Wrap Platforms
Wrap Platforms Explained: Not An Investment, A Shopping Trolley.
A wrap platform is an administration service that lets an adviser hold your super, managed funds, shares, ETFs and cash in one account, charge fees against it and report on it. Here is what they do, what they cost, and who actually needs one.
$330, credited against your advice fee. If you do not need advice, I will tell you.
Four consultations a week.
How A Wrap Works
You do not invest in a wrap. You invest through one. The platform holds the account, the adviser chooses what goes in it, and each layer takes a fee.
The platform is the pipe, and your adviser's ongoing fee is what flows through it.
The Layers Of Fees
| Comparison | Advised Wrap Account | Low-Cost Industry Fund |
|---|---|---|
| Adviser fee | Ongoing, usually a percentage of your balance | None, unless you ask for advice |
| Platform administration | Charged on top | Included in the fund's fee |
| Fees inside | Each managed fund or portfolio charges its own fee | One all-in fee |
| How the fees are paid | Deducted from your account automatically | Deducted once, shown on your statement |
| Who can run it | Usually built to need an adviser | You |
A general comparison of how the two are structured. Your own costs will differ, which is the point of checking.
Do You Need One? Four Questions.
- 1. Is your portfolio genuinely complicated?
- 2. Do you hold unlisted funds you cannot hold elsewhere?
- 3. Do you need someone else to manage it day to day?
- 4. Do you need consolidated tax reporting across many holdings?
Four no's means no wrap.
Wraps have a place. A large SMSF with dozens of holdings, or someone who really does need unlisted assets, can justify the fee. I will tell you when that is you.
Why Advisers Like Them
A wrap lets an adviser deduct a fee from your account automatically, every month, without sending you an invoice. That is the incentive, and it is legal and fully disclosed.
The risk is not theft. The risk is paying several layers of fees, year after year, for something a simpler arrangement would do.
Some of what flows through these platforms pays for advice that was worth having. The point is that the fee comes out either way.
What Are Ongoing Fees Costing You?
Put in your own numbers.
Adviser, platform and fund fees together. Enter your own total.
- Fees you would pay each year now
- $12,000
- Your balance with ongoing fees
- $1,785,981
- Your balance with one-off advice and a low-cost fund
- $2,011,947
Illustration only. Assumes both options earn 7% a year before fees, no contributions or withdrawals, no tax and no inflation, and a comparison fund costing 0.6% a year. It ignores any value the ongoing advice adds. Not a forecast and not personal advice.
What is a wrap platform?
An administration service that holds investments in one account so an adviser can manage, report on and charge fees against them. It is not itself an investment.
What is the difference between a wrap and an industry super fund?
An industry fund pools members' money and invests it at scale, at low cost. A wrap is a menu of investments chosen for you individually, with a platform fee, fund fees and usually an adviser fee on top.
How much do wrap platforms cost?
More than a simple low-cost fund, because there are three layers: the adviser's ongoing fee, the platform's administration fee and the fees of every fund inside it. Ask for the total in dollars for last year.
Are wrap platforms safe?
Your money is held in trust and regulated. The issue is cost and performance, not safety.
How do I get out of a wrap?
Inside super it is usually a rollover to another fund. Outside super, selling can trigger capital gains tax and transfer fees. Get the exit costed before you move.
Have you published research on platforms?
Yes. It is on the blog, with the data and the method shown.
General advice only. It does not take your objectives, financial situation or needs into account. Consider whether it is appropriate for you before acting on it.
This page is general information and my opinion. It does not take your circumstances into account. Past performance is not a reliable indicator of future performance.
Book A Consultation
If you do not need advice, you find out for $330, not $6,600.
- 45 minutes with the adviser himself, not a junior
- A fixed quote on the call, if advice is warranted
- The $330 is credited in full if you proceed
Why $330 and not free? A free first meeting is usually paid for later, through ongoing fees. I would rather you paid once for my time and owed me nothing.
Pay $330 now. A consultation, not an advice session. Reschedule up to 48 hours before.