When you transfer assets to a Wealthfront taxable (individual, joint or trust) account, they can be handled in one of three ways:
If a specific ETF or stock you transfer is eligible to be incorporated into your Wealthfront portfolio and you select this option, we will attempt to include some or all of these transferred assets into your Wealthfront portfolio, per your investment plan.
The following assets are eligible for incorporation:
- ETFs you transfer that are the same ETFs Wealthfront uses for taxable accounts. See our list of ETFs here.
- Large US company stocks, if you have activated Direct Indexing or Advanced Indexing for your account (requires $100,000 and $500,000 minimum account value, respectively).
Some or all of your transferred assets may be sold if they cannot be fully incorporated. This typically occurs when you have a large percentage of your portfolio invested in a single ETF or stock. For example, if 10% of your account is invested in one large US company stock, we will sell most or all of this stock. For accounts without Direct Indexing, we will sell all individual stocks. For accounts with Direct Indexing and Advanced Indexing, even the largest US companies typically represent less than 1% of a diversified portfolio. Therefore, we may sell 90% or more of a single stock if it represents 10% of your account value.
All sales are evaluated using the same tax-efficient process described below.
If a specific investment is eligible for tax-efficient sale and you select this option, we sell this asset using the tax-efficient process described below and reinvest the proceeds into your Wealthfront portfolio, per your investment plan.
We evaluate the tax consequences before selling each security and act on them in the following order:
- Sell assets with losses
- Sell assets with long-term capital gains
- Use short-term capital losses from daily tax-loss harvesting and Direct Indexing to offset short-term capital gains and accelerate your transition into the Wealthfront portfolio
- Defer selling any other assets with short-term capital gains until they achieve long-term status (owned for at least one year)
If a specific investment is not eligible for the tax-efficient selling process and/or if you select this action, we will immediately sell the transferred asset and reinvest the proceeds into your Wealthfront portfolio, per your investment plan.
Nothing in this blog should be construed as tax advice, a solicitation or offer, or recommendation, to buy or sell any security. Financial advisory services are only provided to investors who become Wealthfront Inc. clients pursuant to a written agreement, which investors are urged to read carefully, that is available at www.wealthfront.com. All securities involve risk and may result in some loss. For more information please visit www.wealthfront.com or see our Full Disclosure. While the data Wealthfront uses from third parties is believed to be reliable, Wealthfront does not guarantee the accuracy of the information.