Frec Direct Investing Review - Who's It Meant For?

Direct indexing used to be one of those exclusive wealth management perks that only made sense if you had $250,000+ sitting around. The pitch was simple: own the actual stocks in an index instead of an ETF, harvest tax losses daily, and potentially improve after-tax returns by around 0.5%–1% annually, with occasional higher boosts in volatile markets.

The catch? You needed a financial advisor, paid hefty fees (often 0.5%-1%+), and the whole setup felt like overkill unless you were genuinely wealthy.

Frec is trying to change that. They're offering true direct indexing with minimums starting at $20,000 (S&P 500) and up to $50,000 for broader indices with fees starting at 0.09%. No advisor required. Full self-service.

But... does dropping the minimum to $20K actually make direct indexing worth it?

What Is Frec?

Frec is a self-directed investment platform that gives you direct ownership of individual stocks that track major indices like the S&P 500, Russell 2000, or Russell 3000. Instead of buying one ETF share of VOO, you're buying fractional shares of all ~500 companies in the S&P 500.

Why bother? Tax-loss harvesting.

When you own the individual stocks, Frec can sell losers daily and buy similar stocks to maintain your index tracking. Those losses offset your gains elsewhere, potentially saving you thousands in taxes every year. With an ETF, you can only harvest losses when the entire fund dips.

Frec charges 0.09%-0.35% annually depending on which index you pick, requires $20K-$50K to start (depending on the index), and handles all the trading and rebalancing automatically.

What's Direct Indexing?

Normal investing: You buy one share of an ETF that holds 500 companies. It goes up, you make money. It goes down, you lose money. Simple.

Direct indexing: You buy tiny pieces of all 500 companies individually. When some go down, you sell them (locking in a tax loss), then buy similar companies to keep tracking the index. Those losses save you money on taxes. When stocks go back up, you buy back in.

Think of it like this: Instead of buying a pre-made fruit basket, you're buying each fruit separately. If an apple goes bad, you can throw it out and replace it with another apple - and you get a tax refund for the bad apple. With the pre-made basket, you're stuck with whatever happens to the whole basket.

The benefit? Potentially 1-2% extra annual returns just from tax savings. The catch? Only works if you're actually paying significant taxes.

The Fee Breakdown

Here's what you'll actually pay using Frec (as of writing this!):

Annual Advisory Fee: 0.09% to 0.35% depending on the index

• S&P 500: 0.09%
• Russell 1000: 0.10%
• Russell 2000/3000: Higher due to more positions

Example: $100,000 in the S&P 500 = $90 per year

Additional Costs:

• Standard SEC fees (pennies per trade)
• 0.20% annual fee if you use their Treasury account feature

Trading Fees: $0 for stocks and ETFs

Compare that to traditional direct indexing through a wealth manager, where you're looking at 0.25%-1%+ in fees. On a $100K portfolio, that's $250-$1,000+ annually vs. Frec's $90-$350.

The math gets interesting fast. If you're in the 0.09% tier, Frec costs less than most index fund expense ratios while potentially adding 1-2% in annual after-tax returns through tax-loss harvesting.

Frec vs Wealthfront

Feature	Frec	Wealthfront
Annual Fee	0.09%-0.35%	0.25%
Minimum	$20,000	$20,000
Tax-Loss Harvesting	Daily, automated	Automated
Actual Stock Ownership	Yes	No (uses ETFs)
Customization	Exclude sectors/stocks, adjust dividends	Limited
Portfolio Line of Credit	Yes (70% LTV)	No

Wealthfront is more beginner-friendly and includes financial planning tools, but it's not true direct indexing - they use a mix of ETFs with some individual stocks. Frec gives you actual ownership of every stock in the index.

Frec vs. Parametric (Traditional Direct Indexing)

Feature	Frec	Parametric
Annual Fee	0.09%-0.35%	Often 0.35%-1%+
Minimum	$20,000-$50,000	$250,000+
Advisor Required	No	Yes
Customization	Good	Excellent
Tax-Loss Harvesting	Daily	Custom

Parametric and similar advisor-based platforms offer way more customization (exclude specific companies, complex tax strategies, ESG screening beyond basic options). But you're paying for it - both in fees and by needing an advisor relationship.

For most people, Frec's level of customization (exclude up to 2 sectors, add/remove up to 10 stocks) is plenty.

What Makes Frec Different

$20,000 isn't pocket change, but it's achievable for a lot of people who'd benefit from tax-loss harvesting. Traditional direct indexing at $250K+ is basically saying "this is only for rich people." Frec opened the door for upper-middle-class investors who understand taxes matter.

