Join us on this week's episode of the Slice of Finance podcast, hosted by Jared S. Taylor! Our Guest: Mo Al Adham, Founder & CEO at Frec.

What you’ll get out of this episode:

• What is Frec?: Mo Al Adham explains Frec’s mission to provide market returns with tax savings through direct indexing.

• The Evolution of Index Investing: Frec offers a modern twist on traditional ETFs, providing both returns and capital losses for tax efficiency.

• Portfolio Customization: Frec allows investors to tailor portfolios by excluding specific stocks or industries, offering more control.

• Portfolio Lines of Credit: Mo discusses how Frec's portfolio lines of credit empower investors without the need to sell assets.

• The Future of Fintech & AI: Insights on how Frec utilizes AI for compliance and personalization and its potential impact on the fintech industry.

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The Evolution of Index Investing: Introducing Frec

In a world where traditional mutual funds and ETFs dominate passive index investing, Frec is pushing the boundaries. Mo Al Adham, CEO of Frec, describes the company's mission to offer not just market returns but also significant tax savings through a cutting-edge approach called direct indexing. Unlike ETFs, which offer tax advantages but are limited in flexibility, Frec allows investors to capture the same returns while reaping substantial capital losses. These losses, as Mo explains, can offset future gains, creating a shield for investors against tax liabilities.

Mo elaborates, "You get almost 40% of your investment back in capital losses over a decade with direct indexing. So if you invest $1 million, you could see $400,000 in tax savings over time—benefits that are unattainable through traditional ETFs."

Customization at Its Best: Tailoring Your Portfolio

Customization is another key differentiator that makes Frec stand out. Investors can now exclude specific companies or industries, such as Meta or NVIDIA, from their portfolios. This feature is particularly valuable for employees of large tech firms who don’t want to reinvest in companies they already have exposure to through stock grants or RSUs. Mo emphasizes, "It makes no sense to sell your RSUs and then buy into the same company through an index fund."

Beyond personal holdings, Frec also offers "values filters," allowing users to remove companies that don't align with their ethical or environmental standards. Whether it’s eliminating companies involved in fossil fuels or avoiding sectors that contribute to microplastic pollution, Frec empowers investors to align their portfolios with their personal values.

Portfolio Lines of Credit: Liquidity Without Liquidation

One of the more unique offerings from Frec is the portfolio line of credit. This product allows investors to borrow against their portfolios without having to sell off their investments. Whether it’s for a home renovation or a large purchase, this feature gives investors peace of mind, knowing they can access liquidity while their portfolio continues to grow.

“We built this feature even before launching direct indexing,” Mo shares. “It was critical for us to ensure that users could leverage their portfolios without needing to sell, especially in a market where cash flow might be needed for short-term needs.”

AI's Role in Fintech: Efficiency and Personalization

Mo also dives into how Frec is leveraging AI, particularly in streamlining compliance processes. AI allows the company to review marketing and financial content quickly, replacing the need for manual, time-consuming compliance checks. Mo reflects on how AI reduces review times from weeks to mere days, enabling faster and more efficient workflows.

Looking ahead, Mo envisions AI playing an even larger role in personalization. For example, in the future, users could apply sophisticated value filters powered by AI to create entirely unique portfolios based on custom criteria, such as environmental impact or corporate responsibility. "The possibilities are endless," says Mo.

Frec’s Rapid Growth and What's Next

After a remarkable nine months, Frec hit a significant milestone—$100 million in customer assets. Mo is quick to point out that this growth is just the beginning. Looking ahead, Frec aims to deepen its direct indexing offering, introduce new asset types, and continue refining the user experience. While the fintech space is crowded, Frec remains laser-focused on perfecting its core product rather than expanding into unrelated services.

Mo concludes by reflecting on one of the early challenges Frec faced—a large investor pulling their funds in the beta phase. "At first, it felt like a big setback. But we learned that focusing on the long-term goal and staying true to our core mission would yield better results," he says. In fact, the same investor eventually returned, proving that sticking to the plan was the right move.

As Frec continues to grow, the company’s commitment to offering a personalized, tax-efficient, and investor-friendly platform remains at the forefront of its mission.

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