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Charles Schwab is demanding US $25,000 for opening an international individual broker account which is I guess free for the US citizens.

Why does Charles Schwab charge such a huge amount for international clients?

The following are the conditions stated on the official website:

Each applicant will need:

  • A minimum of USD 25,000 to open an international brokerage account.

  • Non-U.S. Residence Address.

  • Digital copy of passport or government ID.

  • Tax Identification Number or Social Security Number (for U.S. citizens living abroad).

  • Employer’s name and mailing address (if applicable).

  • Digital copy of most recent utility bill.

  • Printer and scanner to print, sign and upload required documents.

Flux
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1 Answers1

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While it's not possible for me to know why exactly Schwab or any brokerage would set minimum initial deposits, they are entitled to do so. Being a non US resident, you don't have the same consumer protections that you would otherwise be entitled to as a resident.

In general, most US brokerages are somewhat hesitant to deal with non residents (the reverse of this is also true, brokerages in most countries are hesitant to deal with US Citizens), this is because of the US Tax code. As a non resident (and non Citizen), you're required to have a W8-BEN on file and depending on the tax treaty that America has with the country of which you are a Tax resident, different withholding rates apply on your investment income.

I suspect that for this reason, the process of managing an account with small investment holdings isn't worth their time. Earlier brokerages used to have trading fees, but with the newer no fees model and the additional compliance costs it's probably not worth it for them to entertain foreigners who don't meet their $25,000 account minimum. That said, $25,000 isn't a particularly large amount for most brokerage accounts. I found this article which has average (non retirement) brokerage account balances. Most account for people in their late 20s and beyond have an average balance greater than > $25,000. With the advent of Robinhood's no fees model and subsequently most of the bigger players copying this model, perhaps more people will start investing and these averages may go down.

nikhil
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