What’s a wrap account?
A wrap account (or wrap service) is a means of consolidating and managing an investor's investment portfolio and financial plans online. Often wrap services are offered for a fee or a series of charges. Charges are on a flat quarterly or on annual basis, covering all administrative, research, advisory and management expenses.
The history goes thus!
Wrap accounts first originated in Australia and New Zealand. Transact was the first wrap account service launched in UK in 2000 for financial advisors. It manages 9.5 billion pounds of 85,000 portfolios.
Wrap variants!
Globally there are two variations of wrap accounts: traditional and mutual fund.
A traditional wrap account offers many different types of securities to meet the investment needs of the individual investor. The main attraction of traditional wraps is that they offer investors access to one or more investment managers to manage their funds.
A mutual fund wrap account is a basket of mutual funds that caters to the investment goals of the investor.
Wrap benefits!
Wrap helps in protecting investors from overtrading or churning. As the wrap account is charged a flat annual fee, the most can be charged is the fixed percentage, usually 1-3% of account’s assets.
Wrap India!
In India, iFAST offers a wrap account known as DeAM Wrap Portfolio in association with Deutsche Asset Management for financial advisors. Through this, IFAs can offer customized solutions to their clients. It allows users to wrap all their mutual fund investments in one account which can be accessed online. Through this facility a client and advisor have advantages like -
- The client fills in forms and signs a cheque only once.
- Through the account, client can have access to all the schemes of multiple AMCs.
- Purchase of any of these schemes can be completed online, without the need to process additional payments.
- Seamless Switching between all funds.
- The client and adviser continue to have full control over the investment decisions – transactions are proposed by the advisor and have to be approved by the client.