Wrap Fees: The 1% Dilution.
Wrap fees are the industry's method for monetizing inactive accounts. It is an annual fee intended to cover all account charges. Wrap fees specifically exclude portfolio management or advisory services. The fee primarily covers all trading commissions, and provides enhanced reporting and access to research. Historically, 80% of a broker's commissions are derived from 20% of his or her clients. Wrap fees change that reality as every account, active or inactive, generate