when given the choice the wise investor finds out exactly what is included and not included in the wrap fee every firm creates its own wrap fee program and some are less comprehensive than others 
an investment advisor must provide clients with a wrap fee brochure listing the services that are included in the fee understanding wrap feesthe benefit of a wrap fee is its predictability the investor knows up front what the cost will be for the year no matter how little or how much of the advisor s services are used there may be services or fees that are not included in the wrap fee investment firms are required to provide a wrap fee brochure detailing the services and costs that are included in the fee choosing a wrap fee can be a good option for investors who intend to use their broker s full line of services since it covers all the direct services the customer receives the wrap fee includes charges like commissions trading fees advising fees and other investment expenses the fee also may cover the administrative costs of the investment firm investors must decide whether the services they routinely demand from their advisors make paying a 1 to 3 charge worth it the investor who builds a solid portfolio and leaves it alone through market ups and downs may find it cheaper to pay the individual one time fees charged for occasional adjustments special considerationswrap fee programs can have a variety of names such as asset allocation programs investment management programs asset management programs separately managed accounts and mini accounts whatever the name this type of account can be subject to additional disclosure under rule 204 3 f of the investment advisers act of 1940 this rule defines a wrap fee as a program under which any client is charged a specified fee or fees not based directly on transactions in a client s account for investment advisory services which may include portfolio management or advice concerning the selection of other advisers and execution of client transactions 1in december 2017 the securities and exchange commission sec released an investor bulletin that provides basic information about wrap fee programs and some questions to consider asking an investment advisor before choosing to open an account in a wrap fee program 2advantages and disadvantages of wrap feeswrap fees provide investors with some sense of predictability they know in advance what the costs of their accounts will be no matter how much or how little they demand from their advisors one common complaint against some brokers is that they make excessive trades in order to earn more trading commissions the wrap fee removes any incentive to trade frequently the downside of the wrap fee is that some investors may be paying for a level of service that they don t use passive investors could be over paying for advice and research that they have no intention of using conservative investors might find that the wrap fee at 1 to 3 eats most of their annual investment returns investors who have most or all of their assets in exchange traded funds aren t looking for word of the next big breakout stock the pay as you go plan might be a better choice in those cases either way investment fees can erode returns as mentioned above wrap accounts may charge anywhere between 1 to 3 of the total assets under management a pretty hefty price tag especially for investors with a small nest egg people who can t afford wrap fees and those who prefer a passive buy and hold strategy may be better off with individual investments furthermore investors with wrap accounts may be on the hook for additional fees such as a mutual fund with an expense ratio 