Sometimes innovation begins with a simple message from one founder to another:
Daffy has a simple mission to help people be more generous, more often. So when Mo reached out with the idea of making it easier for Frec clients to donate stock to charity, we jumped at the opportunity.
We believe that charitable giving should be integrated into every financial platform. This is one of the reasons Daffy launched our API platform in 2023, to make it simple for any developer to integrate charitable giving into their products.
Today, we’re excited to announce a new level of integration with our partner, Frec.
Now, not only can investors open a Daffy account and donate stock from Frec, but they can also use their linked DAF to help increase the tax alpha from Frec’s direct indexing platform.
Donating Appreciated Stock to a DAF is Smart. Frec Makes It Even Smarter.
For investors who want to support charitable causes, donating appreciated stock can be more tax-efficient than giving cash.
Rather than selling shares, paying capital gains taxes, and then donating the proceeds that remain, investors can contribute appreciated stock directly to a donor-advised fund (DAF). If the shares have been held for more than a year, they won’t trigger capital gains taxes on the appreciation and qualify for a charitable deduction based on the full fair market value of the stock they donated, subject to AGI limits.
As of today, Daffy is directly integrated into Frec. Frec clients can open Daffy accounts from Frec’s donation flow, or link their account if they already have one.
Once an account is linked, they can make stock contributions to their DAF directly from Frec.
However, the excitement really begins if you are a Frec client that uses one of their sophisticated direct indexing strategies.
Frec's direct indexing is designed to help investors reduce taxes through automated tax-loss harvesting. Direct indexing can be an incredibly valuable strategy to help minimize capital gains, and has been available to wealthy investors for decades. Taking advantage of the natural volatility of the stock market, direct indexing automatically sells stocks to take short-term losses, while automatically rebalancing the portfolio can achieve the natural long-term benefits of owning a market index.
Charitable giving takes this strategy to the next level. 🚀
When portfolios appreciate, opportunities to harvest additional losses can diminish over time. Gradually, investors can be left with shares of stock with a low cost basis that are less likely to be useful for tax-loss harvesting in the future.
That's where charitable giving creates a new opportunity for tax efficiency.
By contributing low-cost-basis shares to Daffy, and then adding cash back into their direct index, investors can reap three incredible benefits:
- Avoid capital gains taxes on the appreciated shares donated to charity.
- Receive the full charitable deduction for the value of the appreciated shares.
- Create new tax-loss harvesting opportunities with new, higher-cost-basis shares.
In Frec's simulations, the tax alpha generated from this simple strategy is compelling. For example, a $1 million portfolio invested in Frec’s 250/150 S&P 500 Long short strategy donating $50,000 annually could generate up to 0.41% in estimated additional annual tax alpha* compared with donating cash, on top of the benefits of direct indexing itself.
The best part? It’s all automated. All you have to do is tell Frec how much you plan to give to charity, and add the same amount in cash. Frec picks your most appreciated lots held more than a year, sends them to your DAF, and invests your cash back into your portfolio for you.
This could be one of the most meaningful enhancements to direct indexing in the past decade.
How the Frec and Daffy Integration Works
Through Daffy's APIs, Frec customers can now contribute appreciated shares from their direct index or self-managed holdings to Daffy, without leaving Frec.
- Start a donation. In Frec, select Transfer, then Donate, and choose your direct index or self-managed account.
- Connect a DAF. Link an existing DAF or open a new Daffy account from the donation flow.
- Choose how much to give. Frec identifies eligible appreciated shares held more than a year and estimates their value and potential tax savings.
- Complete the contribution. For direct indexing donations, add an equivalent amount of cash, which Frec reinvests into your index after transferring the shares to your DAF. For self-managed holdings, you can select specific eligible lots to donate without adding cash.
- Give to the causes you care about. With Daffy, once your contribution is received, you can recommend donations to almost any of the 1.7 million+ U.S. charities.
Unlike other donor-advised funds, Daffy is a modern platform, built from the ground up to support direct integrations. Daffy's APIs allow Frec clients to open or connect a DAF account within Frec, rather than sending customers through a separate, disconnected process.
Together, Daffy and Frec are making it almost effortless for investors to both save money on taxes and put more aside for charity.
“Daffy is redefining what a modern donor-advised fund can be. They've combined an intuitive giving experience with powerful APIs that set them apart from traditional DAF providers. This technology allowed us to seamlessly integrate charitable giving into Frec, making sophisticated, tax-smart giving strategies more accessible to our customers.” - Mo Al Adham, Founder & CEO of Frec
Building a Future Where Giving is Part of Every Financial Application
The Frec partnership demonstrates what's possible when charitable giving becomes part of the financial experience rather than a separate task.
Tax alpha is one of the hottest topics in wealth management right now, so we know this capability will likely generate some heat. While this may be an industry first, don’t be surprised if over the next ten years more investment platforms directly integrate charitable giving with donor-advised funds.
At Daffy, we’re excited about this trend for one very simple reason. We believe it will lead more people to put more money aside for charity, and as more wealth is generated in the stock market, we want to ensure that some of that wealth finds its way to the organizations and causes that need it.
If financial applications can help people save, invest, and manage their taxes, shouldn't they also help people give? Through Daffy's APIs and MCP server, we're building the infrastructure to make that possible across financial applications and AI-powered tools.
We're excited to partner with Frec and look forward to bringing more innovative giving experiences to financial applications everywhere.
If you’re an investor, explore how Frec can help you invest more tax-efficiently while setting more aside for charity. And if you're a financial institution or developer looking to bring charitable giving into your own product, explore Daffy's APIs.
We'd love to build with you. 👋
Simulation Results & Methodology
*Estimated tax alpha: The 0.41% estimated additional annual tax alpha based on $1 million invested in Frec’s 250/150 S&P 500 Long short direct index, making nine annual gifts of $50,000 over 10 years. Donating shares and adding cash added an estimated 0.27% a year in tax alpha (the tax value of additional losses harvested) for Classic portfolios, 0.32% for 140/40 Long short and 0.41% for 250/150 Long short, at federal tax rates.
All simulation results mentioned in this article are hypothetical, do not reflect actual investment results, and are not a guarantee of future results. Read the full results and methodology in Frec’s white paper.
Disclosures
1) This article is for informational purposes only and isn’t tax advice. Charitable deductions generally require itemizing and are subject to AGI limits, the 0.5%-of-AGI floor and other rules that took effect in 2026. Talk to a tax advisor about how these rules apply to you.
2) Daffy promotes Frec to its members. Frec is not affiliated with Daffy, and no compensation is exchanged.
3) Brokerage services offered by Frec Securities LLC, an SEC registered broker dealer, member FINRA/SIPC and advisory services offered by Frec Advisers LLC, an SEC registered investment adviser. Investing involves risk, including the risk of loss. Past performance does not guarantee future results.