

Some of my compensation is paid in USD. I invest that money and live off the GBP portion of my pay.

Up until now I've exchanged USD to GBP and then invested with a UK broker. This has been a hassle due to the fees and delays of transferring the money from the USA to the UK and exchanging currencies. The exchange rates offered at source are terrible so I decided to use a forex broker. Last time I used CurrencyFair and was hit by a $20 bank transfer fee from an intermediate bank.

Ideally a UK broker would offer USD trading accounts. That way I could transfer money to the broker directly and buy USD-denominated securities on the London Stock Exchange. Not many brokers seem to support this from what I can tell.

Perhaps Interactive Brokers can do this but they charge a $10/month fee for account balances <$100k.

Maybe there are expats or international workers here who are in a similar situation. Any recommendations? Does such a thing exist with low costs?

vrdiver
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Re: Earn in USD, invest in USD, avoid GBP exchange?

#86176

Postby vrdiver » October 5th, 2017, 11:17 pm

When I was in this situation I just invested in US equities via a US broker. Morgan Stanley, (no connection other than as a satisfied customer) worked for me. When I wanted to transfer funds to the UK I took the hit on fees and exchange rates, but at least it wasn't a death of a thousand fees.

JamesMuenchen
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Re: Earn in USD, invest in USD, avoid GBP exchange?

#86217

Postby JamesMuenchen » October 6th, 2017, 8:41 am

TheDrop wrote: Perhaps Interactive Brokers can do this but they charge a $10/month fee for account balances <$100k.

But this is offset against any trading commisions:

https://www.interactivebrokers.com/en/index.php?f=4969
"Monthly Activity Fee = 0 if monthly commissions are equal to at least USD 10.
If monthly commissions are less than USD 10,Standard Activity Fee = USD 10 – commissions. "

They normally take $6 commission per trade, so you only need two trades per month to avoid the Activity Fee completely.

Since opening my account 18 months ago I have paid ~ $20 dollars and rarely pay any Activity Fee with them now as there is always at least some divi income I want to park in ETFs

gryffron
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Re: Earn in USD, invest in USD, avoid GBP exchange?

#87348

Postby gryffron » October 11th, 2017, 9:44 am

TDDirect also offer this. Free if you have >£15k of total funds (not just USD). £25/quarter otherwise. I have used them for years and they are one of the better online brokers. (Or were. They have just been bought out by II, so both quality of service and charges may change :( )

Gryff

TheDrop
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Re: Earn in USD, invest in USD, avoid GBP exchange?

#88415

Postby TheDrop » October 15th, 2017, 5:38 pm

Thanks for the replies, vrdiver, JamesMuenchen, and gryffon!

TDDirect is an interesting option. Two fees I'd like to highlight for others considering using them:
  • 1.5% currency exchange commission
  • 15 GBP for sterling withdrawals up to 100k GBP or $48 for USD withdrawals

As long as withdrawals are infrequent and TDDirect aren't used for currency exchange, they look like a good option. Thanks for your help!

Alaric
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Re: Earn in USD, invest in USD, avoid GBP exchange?

#88447

Postby Alaric » October 15th, 2017, 9:54 pm

TheDrop wrote:[*]15 GBP for sterling withdrawals up to 100k GBP or $48 for USD withdrawals[/list]


You may have misread something, or you are talking about the TD Luxembourg version. I have regularly withdrawn dividend payments to my UK bank account through "faster payments" and have never been charged. There may be a charge for "CHAPS" payments, but I've never needed to use it

1nv35t
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Re: Earn in USD, invest in USD, avoid GBP exchange?

#88453

Postby 1nv35t » October 15th, 2017, 10:32 pm

With TD (UK) US dividends paid in US$ can be left in US$ ... and when enough is accumulated used to buy stock priced in US$. So whilst a modest cost (1.5% for <£25K) to covert from one currency to another, once converted if you just trade/accumulate in that currency without currency converting that cost diminishes proportionately over time.

Your account just list US$x, £y ... etc. (across up to around 12 different currencies).

Just make sure when you buy (or sell) that you select (tick/whatever) the currency you're trading from (to) and ideally use the same currency as what is being bought/sold ... so there's no FX costs involved.

For their ISA accounts (that also shows in the same single 'report') you cannot hold foreign currencies within ISA so that would see each dividend being converted to £ and incurring a FX cost. Easiest choice is to hold £ based stocks/investments within ISA and foreign stocks in the standard trading account.

I can't recall ever having been charged a fee to withdraw or deposit. You just request a transfer to/from your linked (external) bank account and the transfer is made. I have had problems transferring in/out due to bank flags being raised for large transfer amounts and had to phone around to get the transfer completed.

TheDrop
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Re: Earn in USD, invest in USD, avoid GBP exchange?

#88503

Postby TheDrop » October 16th, 2017, 9:22 am

Alaric and 1nv35t, you are right that there is no fee for normal GBP withdrawals. I misread the fee table: 15 GBP is only charged on urgent withdrawals.

gryffron
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Re: Earn in USD, invest in USD, avoid GBP exchange?

#88745

Postby gryffron » October 17th, 2017, 12:25 am

1nv35t wrote:Easiest choice is to hold £ based stocks/investments within ISA and foreign stocks in the standard trading account.

That may be the cheapest option, but it is most certainly not the easiest. As it leaves you having to do self assessment on every foreign transaction/dividend. Converting every payment at that day's exchange rate. And with different tax rules for different countries. It's a nightmare.

I now hold all my foreign stocks inside ISAs precisely to avoid this. It may cost me a few quid, but it is massively less hassle. I value my time very highly.

Gryff

1nv35t
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Re: Earn in USD, invest in USD, avoid GBP exchange?

#88760

Postby 1nv35t » October 17th, 2017, 3:21 am

gryffron wrote:most certainly not the easiest. As it leaves you having to do self assessment on every foreign transaction/dividend. Converting every payment at that day's exchange rate. And with different tax rules for different countries. It's a nightmare.

Never found it to be that bothersome myself. BoE web site to look up daily FX rates and apply those to dividends received to report on Self Assessment and HMRC does all the calculations. Little different to reporting UK dividends. If anything its a useful exercise as typically I don't monitor things during the year and the process of reporting SA is also a prompt to validate that dividends paid were actually received. TD do all of the adjusted withholding taxes as part of each dividend payment such as US 15% withholding tax (they even prompt me when W8BEN has to be refreshed).

londonbus
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Re: Earn in USD, invest in USD, avoid GBP exchange?

#107205

Postby londonbus » January 1st, 2018, 7:37 pm

How about Fineco?

Multi-currency account - CHF, GBP, USD, EUR - deposit USD to its accounts and buy shares in USD. It also offers cheap FX too.

The correspondent bank fee looks about right. I'm working in the Gulf, paid USD into HSBC London and $25 looks like a standard correspondent bank charge.

(I also use Currency Fair for FX - Fineco is cheaper, but am wary pushing my income through it until it offers Faster Payments out).


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