Wrap Accounts

Feb 18, 2010
source: www.sorted.org.nz

A wrap account is a combined administration and investment service. It’s a system, rather than a product, that provides access to a range of funds, shares, bonds and other investments.

If you have or are considering a more sophisticated investment programme, you might want to consider a wrap account. That said, if you are happy to handle your own investments and reporting, you may find it better to arrange your savings and investments so you don’t need a wrap account and therefore save money on fees.
Wrap account features

* There may be a custodian that holds your different investments on your behalf.
* You may decide where your money is invested or you may delegate that decision to your adviser.
* A cash account is often part of the service. This receives your dividends and interest payments and new investments. Your income tax might be paid from this account.
* You will often have access to wholesale funds that you could not usually invest in as a retail investor.
* There is usually a single set of fees that covers administration, investment, advice and other services, and an asset-based administration fee (for example, 1.5% of assets) to cover administration and the adviser’s income.
* You may have Internet access to your account. Sometimes this allows you to trade investments and work out your tax liabilities online, and include discounts on fund managers’ charges.
* You can use your wrap account to get a report on the performance of your investments. Having a consolidated account like this can be useful as you’ll usually get with an annual summary, which is easier to use when it comes to working out how much tax you have to pay.

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