A Wrap Fee is an amount charged to a client of an investment advisor for several services wrapped together(Wrap Program), such as portfolio management, asset allocation, custodial services, execution of transactions, and preparation of quarterly performance reports. The Wrap Fee is calculated as a percentage of net assets in the clients account rather than on transactions. Traditional wrap programs typically charge wrap fees of 1-3%.
Wrap Fee generally covers the money manager's fee, all commissions and transaction costs, ongoing oversight, reviews, and performance-monitoring. There is usually no entrance or exit fee. Investors are free to terminate the relationship at any time without penalty. Any unused portion of the fee will be returned on a pro-rata basis.