Do you need a wrap fund?

Wraps funds can be a good way to simplify your financial life, including tax preparation.
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01.Is it FoFA proof?


If a wrap fund is a good fit for your financial circumstances, choose one that will comply with FoFA requirements or that charges fees for specific services that are clearly outlined in the agreement between you and your adviser. 

Wrap funds consolidate various financial holdings – from savings to share portfolios and managed funds – into a single account. One key advantage is a single statement of your financial position, which is good for keeping your financial life in order and making tax preparation less painful. And wrap funds are also becoming easier to open.

Consumers in existing wrap funds should have a candid conversation with their adviser to make sure they understand the fees being charged and which services they are paying for. 

At a minimum, demand an annual statement of fees, no commissions, and no payments to advisers based on how many products they sell.

Are they worth it? 

ASIC offers some no-nonsense advice and things to consider for consumers considering a wrap fund. 


  • Access to a wide range of managed funds, investments and fund managers. 
  • A single consolidated report instead of individual reports for every investment or account. 
  • Potentially lower management fees if you have access to wholesale funds. 


  • You can be charged fees for wrap fund administration, moving money in and out of the fund, management of different investment options and performance reports plus an overall service fee from your financial adviser. 
  • You may be locked into a particular adviser firm and have to liquidate the account as well as pay capital gains and an exit fee if you want to take your business elsewhere. 
  • Advisers may be recommending these funds for their own convenience, not yours.

FoFA proofing

In funds that don’t meet FoFA standards, clients are paying an inflated price that, in part, funds the rebates to the adviser or their licence holder.
- Krystyna Weston, SimpleWrap

If the Future of Financial Advice (FoFA) reforms that come into play in July next year have the hoped-for effect, the financial advice industry will begin its long-overdue transformation from a sales-driven to a purely advisory profession. But the new rules against conflict of interest in the selling process will only apply to advice relationships that start after the reforms become mandatory in July 2013. 

For existing accounts, incentives to recommend one product over another will still be in full swing. And for complicated financial products such as wrap funds, it can be especially hard to know what qualifies as impartial advice, when you’re getting it, and how much you’re paying for what.

According to Rachael Wade, a financial planner at IAC Robertson, competition has resulted in most wrap funds eliminating or significantly reducing the minimum amount that must be retained in the working cash account. But, with FoFA around the corner, perhaps the wider availability of wrap funds is no accident. Putting everything in the same box may be a way for advisers to keep hidden fees hidden and charge you for making simple changes to the account – the equivalent of moving money from a savings to a transaction account online, for instance.

Regardless of the remuneration scheme, wrap funds opened before July next year will be vulnerable to the same kind of adviser-serving incentives that FoFA aims to eradicate. 

Suzanne Haddan, an independent financial adviser and director of the BFG Group, confirms that the FoFA reforms “don’t deal with existing [wrap fund] clients, [and] financial advisers continue to receive volume bonuses. These are bonuses calculated on the amount consolidated in the wrap account”. 

Business as usual could mean a field day for advisers intent on keeping clients in the dark, Haddan warns. “FoFA is quarantining existing wrap fund agreements, and they’re being turned into a money-making tool by some of the bigger funds. 

“We recommend wrap funds, but we don’t get paid for recommending or implementing a change to a client’s fund. Advisers shouldn't be charging extra commissions or brokerage fees to do that.”

Krystyna Weston, co-founder and director of SimpleWrap, echoes Haddan’s view. “In funds that don’t meet FoFA standards, clients are paying an inflated price that, in part, funds the rebates to the adviser or their licence holder.” 

Funds that voluntarily abide by the FoFA regulations before these officially come into effect this year don’t provide commissions or incentives for advisers to favour certain products. Weston says smart consumers should question advisers to make sure their wrap fund meets FoFA standards – and best suits their financial needs. 

Staying engaged 

Asking questions to work out the fee structure of any fund is always a good idea in any case. Travis Morien, director of Australian Independent Financial Advisers (AIFA), says it’s becoming increasingly difficult for consumers to make informed decisions about wrap funds without putting themselves at the mercy of the adviser. 

“The product disclosure statement is not always publicly available to consumers – it’s often hidden away in an advisers-only section of a website,” he says. 

According to some industry players CHOICE spoke to, there are ways to avoid being gouged, even if you open a wrap fund before the FoFA reforms become mandatory. AMP spokesperson Renae McGregor argues the management strategy and fee structure of the company’s wrap funds is open to negotiation. 

“Any fees paid are set between the adviser and the client,” says McGregor. “We don’t pay advisers for transferring money into our wrap fund. If a customer has agreed to pay an adviser a member advice fee, we can facilitate that by automatically deducting it from the account. We would only deduct what the client has agreed to pay in the advice process.” 

That may be the case, but Weston says consumers need to take a hands-on approach to keeping advisers honest. “FoFA has made it slightly more complex for consumers [in a pre-FoFA wrap fund],” she says. 

Weston believes the solution is to take charge of the situation. “Always ask your adviser if the advice they are giving you is in your best interest. Understand how the product they are suggesting operates and ask if they receive a rebate and how much it is.” 



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