Wrap account fees

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Mar 9, 2006 2:01 am

As you can tell from my screenname, I'm pretty ignorant about the details of how these work. 


I am wondering what you all are paying for these accounts.  How much do you charge, and of that amount, how much is kept in administrative fees before it hits your gross?  Also, are ticket charges customary within a wrap account?  The reps I am looking at partnering up with are open to me building a wrap business, but they don't do it much themselves so they aren't much help.  (Obviously the BD's are telling me they have great programs, but I'm looking for outside guidance.)


Thanks.

Mar 9, 2006 5:48 pm

Payouts vary by firm, production etc..


the general flavor these come in are:


mutual fund wrap acct


SMA (seperately managed account)


the fees on the mutual fund variety generally top out at 1.5% (on top of fund's expense ratio) with breakpoints as assets go up, usually in the format of a 'Lehman Brothers' grid (1.5% on first $250k, 1.25% on next $250k, 1% on next $500k, .75% on $1mill plus for example)


the fees on an SMA are usually up to 3% with .50% going to underlying manager (they don't have an 'expense ratio' outside of that .50%).  I charge a flat 2% up to $300k, with discounts above that amount (generally speaking).


There are also varieties that incorporate ETF's which would be similar in structure to the mutual fund wrap product.

Mar 9, 2006 5:50 pm

as far as ticket charges......what exactly do you mean?  I have not had any ticket charges at the companies I have worked for.


Oh, I'll also note that most of the mutual fund wrap programs rebate the 12b1 fees back to the client.

Mar 10, 2006 11:51 pm

dude,


Thanks for answering.  At this point I'm trying to figure out the fees on the mutual fund wrap accounts.  I don't have the info in front of me, but the program I would have available charges an administrative fee of about .25%, and has ticket charges ranging from $10 for preferred funds to $35 for most other funds up to I think $50 for bonds and UIT's.  There are also fees for small accounts, I think something like $10/quarter if the account is below $100,000.  


Are these types of fees normal for an independent BD?  What about at a wire, are the SB and ML guys having similar internal fees that the client never sees?


After I pay a few ticket charges and the admin fee, I'll probably need to charge 1.5% to have 1% fall to my gross.  I guess I expected the admin fee but not the additional ticket charge.  Not a huge deal for me because I don't plan on making frequent changes, although I will need to make them from time to time.


Anyone else care to let me know if this is a standard type program or a rip off? 


Thanks.

Mar 11, 2006 10:13 am
EDJ4now:

dude,


Thanks for answering.  At this point I'm trying to figure out the fees on the mutual fund wrap accounts.  I don't have the info in front of me, but the program I would have available charges an administrative fee of about .25%, and has ticket charges ranging from $10 for preferred funds to $35 for most other funds up to I think $50 for bonds and UIT's.  There are also fees for small accounts, I think something like $10/quarter if the account is below $100,000.  


Are these types of fees normal for an independent BD?  What about at a wire, are the SB and ML guys having similar internal fees that the client never sees?


After I pay a few ticket charges and the admin fee, I'll probably need to charge 1.5% to have 1% fall to my gross.  I guess I expected the admin fee but not the additional ticket charge.  Not a huge deal for me because I don't plan on making frequent changes, although I will need to make them from time to time.


Anyone else care to let me know if this is a standard type program or a rip off? 


Thanks.



I am indy on the LPL platform. Our fees and charges are very similar to your. We start out paying .20% small advisory accts and the admin fees go down as the assets go up. We have a SAM I account where we charge a fee, back out the admin and all fees are passed to the client. Then there is a SAM II account where all fees are eaten by the FA. I charge a higher fee in the SAM II account so that the client will never see a fee, but I make sure I net out 1%.


So the long answer to your question is that these fees are not unusual.

Mar 11, 2006 9:03 pm

I am confused about WRAP fees and SMA fees. How much do the clients generally pay and how much does the broker gross net say on a $500,000. I am newbie and am trying to figure this all out.

Mar 12, 2006 6:58 pm

Typical fee is 1-1.5%, thus $5,000-$7,500 per year on your 500K example.  I can tell you that I get about 80% of that as an indy, and I assume that you would get about 40% working for someone else, but that varies by employer.