The rap on wrap accounts: they offer professional money management for the (sort of) small investor. (includes related article on junior wrap accounts under $100,000)

They offer professional money management for the (sort of) small investor.

For seven years after he left his job and began directing his own retirement investments, Robert West had little success. "I really floundered," recalls West, 64, a Houston resident and former sales manager who now runs his own business repairing devices for chemical plants. "It took me several years of making mistakes and trying different things, including brokers, to realize that I needed a professional to handle my money."

About a year ago West's tax preparer suggested he try a wrap account. Under the program, West pays 2% of his assets annually to his broker, Kidder Peabody. The broker in turn hires a top outside money manager to invest West's funds.

With any luck, all West has to do now is watch his $120,000 nest egg grow. So far the results look promising. His account, with Harris Bretall Sullivan & Smith, a San Francisco money-management firm that invests primarily in large-cap growth stocks, is up 12.4% in the six months to April 1, versus -1.6% for the Standard and Poor's 500-stock index. (West has actually had better results than most investors with the same manager.)

An estimated $107 billion is tied up in brokersold wrap accounts. Unlike traditional brokerage accounts, you don't pay commissions on trades. Instead, you pay a flat rate that's split between the broker and the money manager regardless of the number of trades in your account.

Think of it: no more calls from your broker suggesting that you buy this or that stock. No more nagging doubts about whether your broker is trying to sell you a stock just to earn a commission. "Wrap accounts put the broker and the client on the same side of the table," says, John McIntyre, the Kidder broker who supervises West's account.

But wrap accounts are not for every investor, and not every broker will offer you a first-rate wrap at a fair price. Here's guidance on how to decide whether you're a good candidate and how to avoid a bad wrap.

HOW DOES A WRAP ACCOUNT WORK?

In a wrap program, you pay a fixed percentage of your assets annually to a brokerage firm, in lieu of commissions. All your expenses, including the cost of hiring an outside manager to select stocks, are wrapped into that one fee - hence, the name.

While some brokerage firms try to persuade their clients to hire in-house managers under wrap programs, a good wrap should offer a choice …