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.

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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
  1. What is financial double-dipping?

    In the financial industry, double-dipping occurs when a financial professional, such as a broker, places commissioned products ... Read Full Answer >>
  2. What is a wrap account and what are the advantages of using one?

    Wrap accounts, in which brokerage account costs are "wrapped" into a single or fixed fee, are great if you don't have time ... Read Full Answer >>
  3. Can mutual funds outperform savings accounts?

    A mutual fund can – and should – outperform a savings account. In most cases, it should not even be a close race. Savings ... Read Full Answer >>
  4. Can mutual funds invest in private companies?

    Mutual funds can invest in private companies, which may come as a surprise to many investors. It is rare for a fund to have ... Read Full Answer >>
  5. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  6. What action is the SEC likely to take on 12b-1 fees?

    The Securities and Exchange Commission (SEC) may take action to impose greater regulation on how 12b-1 fees are used, or ... Read Full Answer >>

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