Mutual Fund Wrap

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James Chen
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James Chen, CMT is an expert trader, investment adviser, and global market strategist.

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Updated June 20, 2022
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Thomas Brock
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Thomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities.
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What Is a Mutual Fund Wrap?

A mutual fund wrap, also known as a mutual fund advisory program or a wrap account, is a wealth management service that gives investors access to personalized advice and a large pool of mutual funds. Mutual fund wrap programs are often offered by full-service brokerage firms. Typically, the investor chooses from a list of mutual funds usually offered with discounted sales loads. The investor pays an annual fee for the account overall, known as the wrap fee.

Key Takeaways

  • With a mutual fund wrap, financial firms give investors access to personalized advice and a large pool of mutual funds.
  • A mutual fund wrap is also called a mutual fund advisory or a wrap account and is typically made available by full-service brokerages.
  • The programs allow clients to put together a personalized portfolio of mutual funds based on their risk tolerance, age, goals and other investment preferences.
  • Because mutual fund wraps typically require a minimum investment of $25,000, they are typically marketed toward high-net-worth clients. 
  • Robo advice platforms offer a lower budget option, providing an automated version of the same investment profiling and portfolio building services with lower fees.
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An Introduction To Mutual Funds

How a Mutual Fund Wrap Works

Mutual fund wrap programs can be a good option for high-net-worth clients seeking to build a customized portfolio of mutual funds. Mutual fund wrap programs allow investors to build a portfolio of mutual funds based on their preferences and objectives. Mutual fund wrap accounts typically require a minimum investment of $25,000.

In a mutual fund wrap program, investors can work with a financial advisor and will be given a select list of funds. A financial advisor can work with the client to build a portfolio based on the goals and risk tolerance of the client. Financial advisors will typically suggest mutual fund portfolio allocations based on the client’s investment profile.

Investors in mutual fund wrap programs can benefit from lower trading costs and a professionally advised portfolio based on their personalized investment goals. The annual wrap fee is typically the primary expense associated with the portfolio. The annual wrap fee is usually tiered based on assets in the program. It can range from 0.25% to 3% depending on the program and is in addition to annual operating fees charged by the funds in the portfolio.

With mutual fund wraps, the investor works with an advisor to create a portfolio. With robo advisory services, the process is automated.

Mutual Fund Wrap Competition

Mutual fund wrap programs can be a good investment option for investors. However, the increasing presence of robo advisors has created competition for these programs. As a result, many full-service brokerage firms offer robo advice alternatives to their customers. Charles Schwab's Intelligent Portfolios is one example.

Robo advice platforms provide investment profiling and portfolio building services. They offer some additional benefits in that the service is automated, fees can be lower, and investment minimums are usually lower. With the lower minimum investments, robo advice wrap programs can be offered to investors seeking to build managed portfolios with only $5,000. Most robo advice wrap programs use exchange-traded funds (ETFs) rather than mutual funds.

Robo advisory programs typically offer ETFs rather than the mutual funds. They can be accessed by investors with only a $5,000 minimum versus the $25,000 minimum typical of wraps.

Mutual Fund Wrap Program Investing

Investors will find mutual fund wrap programs at most full-service brokerage firms. UBS and Charles Schwab are two examples. These programs allow investors to build portfolios of no-load mutual funds with just a small annual fee added for the portfolio management support from professionals.

Article Sources
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  1. Charles Schwab. "Schwab Intelligent Portfolios." Accessed Jan. 23, 2021.

  2. UBS. "Mutual Fund Wrap Program." Accessed Jan. 23, 2021.

  3. Charles Schwab. "Schwab Managed Portfolios: Asset Allocation." Accessed Jan. 23, 2021.

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