Interactive Brokers Changing in Japan

[Lagaffe]

Hello all.
Just joined this community and loving it. You guys are awesome!
This post is to get some guidance about where to post..?
I have been surfing/reading the forum and I think I should post in Stock Market Investing but I am not feeling confident in the clarity of my query or how I should name my subject header ha!ha! Dummies is for me!

I am a Canadian permanent resident here and I have been investing from Japan for 2 years now through Interactive Brokers (IB).
I have been investing (in CAD that I buy with Yen on IB) in the Vanguard ETF : VGRO.TSE. Basically buying on the Canadian market.

Newby to investing but I have done homework for a year prior to investing (Millionaire Teacher, Vanguard books, fellow investors, financial advisor, etc.). My plan is buy and hold, ETF, long term. The Japanese market, with all the stakeholders and opacity, scared me and I decided to invest on the Canadian one.

Just got news from IB that they are changing the way they do business in Japan.
IB is now switching the way it runs its accounts going to full Japanese accounts: International Brokers Securities Japan (IBSJ) and for the coming future will not hold CAD nor VGRO.TSE

My options, according to their messages and the customer service I called, are to close my holdings (sell all my shares) and transfer my account to IBSJ and buy new ETF or stock they may have to offer me (they have no public list as far as I know up to now, I have to ask them for specifics by phone). They also say they would facilitate a transfer of my account to another broker if I want.

My questions are :
1. If I close my holdings (thousands of CAD) won't I get hit with a massive tax increase next year (surplus earnings)?
If I buy another ETF right away I still would get hit the year after right?
Is there any way to change my holdings without getting a tax hit?

2. Is changing brokers worth it ? From what I have been reading here Rakuten or Monex would be the ones to choose from. Or should I just bite the bullet, close my holdings and start again with Japanese ETF IBSJ might offer me? They say they will offer products available on the Japanese market, after reading you guys I'm thinking eMaxis Slim Fund all country (can't find a ticker for that one when I look on the internet?!).

2.1 Sub-question : is my buying Canadian ETF a bad long-term plan? Should I switch to Japanese ETFs? It does look like I will be in Japan for the long-haul but the CAD ETF was kinda like a possible "out" if things go sideways over here. (Been here more than 10 years and not planing to go back anytime soon, in my forties with a family.)

Thank you SOOOOO much for any feedback. All my retirement plan money is in that IB account, pretty nervous about what will happen in the next 2 months...

[zeroshiki]

Is there any reason why you need to use IB? Are you planning on going back to Canada eventually? IB doesn't really offer alot to Japanese residents other than portability basically and with the move to IBJ even that has become iffy. I would just use Rakuten/Monex/SBI unless you have strong reasons not to (for example whether your ETF is available or not)

As far as I understand, selling your position is a taxable event. It doesn't matter if you use the funds to re-buy the same ETFs, it doesn't matter for the Japanese tax authority (not an accountant, not legal advice).

And lastly, I would relook my strategy if I were you. There shouldn't be a strong reason for you to put your money into Canadian indices even if you were Canadian. Why not buy whole world or US mutual funds instead of ETFs?

[Lagaffe]

Thank you very much zeroshiki. I appreciate your feedback.

I am using IB because when I started my investment career, my financial advisor recommended it (it is the tool they use for their customers).
The return to Canada is a difficult thing to predict. I have no plans to go back soon, but let's say my situation here could change (my kids might want to go study and live there for university, I myself am not sure if I'll stay here until retirement). Trying to invest for retirement without knowing where it will happen is a tricky situation...

My thinking for investing in a Canadian ETF is that I thought USAmerican ones are followed and recorded by the IRS (I might be mistaken). Being Canadian, I thought (again I might be mistaken) that getting involved in Canadian ETFs might be easier to untangle come tax and retirement time. Also, through a few books and advisors, ETF looked more appealing to me for their low fees when compared with other managed funds. The one I am currently holding (VGRO) is a very diverse one with companies all over the world.

But I hear you. I will have another look at my strategy and dig deeper into what products might be better for me. It looks like no matter what happens, I will have to sell my holdings and start from scratch with all the fees that come with it... Darn.

On the plus side, IB told me they will send us a notification soon (this week?) of all the available products they will carry from April. That should give me a good look at their Japanese/USA products.

Thanks again!

[beanhead]

(VGRO) is a very diverse one with companies all over the world.

This looks like almost 24% of it is Canadian equity.
That is rather overweight, to say the least. MCSI World is 3.5%, so eMaxis Slim All-Country should be the same (or pretty close).

That is not to say that it isn't a decent fund, but it will not give you the average returns of the major stock markets of the world, in the way that the eMaxis Slim All-Country will.

There aren't really any fees associated with Japanese brokers. If you buy single stocks, there are handling fees. But for mutual funds (投資信託), the very low fees are already priced in.

[beanhead]

eMaxis Slim All Country handling fee is 0.1144％, just FYI.

[TokyoBoglehead]

(VGRO) is a very diverse one with companies all over the world.

This looks like almost 24% of it is Canadian equity.
That is rather overweight, to say the least. MCSI World is 3.5%, so eMaxis Slim All-Country should be the same (or pretty close).

That is not to say that it isn't a decent fund, but it will not give you the average returns of the major stock markets of the world, in the way that the eMaxis Slim All-Country will.

There aren't really any fees associated with Japanese brokers. If you buy single stocks, there are handling fees. But for mutual funds (投資信託), the very low fees are already priced in.

For specific tax reasons these Vanguard Canadian ETFs are more advantageous for Canadians. However, they do not make sense to hold if you are not receiving those benefits as a non-resident.

Canadian Bogleheads prefer these funds for specific reasons, and OP should reassess their holdings to optimize for Japan.

Or alliteratively OP could open a Questtrade account in Canada and invest as a non-resident (allowed by said broker and taxation rules). However they will pay 25% capital gains tax on distributions.

Keeping your foot in the door has costs...

[zeroshiki]

Whether you plan on staying in Japan or not, not using NISA at the very least is foolish at this point. Fill that up first before you consider going with international brokers.

[Lagaffe]

Wow! Thank you so much everyone.
I really like having your feedback and opinions.It makes me look at things with a new angle and it definitely makes me want to go back to drawing a new plan for investing (my first one being thrown out the window with IB changing so much).

Zeroshiki, absolutely right about NISA. Since reading this forum, it has been made clear to me that this is the way to go indeed. I, and the wife, are looking into it but I need more study (especially since NISA starts a new program in 2024 if I understand correctly). This forum is full of information and I will buy the great booklets you all recommend (that the owner/maker of this site has made if I am not mistaken).

TokyoBoglehead and beanhead thank you too! I understand that as a Canadian non-resident the advantages of Canadian ETFs might be lost on me. I also began to look more into the Japanese ETF (this forum mention E Maxis Slim All World a lot) and they indeed might be better for me.

I can't thank you all enough for this discussion. Not a lot of people in my surroundings have the experience to help me make sense of what I am going through.

Here's my plan for now :
1. Wait and see what IB will offer as Japanese products. Hopefully a good low-fee fund will be available.
2. Get ready for NISA by reading up on it and making sure I have a broker/provider that can handle it.
3. Sit down and plan for retirement with different options (Japan, Canada,...) and try to understand the consequences of each choice.

Thank you for all the support.