The "all-in-one" asset management account has been around since 1977, but investment firms have pushed the concept into high gear in 1992. Their goal is luring dollars away from banks through the promise of greater yields and sophistication.
The asset management account, which pulls together securities, checking and money-market funds into one handy package with an annual fee of up to $125, is being promoted more heavily, and many features have been added.
More than two dozen types are offered by various firms, adding up to more than 2 million account holders. There are asset requirements designed to garner prosperous, long-term clients.
An important feature is that you receive a monthly consolidated statement of your financial condition.
While they do provide convenience, investment firms like these accounts primarily because they pool all your financial assets with them. This makes it easier to know your financial business and sell you more products in the long run.
There's nothing sinister about this, but keep it in mind before you sign over all of your cash to any one institution. You can, after all, handle your finances quite well even if they're spread around several different companies.
"Asset management accounts are clearly taking money out of the banks," observed John Markese, director of research for the 100,000-member American Association of Individual Investors. "Yet they don't really make sense for a small, inactive investor, because many of them have such high minimums."
"This account is best for the active investor with very definite long-term investment goals," said Jennifer Radin, senior product manager for Charles Schwab & Co.'s Schwab One asset management account, which was introduced in 1982 and now has 330,000 accounts.
The most important considerations are the annual fee; the minimum required to open the account; money market choices; whether a firm is a full-service or discount brokerage; when money added to the account is swept into the money-market fund; credit cards offered; the type of monthly statement; whether checking is free; automated teller access; and whether automatic bill-paying is available.
Firms are adding features, such as insurance coverage, traveler's checks, more credit lines or other special services.
For example, the Merrill Lynch Cash Management Account has an annual fee of $100, or $125 with a Visa Gold Card; a minimum $20,000 investment; free checks; a daily sweep of $1,000 or more, otherwise a weekly sweep; access to automated teller machines; Visa and Visa Gold; and bill-paying. Merrill Lynch's Capital Builder Account has fewer features, costs $65 and has a $5,000 minimum.
The Schwab One account has no annual fee, a minimum of $5,000, free checks, a daily sweep of $1 or more and a Visa card. It will offer ATM access starting in May and has no bill-paying feature.
The Dean Witter Active Assets Account has an annual fee of $80, a $10,000 minimum, free checks, a daily sweep of $1 or more, ATM access, a Visa card and bill-paying.
The Fidelity Ultra Service Account has a fee of $5 a month or a $25 one-time fee, a $25,000 minimum, free checks, daily sweep of $250 or more, otherwise weekly, ATM access, MasterCard and Visa Gold ($24 a year), and bill-paying.