You can fund your portfolio with cash, or you can transfer individual whole shares of stocks directly out of an external brokerage, including robo-advisors, and into Frec’s self-managed portfolio without selling them by using ACATS. Most brokerages, like Betterment, allow partial transfers while others, like Wealthfront, require full transfers.
Here’s what happens when you initiate a full transfer:
- All ETFs, stocks, and any other securities in your external account (including mutual funds, fixed income, and options contracts) will be transferred in-kind to Frec’s Self-Managed Portfolio.
- Any cash you transfer over from your external brokerage account will be available as Cash in your Frec account.
- We will also bring over your ETF and stock tax lot information, but this can take 3-5 additional business days once your transfer is received.
When setting up your Frec Direct Indexing portfolio (“DI Portfolio”), you can fund it with cash, stocks, or a combination of cash and stocks if the total value of your stock is below the $20,000 minimum. You can also always add a cash deposit or recurring cash deposits after you've set up your index if you want to increase your portfolio value.
To fund with stock, you will first need to complete a stock transfer into Frec or purchase stock in your self managed portfolio. Then you can continue setting up your DI strategy on the platform. After selecting your index and its customization, you’re able to choose how to fund your strategy. You’ll want to select funding by stocks. You will then be shown a list of all stock held in your account and they will be separated out for those within the index you created and those outside of the index you created. Any stock that is within your index will be assigned a target weight according to the methodology of the index you created. Only a specific amount of your stock will be used to seed the index in kind based on that stock's target weight. You can view how much of your stock will be used in kind and how much may be rebalanced over time by clicking the value of the stock in the upper right hand corner. See an example below.
Any stock you select that is outside of your index will be assigned a 0% target weight. The direct indexing algorithm will sell out of these positions and use the cash to purchase underweight positions of your index while avoiding wash sales. These sales may incur capital gains and you should review your tax lots prior to moving them into your index.
Once you’ve selected which stocks you want to seed in your DI, you may also be required to deposit cash if your portfolio is below our minimum of $20,000. Once any cash is settled, we will start investing in your DI strategy.
Keep in mind, if you want to avoid selling when you transfer your stocks, you should only transfer whole shares. Any fractional shares will be sold and transferred as cash, which could result in a capital gain or loss.
Transfer Status
You can view your transfer status within your activities page. Select the ACAT transfer in question and you will be shown a status. If your transfer has been pending for over 10 business days, please contact help@frec.com.
Other information to note:
- Your external brokerage may charge an outgoing ACAT fee (typically between $50 and $100). Frec does not charge any fees for incoming ACATs.
- To avoid transfer rejections, please ensure the name and type of external brokerage account you transfer from matches your Frec account.
- Frec does not currently offer the ability for customers to trade options contracts, fixed income, OTC securities, penny stocks, or mortgage backed securities. This is what happens if you transfer any of those securities into Frec, you will be able to hold them in your account and complete the following actions:
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- OTC or Penny stocks: Submit a sell order to Frec’s support team. You will not be able to purchase additional shares.
- Fixed Income or mortgage-backed securities: You will not be able to make any buy or sell trades. You can transfer them out of Frec or hold to maturity.
- Options: You will not be able to trade them. You can hold them until expiration or transfer them out of Frec.
- Mutual Funds: You will be able to sell any mutual fund brought into Frec and you may be able to purchase additional shares, if your mutual fund is supported for trading. You can find out by reaching out to help@frec.com.
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