There’s two separate issues here: liquidity (including settlement time) and suitability.
For the liquidity part, there’s two different solutions - margin loan, or broker lending to the investor before settlement. Margin loans is the quickest way to access the money in the portfolio, and it doesn’t require selling the assets in the portfolio (and crystallising capital gains for tax purposes). The margin loan can be repaid by either selling assets at a latter time or topping up the account. The down side is margin loan usually charges interest and is marked to market. I’m fairly confidence that this is not what Wise is doing. Then, in order to allow spending money directly from invested assets, the broker (Wise) will need to lend to investors (most likely for 0% interest) until settlement (usually T+2). Since this is done at the cost of the broker, they usually will recover the cost from elsewhere (higher platform fees, commissions, etc.). There’s no free meal in this world.
For the suitability part, which I believe is your major concern, and I share the same view. It’s totally unsuitable to fund regular expenses from selling investment assets by selling assets at the time of spending. However, I must say that it’s totally acceptable to fund regular expenses from strategically selling investment assets in advance. This is exactly what pension drawdown is often doing. The big difference is, strategically selling usually also involves strategically allocating asset classes in the portfolio to allow drawdown during different market conditions. A portfolio in drawdown stage often looks very different than a portfolio in accumulating stage, for example, a portflio in drawdown stage often holds enough cash for many years worth of expenses, and this is unsuitable for the accumulating stage, because it will severely reduce the expected return and to achieve the same level of protection, an income protection insurance is much better than a huge emergency cash pot.
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