A Wrap account works best for the investor who wants some degree of practical management and advice. Investors who use a buy and hold strategy for an equity portfolio might better pay the occasional trading fee incurred by the account. The investor may be better off holding the portfolio in order to get the dividend income. There are no capital gains taxes and there are no commissions or Wrap fees. Subscribe to the OUPblog by email or RSS. Subscribe only to legal articles on the oupblog by e-mail or RSS. Image source: Example of a Wrap contract on MSWHS. Used for illustration purposes. Users “accept” these terms on Wrap contracts that many do not read. The solution to entering into contracts requires consumer awareness of their potential dangers.

Cognitive distortions work against the consumer. Consumer optimism and myopia make it easier to ignorance of latent damage in favor of immediate satisfaction – why do you get angry at hidden terms if you want to connect now? The herd effect weighs users in a false sense of security, since everyone else also clicks “Accept”. A Wrap contract is structurally different from a GIC, but aims to offer participants the same stable benefits. The main difference between a GIC contract and a Wrap contract is that, in the case of a Wrap contract, the associated assets are usually held directly by the plan in a synthetic structure of GIC or are separated in the name of the plan in a separate insurance account Wrap. This splitting structure makes it possible to make decisions such as the choice of the Wrap issuer separately from the selection of an investment manager`s services for the investment of associated assets. To support the book value guarantee for participants, this structure relies on both the value of the associated assets and the financial support of the Issuer Wrap. Wrap contracts can be issued by banks and insurance companies. A Wrap account is an investment portfolio professionally managed by a brokerage firm for a flat fee calculated quarterly or annually.

The fee is based on all assets under management (AUM). It is comprehensive and covers all management, commission and account management fees. A Wrap account may require a minimum investment of $US 25,000 to $US 50,000. An investment fund account with a Wrap fee usually has a much lower initial investment requirement….