The Charms of Asset Management Accounts

To PULL your personal finances together and make the most of what you have, you can get considerable aid from a relatively new service offered by brokers, bankers and mutual funds: an asset management account. It is a combination money market and brokerage account that usually lets you earn high interest on your spare cash, buy and sell securities, borrow more money than you otherwise could and write an unlimited number of checks at no extra charge. You also get a single monthly statement listing all your financial transactions, and that can be a convenience.

So what's the catch? You generally need cash or securities worth $10,000 or more to get into the tent. And you have to pay an annual fee, which can range from $25 to $120. But here are three notable exceptions: The Unsaved account from Unified Management, a mutual fund and discount brokerage company in Indianapolis, requires only a $ 1,000 minimum opening deposit and no annual fee. The Schwab One Asset Management Account at Charles Schwab & Co. discount brokerage also charges no fee; its initial deposit is $5,000 in cash or securities. The Fidelity Ultra Service Account, at the big Fidelity mutual fund house, asks for a $5,000 opening deposit and $60 a year.

If you think convenience is worth the price, your first decision is to choose where you want your asset management account to be. A banker and a broker are equally safe: they offer plenty of insurance for your assets.

If you are primarily interested in investing in stocks and you see the account as a way to simplify your investing paperwork, you should find an excellent broker. But if you are not an active investor and want mainly to organize savings and checking transactions, you may be better off with a bank.

Look carefully at the standard features these accounts offer. One of their greatest charms is the so called sweep. It automatically reinvests dividends and bond income, typically in a money market fund. So your cash earns interest from the day you get it until the day you spend it. Find out whether the sweep is done daily or weekly, and whether it includes all your cash or just the amount above a certain minimum.

Asset accounts let you write checks against your money market deposits. Checking typically is free, and you can write as many drafts as you wish with no minimum checking amount. The big issue here is whether or not you will get your canceled checks at the end of the month. Banks generally return asset account checks, but most brokers simply note the payee, amount and date on your monthly statement.

Usually asset accounts include a Visa, MasterCard or American Express card, either as part of their regular fee or optionally at extra cost. But find out whether the plastic works more like a credit card or a debit card, which has the disadvantage of immediately deducting your charges from the cash in your account. Many asset management accounts come with debit cards. Even if you get a credit card, however, you probably won't get a monthly bill that lets you pay after some delay. Rather, the balance due will be deducted from your money market fund at the end of every month.

You can borrow against your cash and securities in an asset management account. Shop around to see where you can get loans with the lowest interest rate. Often that is from a broker. With a brokerage asset management account, you can borrow as much as half the value of your stocks at the so called margin rate, which is usually much lower than consumer loan rates charged by banks.

When picking an asset management account, also study the kind of brokerage service you can expect. An asset account with a bank or a mutual fund gives you access to discount brokerage service, with commissions as much as 90% lower than the fees charged by full line brokers. But traditional brokers will give you something for their extra charge: investment advice. Take a close look at the monthly financial statement you will get with your asset management account. Some are jumbles. Make sure you can understand the statement. Also find out exactly who will service your account. Many banks promise that if you open an asset management account with them, you will be assigned a personal banker. With a brokerage asset account, you will be assigned an account executive to handle securities trading. But he or she most likely will be underjoyed when you call about a lost check or a statement error, since an account executive doesn't earn commissions by solving such problems.

In sum, a bank may offer you better personal service and lower brokerage commissions, but a broker may offer you lower interest rates on loans and more investment advice.