Legal Definitions - wrap account

A wrap account is an investment account where the investor selects an account manager and pays a fee based on a percentage of the total assets to be managed. The account manager then invests the money in a portfolio of investments, including stocks, bonds, and cash. The investor provides a risk profile but does not select the investments or give instructions to buy or sell.

Example: John wants to invest his money but doesn't have the time or expertise to manage his investments. He opens a wrap account with a brokerage firm and selects an account manager. The account manager invests John's money in a portfolio of investments based on his risk profile. John pays a fee based on a percentage of the total assets managed.

This example illustrates how a wrap account works. The investor selects an account manager and pays a fee based on the assets managed. The account manager then invests the money in a portfolio of investments based on the investor's risk profile.