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Transferring securities from another firm

You can transfer investments directly from another brokerage firm to a Wealthfront investing account through the ACATS system. We handle the transferred securities differently depending on whether you are transferring into an Automated Investing Account or a Stock Investing Account.

Here’s how we’ll handle your investments: 

Transferring to an Automated Investing Account

  • ETFs used to represent the asset classes in your portfolio allocation - either the primary ETF, the alternate ETF used for tax-loss harvesting, or certain selected funds designated as “holdable” will be incorporated into the portfolio up to their target position (actually, we will incorporate slightly more than the target position to reduce the amount of selling required). As an example, suppose you have a new portfolio with a 20% allocation to the US Stocks asset class represented by the VTI ETF, and you fund the account via a transfer of $100,000 in ETFs including $50,000 of VTI. We would incorporate $20,000 of the transferred VTI into your portfolio and sell the remaining $30,000 as soon as it is not at a short-term gain. If you subsequently deposit cash into the account before the remainder of the VTI is sold, we may be able to incorporate more into your portfolio.
  • If you are enrolled in US Direct Indexing or Smart Beta and transfer in individual stocks or ETFs employed in the strategy, we will incorporate securities employed by the strategy at up to twice their target weight. For more details on transfers into accounts with Direct Indexing enabled, see this page.
  • Cash will be automatically invested.
  • We’ll sell everything else. 
    • Stocks and ETFs we’ll sell tax-efficiently. Mutual funds and other unsupported investments will be sold immediately.
    • Read more about how we tax-efficiently handle your transferred assets here.

Transferring to an S&P 500 Direct Portfolio

  • We’ll incorporate stocks that are part of the S&P 500® Index but may sell stocks that are overweight to better track the performance of the S&P 500®. We’ll sell these stocks in a tax-efficient manner. 
  • Cash will be automatically invested. 
  • Other securities that are not part of the S&P 500® Index, such as ETFs, will be sold and the funds will be used to purchase individual stocks for the portfolio. We’ll sell ETFs and other stocks tax-efficiently, but mutual funds and other unsupported investments will be sold immediately.

Transferring to a Stock Investing Account

  • We’ll continue holding stocks and ETFs that you transfer. Securities transferred in-kind would not trigger a taxable event.
  • Cash will be automatically transferred to your Wealthfront Cash Account.
  • Mutual funds and other unsupported investments will be sold immediately and the proceeds will be transferred to your Wealthfront Cash Account. 

Transferring to an Automated Bond Ladder Account

  • We’ll incorporate US Treasuries and cash according to your bond ladder strategy. Treasuries will be held until maturity unless you decide to withdraw funds, which can result in selling early. We’ll balance over- or under-weighted rungs with interest earned from your existing treasuries and with any new deposits you add to your ladder. As an example, let’s imagine you open a 1-year Wealthfront Automated Bond Ladder and transfer in US Treasuries from another brokerage. Some of these bonds mature in 6 months and others mature in 18 months:
    • We’ll add the 6-month bonds to the 6-month rung of your ladder. As needed, we’ll balance your rungs with additional bond purchases (with reinvestments or new deposits).
    • We’ll keep the 18-month bonds in a separate section of your account, still visible on your dashboard. Interest earned on these bonds will be reinvested, and in 6 months, we’ll move your 18-month bonds to the 12-month rung of ladder.
  • Cash will be automatically invested.

Other securities or unsupported investments cannot be transferred into your Wealthfront Automated Bond Ladder Account.

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Wealthfront prepared this article for informational purposes and is not intended as tax advice nor as an offer, recommendation, or solicitation to buy or sell any security. Wealthfront does not represent that any strategy will result in any of the outcomes described, including the effectiveness of any strategy in reducing tax liability, as this depends on an investor’s specific tax and investment profile. Investors are encouraged to consult their personal tax advisors regarding their unique circumstances and any outcomes/consequences that may result from any investment strategy. Investors and their personal tax advisors are responsible for how the transactions in an account are reported to the IRS or any other taxing authority.

Wealthfront and its affiliates may rely on information from various sources we believe to be reliable (including clients and other third parties), but cannot guarantee its accuracy or completeness. See our Full Disclosure for more important information. Financial advisory and planning services are only provided to investors who become clients by way of a written agreement. All investing involves risk, including the possible loss of money you invest. Past performance does not guarantee future performance.

