George Robertson, CFP, CRPS, AIF

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The Rap on Wrap Accounts

Interested in professional money management, a personalized investment approach, and a simple fee schedule? Consider a wrap account (also known as a managed account). For a flat fee, generally based on the value of your assets, a wrap account offers customized management of portfolios that can include a mix of investments, such as stocks, bonds, and mutual funds.

Traditional Wraps vs. Mutual Fund Wraps

Traditional wrap accounts generally require investments of $50,000 to $100,000 or more, but for smaller portfolios, "mini" wraps are gradually gaining popularity. Many investors appreciate wraps because they have the opportunity to maintain a range of investments through one account. Furthermore, wrap fees are based on a percentage of the value of assets, and generally cover all expenses, including administration, commission, transaction, research, and management costs. While fees vary, they generally range from 1% to 3% of assets, with lower percentages often offered for larger investments.

Mutual fund wraps work similar to traditional wrap accounts, but they invest only in mutual funds. The required investment for a mutual fund wrap is generally smaller than for a traditional account, often ranging from $10,000 to $50,000. Account managers achieve asset allocation by investing in different types of mutual funds. Fees are asset-based, not commission-based, and typically cover the cost of tailoring an account to meet your objectives, as well as rebalancing your portfolio when needed.

The Benefits of Professional Management

Many investors find wrap accounts attractive because-through one account-they can achieve a variety of goals. A professional account manager builds an account based on your personal time horizon, risk tolerance, and financial objectives. Furthermore, as part of the comprehensive wrap fee, additional money managers may bring their specific professional strengths to your portfolio.

Benjamin Franklin once said, "Money makes money. And the money that money makes, makes money." No one can guarantee the performance of your investments, but traditional wrap accounts and mutual fund wraps put knowledge and professional experience on your side. [Note: Investment values will fluctuate due to market conditions; shares of particular investments, when redeemed, may be worth more or less than their original cost.]

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