Direct Indexing: How Frec is Disrupting Wealth Management

First of all, what is Direct Indexing? It’s an investment strategy that allows individuals to own the individual stocks that make up an index, such as the S&P 500, instead of buying an ETF or mutual fund that tracks the index. This enables investors to achieve similar performance to traditional funds while enjoying greater tax efficiency through tax-loss harvesting, which can reduce capital gains and even offset up to $3,000 of ordinary income taxes annually. Unlike traditional advisors who charge fees of around 1%, Frec offers direct indexing with fees starting at just 0.1% and 14 different indices to choose from. 

Direct Indexing: Redefining Portfolio Management  

Frec is redefining portfolio management by removing the middleman and empowering sophisticated, self-directed investors with these institutional-grade tools they need to manage their investments. With a focus on algorithmic direct indexing, Frec is paving the way for a future where investors have more control, tax efficiency, and flexibility. 

At the core of Frec’s platform is its advanced algorithm. Frec's adoption of MSCI's Barra Global Total Market Equity Model, a factor-based risk model, has significantly improved the effectiveness of tax-loss harvesting across all market segments. The new model testing showed dramatic improvements over traditional methods, delivering up to 25% better results in mid-cap indices, with a tracking error below 1%. Frec is also maximizing tax alpha through daily tax loss harvesting—capabilities that were previously exclusive to high-fee advisors and the ultra-wealthy.

Portfolio Allocation Feature Empowers Investors 

Frec's Portfolio Allocation feature further challenges the industry's robo-advisor incumbents by recognizing a fundamental truth: most investors maintain multiple accounts across different platforms. Instead of enforcing automatic rebalancing that triggers unnecessary tax events, Frec puts decision-making power directly in the hands of investors, allowing them to rebalance at their own pace through:

• Cash Deposit: Use external funds from other accounts to bring allocations back in balance without triggering unnecessary sales.
• Leverage Up: Utilize Frec's portfolio line of credit to rebalance without liquidating high-performing assets.
• Sell and Buy: When preferred, click a button to sell or buy your positions back into the allocation you choose.  

"For years, robo-advisors have promoted the idea of constant rebalancing as the gold standard, but this one-size-fits-all approach often doesn't align with real-world investor needs," said Mo Al Adham, CEO and Founder of Frec. "With our Portfolio Allocation feature, we're breaking away from this flawed model. Investors can now rebalance at their own pace, ensuring their portfolios reflect their personal strategies and with more tax-efficient alternatives."

Frec and the Growth of Direct Indexing 

Direct indexing is projected to be one of the fastest-growing segments in investment management, and Frec remains at the forefront of this new chapter. Frec's rapid growth from $100M to $170M AUM in just four months reflects the strong demand for intelligent investment solutions that don't compromise sophistication or control.

Frec also offers:  

• Self directed trading
• A high yield treasury account
• A low cost, flexible portfolio line of credit

To get started today sign up or book a demo to learn more.  

^{etf.com is not a Frec customer and Frec paid a one-time fee for this article. Investing involves risk, including the risk of loss. Borrowing on margin increases this risk. Initial borrow is 50% with the ability to increase to a maximum of 70% over time. MSCI’s Barra Risk Model tax loss harvesting results are hypothetical, do not reflect actual investment results, and are not a guarantee of future results. The results range from 7.5% to 25% improvement based on index. Frec’s AUM fees range from 0.10% - 0.45% based on index. Brokerage services provided by Frec Securities LLC, member FINRA/SIPC and advisory services provided by Frec Advisers LLC, an SEC RIA. Both are subsidiaries of Frec Markets, Inc.}