Wrap Fee

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Definition of 'Wrap Fee'

A wrap fee is a fee charged by an investment adviser for managing an investment portfolio. The fee is typically based on a percentage of the assets under management (AUM). Wrap fees can range from 0.5% to 2.0% of AUM, and are often higher for portfolios with higher AUM.

Wrap fees can be a good option for investors who do not want to actively manage their own portfolios. However, it is important to be aware of the total cost of the wrap fee, as it can add up to a significant amount of money over time.

There are a few things to consider when evaluating a wrap fee. First, you need to understand what services are included in the fee. Some wrap fees include only investment management, while others may also include services such as financial planning, tax advice, and estate planning.

Second, you need to compare the wrap fee to the fees charged by other investment advisers. It is important to get the best value for your money, so you should shop around before you make a decision.

Third, you need to be aware of the potential conflicts of interest that can arise with wrap fees. For example, an investment adviser who is paid a wrap fee may be more likely to recommend investments that generate higher commissions for the adviser, rather than investments that are in the best interests of the client.

If you are considering a wrap fee, it is important to do your research and understand all of the costs involved. You should also be sure to ask the investment adviser about any potential conflicts of interest.

Here are some additional things to keep in mind about wrap fees:

* Wrap fees are typically charged on a quarterly or annual basis.
* Wrap fees are not tax-deductible.
* Wrap fees can be waived if you meet certain criteria, such as having a large enough AUM.
* Wrap fees can be negotiable.

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