A wrap account

George and Trish had been clients of a well-known financial adviser for a number of years and, until they retired, they had used the adviser’s wrap account to look after their retirement saving portfolio.

They received a report every three months that listed their investments ($400,000 in total) and provided a statement for their tax returns each year. They could also look at the position of their investments using the Internet.

When returns were high and George and Trish were busy with their careers, they found the wrap account worked well for them. They weren’t concerned about the fees they paid as their returns were good and they felt they were getting value from their adviser.

But the international share downturn of 2000-03 affected their investments quite significantly and their investments dropped in value. George and Trish began to worry about the costs associated with the wrap account. They asked their adviser to give a complete breakdown of everything they paid in fees. She showed them that they were paying 1.2% (before tax) or $4,800 a year for the wrap account.

When they thought about it, George and Trish decided that while the wrap account did make things easier for them, it wasn’t worth $4,800 a year. Having retired, they decided they could look after the bookkeeping themselves and save the $4,800!