SCHWAB’S WRAP AT CENTER STAGE

Last October, Charles Schwab Corp. rolled out a program that refers financial advisers to big-name institutional money managers and Fidelity Investments quickly followed suit, announcing that it was considering its own version.

But “wrap á la Schwab,” as industry consultant Geoff Bobroff calls its program, might prove more troublesome than innovative.

The question, says Mr. Bobroff, who operates out of East Greenwich, R.I., is whether financial advisers have the tools to monitor the managers. Wirehouses like Merrill Lynch & Co. Inc. and Salomon Smith Barney Inc., which were first to offer wrap accounts, have the internal structure to do so.

Schwab, meanwhile, is taking a hands-off approach. The legwork involved in putting together investors and money managers falls to the adviser.

Under Schwab’s program, called Managed Account Connection, advisers with client accounts through Schwab Institutional can choose from 34 institutional separate account managers to create customized portfolios for clients with as little as $250,000. The service is in addition to Schwab’s mutual fund supermarket for advisers.

But Donald Trone, president of financial advisory firm Investment Management Council in Lafayette, Calif., which sells investment research, doubts money managers will take the call of a financial adviser when they have a pension fund client on the other line.

“The advisers aren’t experienced in this stuff,” he says. “Without a lot of hand holding and guidance to set up these accounts, clients are going to be sold inappropriate money management solutions.”

But Mr. Bobroff says the program reflects a demographic shift. “The last seven years have created a lot of new wealth,and the thinking is that these newly wealthy people should be treated differently.”

Still, the wrap account business, managing $125 billion, pales in comparison with mutual funds and their assets teetering on $5 trillion.

“Three to five years from now there might be some headway,” says Mr. Bobroff, “but I don’t think discount brokerage wrap accounts will ever be a blooming success.”