Frec vs. Wealthfront
8 min read
In the 1990s, investing went through a revolution of sorts. When brokerages like E-Trade and Schwab launched their online investing platforms, it became easy for anyone to execute a trade in any stock within seconds to minutes. Investing went from a big deal (you had to make a call and place a trade with a traditional brokerage) to something commonplace (just click a button online). And before both online brokerages and traditional brokerages, investing was mostly reserved for the wealthy.
Despite these advancements, some things have remained out of reach for everyday investors. Direct indexing is one of those things. The basic idea of direct indexing is that you track an index by owning its individual stocks, rather than the index itself, so you can harvest capital losses while also capturing similar market returns. If executed well, direct indexing can be a useful way to track market returns and pay less in taxes.
But for decades, direct indexing has been gatekept. If you were curious about direct indexing as a strategy to track market gains while potentially saving more on taxes, you were asking questions like: How do I get access to this without millions of dollars? Do I need a full-time wealth manager?
There has been something of a direct indexing revolution over the past decade. Now you don’t need a wealth manager or a large portfolio. All you need to do is open your computer and sign up for one of the various online direct indexing products that now exist with low minimums and low fees. It’s as easy to direct index now as it is to trade normal stocks with any brokerage. You could have everything set up this week!
This revolution introduces a new set of problems: which direct indexing platform do I choose?
Frec and Wealthfront are two popular options. In this piece, we’ll compare the two.
Not all direct indexing is made equal
There is a good reason it matters which direct indexing platform you choose: direct indexing is not the same product at every company. You are not getting the same thing with different branding. There are real variations between what these companies are doing.
The difference between direct indexing products makes the strategy different from basic investing. If all you care about is the ability to buy and sell individual stocks, it doesn’t really matter which online brokerage you sign up for. Fidelity can do it. Schwab can do it. Robinhood can do it. Sure, there may be differences in execution time, fees, and so on—but the functionality is binary. Either you can buy stocks or you can’t.
Direct indexing is really an umbrella term for a range of products that all follow the same basic approach – owning individual stocks in an index to harvest capital losses – but each differs in how they execute that and how much customization they offer.
Wealthfront and Betterment, as one example, commonly include ETFs as part of your direct indexing portfolio. Frec only buys individual stocks, which, according to research, is more effective. There are 100s or 1000s of decisions a company makes that impact their direct indexing product and your experience with it. Your choice matters!
So: Frec or Wealthfront?
Frec’s direct indexing approach
Frec offers three kinds of direct indexing: Classic, Long Short, and Diversify.
Classic: Track an index like the S&P 500 by owning its underlying stocks, so you can capture index returns while also generating capital losses to offset gains elsewhere.
Long Short: Add long and short extensions to your core index portfolio to tilt toward specific investment factors (e.g. growth, value, or quality), and seek to harvest more losses than Classic.
Diversify: Build long and short overlays around a concentrated stock position to reduce concentration risk and gradually shift your exposure towards a broad market index. Harvest losses along the way to reduce the capital gains incurred as we sell down your position.
Classic is generally the same category of direct indexing product you see on other platforms. Long Short and Diversify may be more difficult to find outside of Frec.
One thing that’s unique about Frec is the number and diversity of indices you can track. You can choose from 22 different indices (with more on the way), including two international indices. You can have multiple of these indices running at the same time if you want diversified exposure.
Frec prioritizes customization: you can exclude both individual stocks and entire categories from your indices. You can move stocks in and out of your indices. You can, with long short, decide what factors you’d like to prioritize (e.g. growth). The level of customization and flexibility you get with Frec is significantly higher than what you get with other platforms, including Wealthfront.
Fees and Minimums:
- Classic: Management fees range from 0.09% to 0.35%, depending on the index. Minimum investment is $20,000 to $50,000.
- Long Short and Diversify: Management fees range from 0.50% to 1.30% plus financing costs. Minimum investment is $100,000 to $500,000.
Wealthfront’s direct indexing approach
Wealthfront offers two direct indexing products:
- Automated Investing Account: This is an ETF-based account that does tax loss harvesting (e.g., generating capital losses for you) by taking advantage of daily market movement. If your account has more than $100k in it, Wealthfront offers a version of direct indexing; you can replace your US equities ETF with a mix of individual stocks and other ETFs.
- S&P 500 or Nasdaq 100 Direct: Own individual S&P or Nasdaq 100 stocks instead of an ETF so you can harvest more tax losses from daily dips in individual stocks, with the goal of lowering your tax bill.
