The Dispatch

Auto Invest Turned on For Most Accounts

In the weeks ahead we will be setting the remainder of eligible accounts up with Auto Invest to automatically invest cash into managed portfolios. These automatic investments will be triggered when Unaffiliated Cash is above a minimum based on account size and below $50,000. Advisors have consistently asked to be given the chance to decide on the investment method for larger amounts above $50,000.

If the account has multiple models and your past instructions or actions to allocate to these multiple models is clear, we will turn on Auto Invest. If we are uncertain of your intent, we will not turn on Auto Invest without your instructions. If the account has a conflicting service request in place, such as Dollar Cost Averaging, Systematic Withdrawal or Trade Hold, Auto Invest cannot be turned on as it would contradict with the other standing instruction. At any time, you can go into an account and change the minimum or maximum amounts or turn off Auto Invest altogether. Simply click on the Service tab at the account level and open the Auto Invest service request in the window at the bottom (or contact us for help).

For larger incoming cash deposits, if you alert us in advance that the cash is arriving and provide instructions of whether to invest it or not, then we will not need to contact you for instruction, saving you time and ensuring client funds are handled properly and quickly.

Please read the questions and answers below.

Auto Invest Questions & Answers

What is the range used to trigger an Auto Invest?

Is this dividend reinvestment?
No. With Auto Invest the cash is invested across the model(s) not just in the individual security from which the dividend originated. When we stopped dividend reinvestment years ago it had a very positive impact. Automatically reinvesting dividends in our highly diversified portfolios resulted in an excessive number of tiny transactions, and without dividends replenishing account cash even more transactions had to be generated to free up cash to pay monthly fees. Through the advanced technology of the Freedom Advisors platform, most of these transactions will be eliminated. Stopping dividend reinvestment resulted in significantly shorter client statements and tax forms. Now automatically investing Unaffiliated Cash through the Auto Invest function automatically reinvests dividends and other cash inflows.

How is the cash allocated within the model?
All cash added to an existing single-sleeve model starts with the security furthest from target weight on the downside and invests the cash there until it reaches the target weight. If more cash remains it goes to the next security furthest from target, and so on. All cash added to an existing multi-sleeve model starts with the sleeve furthest from target weight on the downside and invests the cash there until it reaches the target weight. If more cash remains it goes to the next sleeve furthest from target, and so on.

Can I change the dollar range for individual accounts?
Yes. We analyzed the typical inflow of cash from dividends and that is how we determined the range indicated above. For much larger accounts you can raise the minimum. We set the maximum at $50,000 because you and your client should decide if it should be higher. This is an immediate placeholder. Some advisors have set the maximum at $100,000, some have set it lower than $50,000. All advisors who have set up Auto Invest agreed they wanted to speak to the client before automatically investing larger sums.

Can I change the dollar range on all accounts?
Yes, we will do that for you. Just send us in writing what you want the minimum and maximum to be.

What if an account has an automated recurring investment instruction in place like Dollar Cost Averaging or Systematic Withdrawal?
Any existing recurring investment instruction in place in your Freedom Advisors Service Center that conflicts with the Auto Invest function results in that account not having Auto Invest turned on. For example, you cannot Dollar Cost Average cash into an account on a defined schedule over time while at the same time turning on Auto Invest. These instructions contradict each other.

What is the minimum we can go to? 
$50 

What is the maximum we can go to?
There is no maximum in the system, but we need to be cautious and not set it too high.

Does it invest all cash or just that amount between the minimum and maximum range?
Auto Invest will only be triggered when the Unaffiliated Cash balance is between the minimum and maximum range. Once triggered, all Unaffiliated Cash will be invested. The system does not touch cash that is in a Managed Portfolio or in Discretionary. It only pulls cash from the cash sweep bucket, which is labeled Unaffiliated Cash. 

How are you reserving sufficient cash to pay fees?
We will seek to maintain sufficient cash within Managed Portfolios to pay fees.

How can I hide cash from being automatically invested?
Some advisors allocate cash in their models because they have made an investment decision to have a portion of the portfolio in cash. For cases where a client has reserved cash outside a managed model, you simply purchase the Schwab Tax Exempt Money Fund Model or Invesco Taxable Money Fund Model. That removes the funds from the cash sweep account and reserves it.

Do we need authorization from clients to automatically invest incoming cash?
Not unless your client has instructed you not to invest incoming cash. For our entire history we have automatically invested all incoming cash into the account's model(s) and reinvested dividends. But Freedom Advisors brings you so many more options for types of investments and automating the timing of investments, that for new cash over $50,000 it is prudent to not automatically invest, as the client's deposit of those funds may not have been intended for automatic investment.

Can I pause Auto Invest for an individual account?

Yes. Pausing Auto Invest is necessary at times, such as when you want to submit a Raise Cash or Dollar Cost Averaging service request. When submitting a Raise Cash request, the system will prompt you to pause Auto Invest. If raising cash one-time for a withdrawal, make sure to select a date far enough in the future for turning Auto Invest back on to allow for the cash to be withdrawn from the account; otherwise the system will automatically reinvest it if it is still in the account.

Where can I find an account's standing Auto Invest function if I want to make a change?
You can find standing Auto Invest recurring service requests by going to the account, clicking on Service in the lower navigation bar on the screen, and finding the Auto Invest service request in the window at the bottom. Click on the > on the left and the details will be revealed.

Where can I find the Auto Invest Service Request if I want to create one for an account that does not have one?
To create automated investment of cash, go to the account, click on Service in the lower navigation bar, and among the selection of links in the middle of the screen, click on Auto Invest.

What if an account has more than one model? How will Auto Invest allocate the cash?
We have not turned on Auto Invest for many accounts that have more than one model. You need to make the allocation decision for each account. The Auto Invest service request function allows you to easily set percentage allocation to each model. But we cannot make that percentage allocation decision for you because not all accounts began with explicit allocation to multiple models. In many cases, additional models were added long after the first model, and it was done on a dollar basis.

If you have more questions, call us or email support@freedomadvisors.com.