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Definition of 'Wrap Account'
An account in which a brokerage manages an investor's portfolio for a flat quarterly or annual fee. This fee covers all administrative, commission, and management expenses. Sometimes this also includes funds of funds.
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Investopedia explains 'Wrap Account'
The advantage of a wrap is that it protects you from overtrading. This is when your broker trades your account excessively to make more commission. Furthermore, because the broker gets a flat annual fee, then he or she only trades when it is advantageous to you. A traditional wrap typically requires an initial investment of at least $50,000 to $100,000.
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Tax benefits, low expense ratios and flexibility - discover the advantages of this managed money product.
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These advisory programs offer professional supervision and other handy tools for building a diversified portfolio.
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Find out if fee-based investing is right for you, by learning its terminology and types of investment vehicles.
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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.
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Fee-based accounts were banned in 2007, but a on a practical level, this service remains the same for investors.
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