Wrap Programs and Asset Allocation Services:

A wrap account is the term used to describe a grouping of investment services all charged one single fee. A wrap portfolio is a managed solution in which the investor does not have to do any trading themselves. This type of investment is different from a mutual fund because the investor is not charged a sales commission for every trade. The annual fee covers all trade transactions, plan administration, and any other associated costs of managing the investments. Wrap programs are an appealing choice for investors who do not have the time, or knowledge to manage their own portfolio of investments.


One of the most appealing features of wrap programs is the asset allocation services. A wrap account is very diversified by such techniques as sector, geography, market capitalization, asset class, and management style. Because the asset allocation of the account is consistently maintained, the investor’s portfolio is automatically rebalanced to the target asset allocation.

Discretionary Managed Accounts:

A discretionary managed account gives an investor more freedom than a wrap account. The investor allows a broker to buy and sell securities without their consent by signing a discretionary disclosure with the broker that acts as documentation of the clients consent. The broker and investor are able to individualize this plan to suit the needs of the investor and then they can determine which trades can be made without consent. The greatest advantage of discretionary accounts is that is saves valuable time for the client to execute trade, while still allowing the client to maintain control of their account.


Pooled Funds:

A pooled fund is an investment vehicle that combines the assets of multiple investors that all share the same investment objectives. The pooled fund approach generates economies of scale to increase portfolio diversification and reduce costs.

Pooled Funds and Mutual Funds operate very similarly, but there are a few noted differences. Pooled Funds may be offered exclusively, and sometimes are only available to members of a company, group sponsored plans or high net worth individuals. Mutual Funds are typically a much broader investment vehicle as they are available to both individual investors and members of group plans. Pooled Funds, unlike Mutual Funds, are not offered by prospectus and have a different registration status. For large investors, pooled funds may be an optimal choice because pooled funds have higher minimums to invest in so a larger investors can customize their account to their specific investment goals, risk tolerance and time horizon. Pooled funds also include daily portfolio monitoring and rebalancing, strategic tax planning and the flexibility to offset capital gains and losses. While individual mutual funds offer these services to some extent, they are not as complex.


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Glen Rankin  
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