Mutual Fund Wrap

AAA

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.

INVESTOPEDIA EXPLAINS '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%.

VIDEO

Loading the player...
RELATED TERMS
  1. Wrap Account

    An account in which a brokerage manages an investor's portfolio ...
  2. Wrap Fee

    A comprehensive charge levied by an investment manager or investment ...
  3. Trailer Fee

    A fee that a mutual fund manager pays to a salesperson who sells ...
  4. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  5. Front-End Load

    A commission or sales charge applied at the time of the initial ...
  6. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
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. Are so-called self-offering and self-management covered by "Financial Instruments ...

    As the Financial Services Agency (FSA) explains, self-offering of interests in collective investment schemes falls under ... Read Full Answer >>
  4. What happens when I want to sell my A-shares of a mutual fund?

    Typically, commissions or other sales charges may apply when a mutual fund is sold. This is an important factor in deciding ... Read Full Answer >>
  5. What does the information ratio tell about the design of a mutual fund?

    The information ratio can tell an investor how well a mutual fund is designed to deliver excess or abnormal returns as well ... Read Full Answer >>
  6. Is it better to buy A-shares or a no-load mutual fund?

    Mutual funds and other pooled investments are popular among investors because they provide a level of diversity and professional ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Paying Your Investment Advisor - Fees Or Commissions?

    The way a professional is compensated can affect quality of service. Learn more here.
  2. Mutual Funds & ETFs

    That's A (Mutual Fund) Wrap!

    These advisory programs offer professional supervision and other handy tools for building a diversified portfolio.
  3. Bonds & Fixed Income

    Wrap Accounts: A Gift Of Advice?

    Fee-based accounts were banned in 2007, but a on a practical level, this service remains the same for investors.
  4. Options & Futures

    The Rap On Wrap Fees For Retirement Accounts

    If your retirement account is managed under a wrap fee program, you need to consider whether you should pay the fee out of your retirement account balance or out-of-pocket.
  5. Mutual Funds & ETFs

    Looking To Invest In Texas? Here Is How

    Ranging from energy to household names, here are some of the top investment opportunities in Texas.
  6. Investing Basics

    What Does a Financial Intermediary Do?

    A financial intermediary is an institution that acts as a go-between in a financial transaction.
  7. Mutual Funds & ETFs

    4 Ways You Can Invest In Gold Without Holding It

    Owning gold can be a store of value and a hedge against unexpected inflation. Holding physical gold, however, can be cumbersome and costly. Fortunately, there are several ways to own gold without ...
  8. Savings

    Get Better Mileage Out Of Your Savings At The Pump

    U.S. drivers are spending 90 cents less on a gallon of gas than a year ago, about more than $10 a tank. If that’s you, what are you doing with that money?
  9. Professionals

    Fund Boards: What They Do and Why You Should Care

    Fund boards oversee management and operations of the fund on behalf of shareholders. Make sure you've got a board that will look out for you.
  10. Professionals

    Are Robo-Advisors a Better Alternative to Professionally Managed Funds?

    Robo-advisors are the wave of the future. They are programs that provide multi-level management of an investment portfolio with a minimum amount of human interaction.

You May Also Like

Hot Definitions
  1. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  2. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  3. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  4. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  5. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  6. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!