The approach Wealthfront uses prioritizes tight tracking, automated tax-loss harvesting, and simplicity. Their white papers show a historical simulation of $10,000 invested between February 2015 and the end of 2024, resulting in over 99.6% correlation between its U.S. direct indexing portfolios and the CRSP US Total Market Index.
There is not much customization with Wealthfront’s direct indexing products, and if you would like to track more indices (anything beyond S&P 500 and Nasdaq 100) or would like to express your own investing viewpoints, you might find yourself frustrated with Wealthfront’s product. But, for the right person, Wealthfront can be a useful and easy solution.
Fees: For the Automated Investing Account, there is a 0.25% advisory fee. For S&P 500 Direct, there is a 0.09% advisory fee. For Nasdaq 100 Direct, there is a 0.12% advisory fee.
Minimum investment: For the Automated Investing Account, there is a $500 minimum. For S&P 500 Direct and Nasdaq 100 Direct, there is a $5,000 minimum.
What about additional offerings?
Here is a lightning-round summary of the other features and offerings we haven’t covered yet.
- Can I own fractional shares? Yes, on both Wealthfront and Frec.
- Can I transfer between account types? Yes on Frec (e.g. you can transfer between Diversify, Long Short, and Classic), no on Wealthfront.
- How much can I customize? Frec offers a lot of customization. You can exclude stocks and even exclude entire sectors, and you can move assets both in and out of a direct index. On Wealthfront you are currently limited to just excluding individual stocks.
- Can I borrow against my direct index? Yes, you can borrow against your direct indices on both platforms, but Wealthfront’s portfolio line of credit is limited to customers with specific account types and deposits of at least $25,000. Anyone on Frec with any direct index (it could be Diversify, Classic, Long Short, or some mix of them) can access a portfolio line of credit. Both have low interest, though Frec has a lower rate.
Which is right for me: Frec or Wealthfront?
So which do you pick for direct indexing? Wealthfront may be a better fit if you can’t meet Frec’s $20,000 minimum, or if you want an integrated high-yield savings account – a feature Wealthfront offers that Frec doesn’t (though Frec’s Treasury product serves a similar purpose).
If the minimum is not a barrier, the two platforms differ most in their range of direct indexing approaches. Wealthfront offers a streamlined experience centered on tax-loss harvesting. Frec offers multiple strategies: Classic, Long short, and Diversify – each targets different goals, from gradually accruing capital losses to exiting a concentrated position in a tax-efficient way. Frec also supports a broader range of indices and more customization options, which may matter more as your needs evolve.
The right choice depends on your starting point, your goals, and how much flexibility you want.
Here is a summarized overview:
Frec | Wealthfront | |||
| Classic (Long Only) | Long Short | Diversify | — | |
| Minimum investment | $20,000 – $50,000 | $100,000 – $500,000 | $100,000 – $500,000 | $5,000 for S&P 500® and NASDAQ 100; $100,000 for US Total Market |
| Fees | 0.09% – 0.35% | 0.50% – 1.30% | 0.60% – 1.10% | 0.09% for S&P 500 and NASDAQ 100; 0.25% for US Total Market (plus any ETF fee) |
| Available indices | 23 | 2 (S&P 500, Russell 1000) | 2 (S&P 500, Russell 1000) | 3 (S&P 500®, NASDAQ 100, US Total Market) |
| Leverage ratios | — | 140/40, 200/100, 250/150 | 140/40, 200/100 | — |
| International direct indices | Yes | No | No | No |
| ETF-to-ETF TLH | No | No | No | Yes |
| Customizations | 50 trade restrictions; 5 sector customization; 25 stock customizations | 50 trade restrictions; 5 sector customizations; 25 stock customizations; 50 do not short | Yes (details vary) | |
| High-yield savings | No — Treasury available between 3.18% – 3.38% | Yes, between 3.30% – 3.55% APY | ||
| Portfolio line of credit | 4.64% | 4.72% | ||
| Where funds are held | Apex Clearing | Wealthfront Brokerage LLC (partnered with RBC Clearing & Custody for clearing) | ||
As of 4/24/2026
TL;DR: You might go with Wealthfront if you want a lower entry point and don’t care much about advanced functionality, customization, or more indices. You might choose Frec if the $20k minimum isn’t a blocker: Frec offers more advanced strategies, is more customizable, and gives you more optionality to maximize your tax efficiency.
If Frec sounds interesting, you can open an account today, transfer your assets, and start tax loss harvesting. You can also book a call with our team if you have any questions.
