Mutual-Fund Advisory Program

A mutual fund advisory program is a portfolio of mutual funds that are selected to match a pre-set asset allocation. The pre-set asset allocation model is based on the investor's objectives and offered in a single investment account together with the services of a professional investment adviser. Typically, investors will not be charged separate transaction fees, but periodic (i.e., monthly/quarterly/yearly) asset-management fees based on the average value of assets held within the account. Also known as a "mutual fund wrap."

Unlike managed accounts, where the financial adviser has full discretion over any investment decisions, mutual-fund advisory programs allow the investor to work with the adviser in developing the optimal asset-allocation strategy. The adviser will help determine which model is best based on various factors such as the investor's goals, risk tolerance, time horizon and income, while providing ongoing guidance and investment support.

Investors in mutual-fund advisory programs can benefit from lower trading costs and a professionally advised portfolio based on their personalized investing interests. The annual wrap fee is usually tiered based on assets in the program. It can range from approximately 0.25% to 3%, depending on the program, and is in addition to the annual operating fees charged by the funds in the portfolio.

Mutual-fund advisory programs can be a good investment option for investors. However, the increasing presence of robo-advisers has created competition for these programs. As a result, many full-service brokerage firms have begun to offer robo-adviser alternatives for their customers. Schwab’s Intelligent Portfolios are one example.

Robo-adviser platforms typically provide the same investment profiling and portfolio building services. They offer some additional benefits in that the service is automated, fees can be lower and investment minimums are usually lower. With the lower minimum investments, robo advice wrap programs can be offered to investors seeking to build a managed portfolio with only $5,000. Currently most robo advice wrap programs use exchange-traded funds (ETFs) rather than mutual funds.

UBS offers PACE (Personalized Asset Consulting and Evaluation), a fee-based, nondiscretionary mutual fund advisory program utilizing a disciplined approach to selecting and building a diversified portfolio of mutual funds. Here's how PACE works:

• A financial adviser creates an investor profile that contains information about your investing goals, time frames and comfort level with risk.
• You and your financial adviser select from a list of mutual funds
• You may choose PACE Multi Adviser (a broad range of no-load or load-waived mutual funds at net asset value) or PACE Select Advisers (a refined list of leading no-load funds brought to you by UBS Global Asset Management)
• Your mutual funds will be continually monitored by UBS research professionals
• You'll receive monthly statements