Mutual Fund Wrap

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DEFINITION of 'Mutual Fund Wrap'

Also known as a mutual fund advisory program or a wrap account, these programs give investors access to a large pool of mutual funds for one annual fee (usually between 0.5\% and 2\%). In other words, that one fee is supposed to "wrap around" all your mutual fund activity, giving you a clear picture of what is paid to your broker or financial advisor. These mutual fund wrap programs are most often offered by full-service brokerage houses to give customers another pricing option besides paying an upfront commission or surrender charges.

BREAKING DOWN 'Mutual Fund Wrap'

While mutual fund wrap accounts may seem like a transparent way of managing your mutual fund costs, most investors miss a major facet. In most instances, the wrap fee only covers the services provided by your broker, not the actual management fees of the mutual fund itself. These management expenses can range from just a few basis points to 1-1.5% annually, putting your total combined cost as high as 2-3%.

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RELATED FAQS
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    Wrap accounts, in which brokerage account costs are "wrapped" into a single or fixed fee, are great if you don't have time ... Read Answer >>
  2. My FA recommended a wrap fee for me, is that appropriate?

  3. How do I judge a mutual fund's performance?

    Evaluate mutual fund performance utilizing resources such as Morningstar; compare the fund with others in its peer group ... Read Answer >>
  4. How do I calculate the loan-to-value ratio using Excel?

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    Learn how mutual funds differ from exchange-traded funds (ETFs) in how they are traded. Also, learn what fees are involved ... Read Answer >>
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    There is no written rule that stipulates how much of a company a mutual fund can own. Instead, there are two major factors ... Read Answer >>
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