Why More Advisors are Outsourcing Investment Management to Wrap Programs

June 16th, 2025, 12:09 PM

The financial planning landscape continues to evolve, and for a growing number of advisors, managing client investments no longer is a priority. As reported by Financial Planning, many have turned to mutual fund wrap programs to handle the investment side while they focus on broader financial planning. Mutual fund wrap programs include prepackaged, professionally managed investment portfolios.

According to the annual Trends in Investing report, use of these wrap programs among financial advisors has climbed 20 percent since 2020. Despite the rise of low-cost, flexible exchange-traded funds ("ETF"s), such "wrap programs" have carved out a space by offering convenience and turnkey portfolio management.

Financial Planning reports that non-wrap mutual funds have lost ground. Traditional mutual funds, often burdened by upfront fees, no longer appeal in an era dominated by ETFs offering similar asset exposure at lower costs.

Still, convenience comes with costs. Wrap programs typically charge fees between 1 percent and 3 percent of assets under management. Those fees often include compensation for a mutual fund company advisor managing the wrap portfolio, in addition to the client's primary financial advisor fee. Institutional share classes typically charge less.

Another layer of fees stems from the structure of these wrap accounts. Often, the underlying funds within the wrap program are proprietary, selected from the mutual fund company's own lineup.

Financial incentives also play a role. Financial Planning reports that broker-dealers often prefer wrap programs because of the 12b-1 fees attached to the mutual funds within them. A portion of those fees (typically around 25 basis points) flows back to the broker-dealer, adding another revenue stream to the equation.

Financial Advisor Transitions consults advisors nationwide to explore employment transition options and to preserve and protect their practice in any transition that they make.

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Blog

Why More Advisors are Outsourcing Investment Management to Wrap Programs

June 16th, 2025, 12:09 PM

The financial planning landscape continues to evolve, and for a growing number of advisors, managing client investments no longer is a priority. As reported by Financial Planning, many have turned to mutual fund wrap programs to handle the investment side while they focus on broader financial planning. Mutual fund wrap programs include prepackaged, professionally managed investment portfolios.

According to the annual Trends in Investing report, use of these wrap programs among financial advisors has climbed 20 percent since 2020. Despite the rise of low-cost, flexible exchange-traded funds ("ETF"s), such "wrap programs" have carved out a space by offering convenience and turnkey portfolio management.

Financial Planning reports that non-wrap mutual funds have lost ground. Traditional mutual funds, often burdened by upfront fees, no longer appeal in an era dominated by ETFs offering similar asset exposure at lower costs.

Still, convenience comes with costs. Wrap programs typically charge fees between 1 percent and 3 percent of assets under management. Those fees often include compensation for a mutual fund company advisor managing the wrap portfolio, in addition to the client's primary financial advisor fee. Institutional share classes typically charge less.

Another layer of fees stems from the structure of these wrap accounts. Often, the underlying funds within the wrap program are proprietary, selected from the mutual fund company's own lineup.

Financial incentives also play a role. Financial Planning reports that broker-dealers often prefer wrap programs because of the 12b-1 fees attached to the mutual funds within them. A portion of those fees (typically around 25 basis points) flows back to the broker-dealer, adding another revenue stream to the equation.

Financial Advisor Transitions consults advisors nationwide to explore employment transition options and to preserve and protect their practice in any transition that they make.

Return to All