Navigating International Robo-Advisors: Legal Requirements and Regional Considerations
Are there any robo-advisors available internationally? Yes, you probably can find a Robo-advisor that works internationally. Many US Robo-advisors accept clients from most countries worldwide, even if they are not registered or regulated in those countries. However, this might not be the best option to go with. While the economies of scale allow these companies to offer a better service at a lower price, it’s important to consider the specific needs and regulations of the country in which you reside.
Regulatory and Economic Differences
Even though an international Robo-advisor can be a good option, the service is often tailored for residents in the countries where they are regulated. Investment strategies, currencies, and tax structures differ significantly between countries. For instance, in Portugal, where I reside, dividends are subject to high taxes. This means that a preferred portfolio of ETFs should include accumulating ETFs rather than distributing ETFs to avoid paying dividend taxes.
Other countries, such as the UK, have capital gains allowances for specific investment instruments. These differences highlight the importance of considering local tax laws and regulations when selecting a Robo-advisor. It's advisable to see which Robo-advisors are available in your country and compare them on a like-for-like basis. I am in the process of developing a list of Robo-advisors available by country, as well as a full comparison table on my website. The link to my website is in the profile description for your convenience.
Legal Requirements and Asset Restrictions
Investment companies that offer this kind of service need legal authorizations just like a regular investment company would. Each country has its own set of rules regarding which advisors can operate within its borders. Some countries grant these authorizations while others do not, and even those that do have specific regulations regarding what kind of assets these advisors can manage. There is always a concern to protect small investors, which drives these regulations.
For example, some countries may restrict the types of assets that Robo-advisors can manage, such as real estate or certain currencies. It is crucial to understand these restrictions and how they might impact your investment strategy. For instance, if you want to invest in real estate but the Robo-advisor is restricted from managing such assets, you may need to consider an alternative service provider.
Conclusion and Next Steps
While international Robo-advisors can offer convenience and lower costs, it’s essential to consider their suitability for your specific needs and the regulatory environment in your country. By comparing local options and understanding the legal requirements, you can make an informed decision that aligns with your investment goals and risk tolerance.
For more detailed information and a comprehensive comparison of Robo-advisors by country, visit my ongoing project on my website. I have the link in the profile description for easy access.