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Item 5I covers the investment adviser's participation in wrap fee programs - advisory arrangements where clients pay a single bundled fee covering both investment advisory services and trade execution costs. Instead of separate advisory fees plus transaction charges, wrap programs package everything into one annual or quarterly fee.
Wrap programs serve investors who trade frequently or want predictable all-in costs without per-transaction charges. The adviser might sponsor the program (design and offer it to clients), serve as portfolio manager within someone else's program, or perform both roles simultaneously.
Item 5I(1) asks whether the firm sponsors wrap fee programs. Sponsoring involves creating the program structure, setting fees, selecting available investment options, and managing client relationships within the wrap framework.
Items 5I(2)(a) through 5I(2)(c) quantify regulatory AUM attributable to different wrap roles: sponsor-only, portfolio manager-only, and combined sponsor/portfolio manager for the same program. These figures help assess the wrap business's scale relative to the firm's traditional advisory services.
Understanding Item 5I helps you identify advisers with wrap program expertise and potential fee arrangements that might suit high-activity portfolios or clients preferring bundled pricing.
On Best Investors, Item 5I typically appears within the Item 5 section of the ADV form panel, showing wrap program participation and associated AUM figures.
Locate Item 5I on the firm's ADV form panel on Best Investors. The section reveals wrap fee program involvement that might offer alternative fee structures for your accounts.
Check 5I(1) - sponsor wrap programs to identify firms that create and manage their own wrap offerings. A Yes indicates the firm has developed bundled fee programs and maintains the infrastructure to operate them efficiently.
Review the 5I(2) dollar amounts to gauge wrap program scale. Compare 5I(2)(a) sponsor AUM, 5I(2)(b) portfolio manager AUM, and 5I(2)(c) combined sponsor/manager AUM with 5F(2)(c) total regulatory AUM to understand what percentage of the firm's business operates through wrap arrangements.
High wrap AUM relative to total AUM suggests the firm has significant expertise in bundled fee programs and might offer competitive wrap pricing. Low wrap AUM might indicate limited wrap experience or focus on traditional fee-plus-commission structures.
Consider wrap programs if you expect frequent trading, want predictable annual costs, or prefer simplified fee structures. Wrap arrangements work well for tactical asset allocation strategies, active rebalancing, or portfolios requiring regular adjustments.
Ask firms with significant wrap AUM about their specific program features: minimum account sizes, available investment options, trade execution quality, and how wrap fees compare to unbundled alternatives for your expected activity level.
Cross-reference wrap program data with Item 5E compensation arrangements to understand the firm's overall fee structure flexibility. Firms offering both traditional percentage-of-assets fees (5E(1)) and wrap programs provide multiple pricing options.
Item 5I identifies wrap program participation but does not specify wrap fee rates, minimum account sizes, or program terms that affect your cost analysis. Actual pricing requires direct inquiry with the firm.
The section does not indicate whether wrap programs are available to all clients or limited to specific account sizes, relationship types, or investment strategies. Some firms reserve wrap offerings for larger accounts or institutional clients.
Wrap program quality and execution standards remain invisible in Item 5I. The adviser's role as sponsor or portfolio manager does not guarantee competitive trade execution, favorable pricing, or superior investment options within the wrap structure.
Item 5I also does not compare wrap programs with the firm's traditional fee arrangements. A firm might offer wrap programs while maintaining higher-quality service or better investment options in non-wrap relationships.
The timing and structure of wrap fee billing varies across programs but does not appear in Item 5I. Some wrap programs charge quarterly fees in advance, while others use monthly or annual billing cycles.
Finally, the AUM figures in 5I(2) reflect filing-date snapshots that may not represent current wrap program scale or availability. Recent program launches, terminations, or capacity constraints will not appear until the next Form ADV update.