Financial advisory, planning, and investment management services are offered by Wealthfront Inc. (“Wealthfront”), an SEC registered investment adviser. Brokerage products and services offered by Wealthfront Brokerage Corporation, member FINRA / SIPC, and a wholly-owned subsidiary of Wealthfront.

When Wealthfront replaces investments with “similar” investments as part of the tax-loss harvesting strategy, it is a reference to investments that are expected, but are not guaranteed, to perform similarly and that might lower an investor’s tax bill while maintaining a similar expected risk and return on the investor’s portfolio. Wealthfront assumes no responsibility to any investor for the tax consequences of any transaction.

Tax loss harvesting may generate a higher number of trades due to attempts to capture losses. There is a chance that Wealthfront trading attributed to tax loss harvesting may create capital gains and wash sales and could be subject to higher transaction costs and market impacts. In addition, tax loss harvesting strategies may produce losses, which may not be offset by sufficient gains in the account and may be limited to a $3,000 deduction against income. The utilization of losses harvested through the strategy will depend upon the recognition of capital gains in the same or a future tax period, and in addition may be subject to limitations under applicable tax laws, e.g., if there are insufficient realized gains in the tax period, the use of harvested losses may be limited to a $3,000 deduction against income and distributions. Losses harvested through the strategy that are not utilized in the tax period when recognized (e.g., because of insufficient capital gains and/or significant capital loss carryforwards), generally may be carried forward to offset future capital gains, if any.

Wealthfront’s investment strategies, including portfolio rebalancing and tax loss harvesting, can lead to high levels of trading. High levels of trading could result in (a) bid-ask spread expense; (b) trade executions that may occur at prices beyond the bid ask spread (if quantity demanded exceeds quantity available at the bid or ask); (c) trading that may adversely move prices, such that subsequent transactions occur at worse prices; (d) trading that may disqualify some dividends from qualified dividend treatment; (e) unfulfilled orders or portfolio drift, in the event that markets are disorderly or trading halts altogether; and (f) unforeseen trading errors. The performance of the new securities purchased through the tax-loss harvesting service may be better or worse than the performance of the securities that are sold for tax-loss harvesting purposes.

Wealthfront only monitors for tax-loss harvesting for accounts within Wealthfront. The client is responsible for monitoring their and their spouse's accounts outside of Wealthfront to ensure that transactions in the same security or a substantially similar security do not create a “wash sale.” A wash sale is the sale at a loss and purchase of the same security or substantially similar security within 30 days of each other. If a wash sale transaction occurs, the IRS may disallow or defer the loss for current tax reporting purposes. More specifically, the wash sale period for any sale at a loss consists of 61 calendar days: the day of the sale, the 30 days before the sale, and the 30 days after the sale. The wash sale rule postpones losses on a sale, if replacement shares are bought around the same time.

The effectiveness of the tax-loss harvesting strategy to reduce the tax liability of the client will depend on the client’s entire tax and investment profile, including purchases and dispositions in a client’s (or client’s spouse’s) accounts outside of Wealthfront and type of investments (e.g., taxable or nontaxable) or holding period (e.g., short- term or long-term). Except as set forth below, Wealthfront will monitor only a client’s (or client’s spouse’s) Wealthfront accounts to determine if there are unrealized losses for purposes of determining whether to harvest such losses. Transactions outside of Wealthfront accounts may affect whether a loss is successfully harvested and, if so, whether that loss is usable by the client in the most efficient manner.

A client may also request that Wealthfront monitor the client’s spouse’s accounts or their IRA accounts at Wealthfront to avoid the wash sale disallowance rule. A client may request spousal monitoring online or by calling Wealthfront at 844-995-8437. If Wealthfront is monitoring multiple accounts to avoid the wash sale disallowance rule, the first taxable account to trade a security will block the other account(s) from trading in that same security for 30 days.

The S&P 500® index is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and has been licensed for use by Wealthfront Advisers LLC. Standard & Poor’s®, S&P®, S&P 500®, US 500 and The 500 are trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Wealthfront Advisers LLC. Wealthfront’s S&P 500 Direct Portfolio is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product nor do they have any liability for any errors, omissions, or interruptions of the S&P 500® index.

Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.