A wrap account allows an investor to hold multiple investments, such as managed funds and direct shares, under the one umbrella. It is also used by financial advisers to manage investments, which might allow the investor to save in financial planning costs.
Pros of wrap accounts
Wrap accounts are good for investors with large amounts of money to invest (for example $2,000,000) and who want the convenience of one report for multiple investments. They can also be a convenient way to reduce financial adviser costs.
Cons of wrap accounts
With wrap accounts you may incur addition fees from your financial adviser for administration and buying and selling investments. You might also incur an upfront fee to establish a wrap account.
Difference between a wrap account and a master trust
Unlike a master trust, with a wrap account, the investor owns the underlying investments. This provides flexibility to move investments in or out of the wrap account. It also means that if you want to change financial advisers, your portfolio is not tied to them, so you don't have to sell off your investments and incur capital gains tax.
How is it managed?
Typically, the wrap is run by a trustee, with income and expenses run through a cash account.
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General advice disclaimer
This is general information only and does not take into account your personal objectives, financial situation or needs. You should assess whether the information is appropriate for you having regard to your objectives, financial situation and needs and consider obtaining independent professional advice before making an investment decision. If information relates to a specific financial product you should obtain a copy of the product disclosure statement for that product and consider that statement before make a decision whether to acquire the product.