ThomasKostigen

SANTA MONICA, Calif. (CBS.MW) — OK, so you don’t have a million dollars. That doesn’t mean you can’t get some of the same financial services available to millionaires.

“We are seeing a lot of activity, but whether that translates into assets being raised direct from the consumer is a wildcard.” James K. WallerCheckFree Investment Services

Individually managed accounts, or wrap accounts, give investors with as little as $25,000 access to money managers and services that usually require a million-dollar minimum. How? Brokerage firms have batched together these smaller accounts and offered them to million-dollar money managers. Now this access can be had online.

Web sites have replaced the brokerage firms as middlemen. Investors can sign on to a site, sift through a list of money managers, find one they like, fill out an application, and voila: They now have a million-dollar money manager overseeing their nest egg.

Consumers can now access old line, white shoe firms like Lazard Freres, U.S. Trust and 1838 Investment Advisors that manage money for some of the nation’s wealthiest people.

Various offerings

There are about two dozen sites offering wrap accounts online, according to Jupiter Communications, a New York-based research firm. They include Runmoney.com. Foliofn.com. Efrontiers.com. Wrapmanager.com. Privateaccounts.com. Investorforce.com. Mymoneypro.com. Managerlink.com and Advisorport.com. Jupiter dubbed these sites “infomediaries” as they’ve replaced financial intermediaries with information.

The sites offer educational material, financial-planning tools and money-manager performance information in lieu of a live financial adviser.

Hence, the 1 percent fee charged for wrap-account service is lopped off the top. The typical wrap account charges 1.89 percent plus that adviser fee, according to Boston-based research firm Cerulli Associates.

Lower prices, direct access and technology may be fostering a high amount of activity in the online wrap account area, but actual investments in these programs are estimated to be very low.

“We are seeing a lot of activity, but whether that translates into assets being raised direct from the consumer is a wildcard,” said James K. Waller, senior vice president at CheckFree Investment Services in Jersey City, NJ.

Checkfree provides wrap-account technology systems to brokerages and tracks growth in the area. With its wrap system accounts now exceeding 1 million investor portfolios, it’s growing 40 percent a year, which translates to close to $8 billion new assets per month.

Embryonic stages

Robert Jorgensen, chief executive of Runmoney.com in San Diego, CA, said the online wrap account business is still in its infancy, with most online firms opening their cyber doors just this year. He predicts wrap-account assets will eclipse those of mutual funds over the next 10 years as investors become aware of their benefits and availability via the Internet.

“I see the education curve being 18 to 24 months before investors are confident enough and familiar enough with (wraps) to make their own decisions online.” Robert Jorgensen,Runmoney.com

For their money, wrap account investors get custody and clearing of their securities, quarterly-investment statements and a money manager who monitors their account on a day-to-day basis.

The accounts are “individual” in that investors can choose to hold or sell certain stocks within their portfolio for tax reasons. As well, they can screen or block, say, tobacco stocks. Whether investors get superior performance is a factor of the money manager they choose.

Waller sees this as perhaps the biggest problem with buying wrap accounts online. “How assured can these online firms be that the asset-allocation model the investor chooses will be used correctly? And how appropriate is it for Mrs. Smith to hire an aggressive small cap growth manager?”

Jorgensen says education is available on his site to provide sophisticated tools for consumers to make an educated decision about who and what they’re going to invest in.

Still, the site also offers a call-in center, staffed by seven licensed financial advisers to assist investors with their decisions.

“A lot of them do need a person to talk to,” Jorgensen said. “I see the education curve being 18 to 24 months before investors are confident enough and familiar enough with the individually managed account product to make their own decisions online.”

If the trend on assets being invested online is any indication, Jorgensen may just be right. Jupiter predicts there will be more than $1 trillion of online assets by the end of this year and $3 trillion by the close of 2003.