Chapter 25 - Fee-Based Accounts (Done)

Question 1

What are fee-based accounts?

Answer 1

Fee-based accounts charge a fixed fee for services instead of commissions, providing comprehensive services beyond stock and bond picking.

Question 2

What are the advantages of fee-based accounts?

Answer 2

More services, payment tied to performance, greater transparency, and greater trust.

Question 3

What are the disadvantages of fee-based accounts?

Answer 3

Higher potential cost, potential for neglect, and extra fees in some programs.

Question 4

What are managed fee-based accounts?

Answer 4

Include professional investment management, exclusive client-held assets, a package of services beyond investment management, greater transparency, and an investment policy statement.

Question 5

What are mutual fund wraps and ETF wraps?

Answer 5

• ETF Wraps: Passive and active management approaches, lower fees, asset allocation models, currency hedging, and focus on services.
• Mutual Fund Wraps: Client holds actual funds with an overlay manager for composition and rebalancing, offering coordinated investment accounts and ongoing oversight.

Question 6

What are advisor-managed accounts?

Answer 6

Advisors make investment decisions for clients, must be licensed portfolio managers. Advantages include lower cost, personalized service, and ability to exclude certain securities. Types include model-based and non-model-based accounts.

Question 7

What are separately managed accounts (SMAs)?

Answer 7

Clients can opt for external portfolio managers. Types include single mandate (managed by one manager or team) and multi-mandate (managed by multiple institutional managers).

Question 8

What are household accounts?

Answer 8

Coordinate holdings across a family for better tax management, allocating investments based on family members’ tax brackets.

Question 9

What are private family office accounts?

Answer 9

For ultra-high-net-worth individuals with $50 million or more, managed by a team of advisors to provide a unified strategy for financial affairs.

Question 10

What are the different types of brokerage accounts?

Answer 10

• Full-Service Brokerage Accounts: Financial planning services and fixed or unlimited trades, with fees ranging from 1% to 2.5% of assets under management.
• Self-Directed Brokerage Accounts: Investors manage their own accounts without advice, often using robo-advisors for pre-built investment plans.