Any RIA compensated under a wrap fee program for sponsoring, organizing, or administering the program, or for selecting, or providing advice to clients regarding the selection of, other investment advisers in the program, does not use the normal brochure or Part 2A of the ADV. Instead, that adviser furnishes clients and prospective clients Part 2A, Appendix 1.
A wrap fee program is an arrangement between financial institutions (typically broker-dealers and investment advisers) that enables customers to pay an all-inclusive fee (usually as a percentage of assets) for investment advisory services bundled with various other services, such as execution, clearing, and custodial services. These programs can be referred to by several different names such as asset allocation programs, asset management programs, investment management programs, mini-accounts, and separately managed accounts. The defining feature for all of these is that they offer bundled investment management and brokerage services for one fee. Wrap fee programs create a number of suitability issues for the financial institutions that sponsor the wrap fee program or participate in the program. Read More…