Brokerage Wrap Accounts

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Brokerage Wrap Accounts

Things To Know

  • Wrap accounts "wrap" all costs into one single fee.

Wrap accounts are a newer type of brokerage account that have become popular with customers who give their brokers trading discretion in their accounts. They are a brokerage account in which all associated costs—broker commissions, money management fees, and transaction costs—are wrapped into a single fee. This fee is typically assessed annually as a percentage of the total account value, and collected in quarterly, semi-annual, or annual payments. The primary advantage of the wrap account, at least in theory, is that there is no incentive for the broker to churn the account—to execute trades for the sole purpose of generating commissions. Wrap account fees can be as high as 3 percent, depending on the services provided, although wrap fees typically range between 1 and 2 percent annually.