Schwab Unveils Wrap Accounts

Charles Schwab slashes the cost for pre-assembled packages of funds.

Like Ikea furniture, a good portfolio of mutual funds takes some effort to assemble. You find superior funds, buy their shares, monitor performance, and rebalance at least once a year. Too much work? For some people, yes. That explains why $346 billion is invested in mutual fund "wrap" accounts. Pros make the picks and do the other work for you. But the cost of brokerage-run fund wraps is high, averaging 1.17% annually (not counting the expenses of the underlying funds) -- not very attractive to cost-conscious investors.

Now comes broker Charles Schwab Co. to undercut the competition. The annual fees of its Schwab Managed Portfolios, launched in August, top out at 0.50% with a $50,000 investment and fall to half that if you invest more than $500,000. Schwab is offering eight portfolios, consisting of its own funds and those managed by other firms, with various levels of risk.

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Contributing Editor, Kiplinger's Personal Finance