It's Actually Direct Indexing

Some platforms claim "direct indexing" but use partial ETF solutions. Frec buys you fractional shares of every single stock in the index. You own them. They show up in your account. This matters for tax purposes and transparency.

You Can See Everything

Frec shows you every trade they make, the logic behind it, your tracking error vs. the benchmark, and exactly how much tax loss has been harvested. Most robo-advisors are black boxes. Frec isn't.

The Customization Actually Works

Want to exclude the energy sector because you work in oil and gas? Done. Want to remove a specific stock because you get equity comp there? Easy. Want your dividends to pay down your portfolio line of credit instead of reinvesting? You can do that.

It's not infinite flexibility, but it's way more than most automated platforms offer.

Portfolio Line of Credit

You can borrow up to 70% of your portfolio value at competitive rates (but check their website for more). This is huge for liquidity without triggering taxable events. Need cash but don't want to sell stocks and pay capital gains? Borrow against your portfolio.

Not many robo-advisors offer this. It's typically a private wealth management feature.

The Honest Downsides

You need to know what you're doing. This isn't Betterment. There's no hand-holding, no financial advisor calls, no "let's talk about your goals" questionnaire. If you don't know why you'd want direct indexing or how tax-loss harvesting works, Frec probably isn't for you yet.

The Tax Benefits Might Not Matter Yet

If you're in the 12% tax bracket or lower, the tax-loss harvesting benefits are minimal. Direct indexing shines when you're in higher tax brackets with significant capital gains to offset.

Frec's backtesting claims you can harvest up to 45% of your initial deposit over 10 years in losses (S&P 500 scenario). That's impressive, but you need actual gains to offset for it to matter.

The Tracking Error Exists

Because Frec is constantly selling losers and buying similar stocks, your portfolio won't perfectly match the index. The tracking error is usually small (often under 0.5%), but it exists. Some years you might underperform the index by a few basis points, even after accounting for tax benefits.

Limited Index Options Compared to ETFs

You get S&P 500, Russell variants, CRSP, some sector-specific indices, and ESG options. That's solid, but you're not getting exotic factor tilts or international exposure. If you want small-cap value or emerging markets direct indexing, you're out of luck.

Who Should Actually Use Frec?

You're a Good Fit If:

• You have $20,000+ to invest in a single taxable account
• You're in the 24%+ federal tax bracket
• You understand index investing and taxes
• You're comfortable with a self-service platform
• You have other capital gains you need to offset
• You want more control than a standard robo-advisor

Skip It If:

• You're investing primarily in retirement accounts (tax-loss harvesting doesn't help in IRAs/401ks)
• You're in a low tax bracket
• You need someone to hold your hand through investing
• You want international stocks or complex factor strategies
• You have under $20,000 to invest

An Example

You invest $50,000 in Frec's S&P 500 direct indexing.

Annual cost: $45 (0.09% fee)

Estimated tax-loss harvesting benefit: 1% of portfolio value = $500 in tax savings (conservative estimate)

Net benefit: $455 annually

Over 10 years, assuming modest growth, that's potentially thousands in additional after-tax returns compared to just buying VOO. But that benefit assumes you're actually in a tax situation where harvesting losses matters. If you don't have gains to offset, the losses just carry forward. Still useful, but not immediately impactful.

Compare that to paying an advisor 0.5%-1% for similar services - that's $250-$500 annually on a $50K portfolio - and suddenly Frec's value proposition gets clearer.

Wrapping Up

Frec isn't revolutionary. Direct indexing has existed for decades. What Frec did is make it accessible and affordable for people who aren't ultra-wealthy.

The platform works. The fees are competitive. The tax-loss harvesting is automated and transparent. If you're a self-directed investor in a high tax bracket with $20K+ in a taxable account, Frec is legitimately worth considering.

But it's not magic. You're still tracking an index, you still have market risk, and the tax benefits only matter if you're actually paying significant taxes. If you're young, in a low tax bracket, or investing primarily in retirement accounts, just buy a low-cost index fund and move on with your life.

Frec is a tool for optimizing taxes on money you've already decided to invest in index funds. It's not a get-rich-quick scheme. It's not suitable for everyone. But for the right investor, it's one of the better deals in automated investing right now.

Disclaimer: This review is based on publicly available information about Frec as of November 2025. I'm not a financial advisor, tax professional, or your mom - this isn't personalized investment advice. Your tax situation, investment goals, and risk tolerance are different from everyone else's. Before investing $20,000+ anywhere, talk to an actual professional who knows your specific circumstances. Frec's fees, features, and terms can change, so verify everything on their website before committing. Some links in this article may be affiliate links, meaning I could earn a commission if you sign up - but that doesn't change my analysis or recommendations. I only write about products I'd actually consider using myself.