Zacks Advantage Robo-Advisor Review 2019

Zacks Advantage Expert Review

Zacks Advantage is an actively-managed automated investment advisory service. The company is based in Chicago, and was formed in 1992 as Zacks Investment Management, a wealth management boutique which is owned by Zacks Investment Research.

This actively managed robo-advisor owns a #1 ranking by the Robo Report for the last two quarters of 2018 from among the top 26 robo-advisors.

Review: Best Robo-Advisor Performance

Zacks’ is one of the largest investment research firms in the US. As a portfolio manager for many years, when studying individual company’s stock, I thrived on the excellent Zacks’ research. Their proprietary research is the backbone of the Zacks Advantage Robo-Advisor.

Zacks Advantage seeks long term performance, with downside risk protection.

The Zacks Advantage robo-advisor is operated on the principle that the most important fundamental factor affecting stock prices is earnings.

Zacks Advantage Robo-Advisor Review

Their research has proven that analyst estimate revisions of future earnings is the most powerful leading indicator in forecasting and predicting actual changes in earnings. This means that when investment analysts say future earnings will rise or fall, in many cases, their predictions are accurate.

Zacks research and expertise drives this actively managed robo-advisor.

Zacks functions as a robo-advisor from a technology standpoint, but uses an active management strategy in an attempt to outperform the general market. This is a fundamental departure from most robo-advisors, who simply seek to match the performance of the underlying market.

Zacks Advantage Robo Advising Features at a Glance

OverviewActively managed digital investment advisor.
Minimum Investment Amount$25,000
Fee Structure0.70% to 0.35%, based on assets under management
Top FeaturesPlatform combines robo-advisor automated technology with an active investment management strategy that attempts to outperform the market. Broad range of asset classes. Portfolio’s based on premier Zacks investment research.
Free ServicesN/A
Contact & Investing AdviceLicensed financial advisors available for all clients. Phone and email, Monday through Friday, 9:00 am to 6:00 pm, Central Time
Investment FundsLow fee, diversified, index ETFs
Accounts AvailableIndividual and joint taxable accounts, revocable living trusts, and traditional, Roth and rollover IRAs
Promotions “Advantage Pledge”: If you’re unsatisfied with your investment performance anytime within the first year, 100% of the management fees will be refunded.

What Differentiates Zacks Advantage From Competitors

Zack’s Advantage is a robo-advisor to consider, if you’re seeking the opportunity to beat the average stock and bond market returns. With index fund ETFs plus active management, Zacks joins Qplum, Personal Capital, BuildingBenjamins and TRowe Price PortfolioPlus in the actively managed robo-advisor category.

Active management, with downside risk protection is a big draw for Zacks Advantage. While every investor would love to outperform the market during rising markets, outperforming during declining markets maybe even more significant.

When markets fall, preserving capital becomes increasingly important. Any reduction in investment losses during a bear market will be a win for an investor.

Bonus: Easiest Way to Choose a Robo-Advisor is With the Robo-Advisor Selection Wizard

Zacks Advantage also diversifies to a much greater degree than its competitors. Their investment portfolios go beyond the typical robo-advisor with diversification into categories such as master limited partnerships (MLPs), gold, and preferred stock, as well as typical stock and bond funds.

Zacks investment research, which drives the robo-advisor portfolios, sets this digital advisor apart from the pack.

Who Benefits from the Zacks Advantage Financial Advisor Robo?

Zacks Advantage is designed for investors who want the benefits of automated investing that are provided by robo-advisors, but aren’t content to merely match the performance of the markets. Using this service, you’ll have fully automated investment management, with an opportunity to outperform the markets.

It’s also an excellent choice for investors who are looking for a robo-advisor offering portfolios with greater diversification among asset classes.

Zacks Advantage Drill Down

Zacks Advantage Investment Mix

Zack’s uses a a tactical adaptive portfolio, that seeks to provide higher returns with lower volatility than passive index fund investing strategies. Zacks isn’t a typical robo-advisor that invests in several market matching index funds covering U.S. and international stock and bond markets in proportion to your risk tolerance and goals.

This robo tweaks investments to reduce risk during market downturns, and accelerates portfolio market participation during cyclical market recoveries.

Zack’s Advantage employs strategic diversification.

“Strategic diversification offers substantial benefits via broad-based exposure to non-correlated asset classes, enabling investors to generate alpha in robust markets while managing risk in market downturns— all with the ultimate end of
growing wealth over long periods of time (20+ years).” ~Zacks Advantage whitepaper

Here’s how Zack’s Advantage Ranks and Chooses Investments

First, using a one-year outlook, Zacks ranks ETFs based upon these factors:

  • Asset class forecasts
  • Expense ratios
  • Bid-ask spreads (The price difference between what a buyer pays and a seller receives. Smaller is better.)

Next, Zacks evaluates a range of funds from many asset classes.

The platform’s ranking method provides a one-year-outlook that seeks to find ETFs that are likely to outperform the market, based on five factors:

  • Momentum
  • Duration
  • Credit ratings
  • Yields
  • ETF holdings

The funds are ranked on a scale of #1 (Strong Buy) to #5 (Strong Sell).

Each fund is selected with the goal of offering the highest level of expected return for a given level of risk.

How Your Individual Zacks Advantage Portfolio is Determined

zacks advantage review

When you sign up for the investment service, you’re asked to complete a 12 question Investor Profile Questionnaire (IPQ).  These questions are designed to assess your comprehensive investment profile, and create your portfolio.

Zacks is unique in its risk calculation as it considers not only your risk tolerance/willingness, or amount of portfolio decline you can tolerate, but it also assess your risk capacity. Risk capacity is another metric that looks at how much of your investment portfolio you can reasonable afford to lose in during a typical market decline. Michael Kitces has an excellent article describing the difference between risk tolerance and risk capacity.

After your IPQ is completed an analyzed, your directed to a personally tailored investment portfolio.

Investment portfolios are broken into strategies.

There are three strategies, including:

  • Total Taxable Return – includes 12 portfolios ranging from conservative to aggressive.
  • Total Return Municipal – includes 12 portfolios ranging from conservative to aggressive.
  • Income Taxable – includes three portfolios ranging from conservative to aggressive.

Investment portfolios include funds from these asset classes:

Growth

  • US large-company stocks
  • US small-company stocks
  • International developed large-company stocks
  • International developed small-company stocks
  • International emerging markets stocks

Growth and Income

  • US large-company stocks (high dividend)
  • International developed large-company stocks (high dividend)
  • Master limited partnerships (MLPs)

Income

  • US investment grade corporate bonds
  • US corporate high-yield bonds
  • US securitized bonds
  • International emerging markets bonds
  • Preferred stocks
  • Bank loans & other floating-rate notes

Inflation

  • US inflation protected bonds
  • US REITs
  • International REITs

Defensive Assets

  • Cash
  • Treasuries
  • Gold & other precious metals
  • International developed country bonds

Notice that in addition to asset allocations in stocks and bonds, Zacks Advantage also diversifies into master limited partnerships, bank loans and other floating rate notes, US and international real estate investment trusts, and gold and other precious metals. The platform is clearly set up to diversify into wide ranging types of assets.The company does not indicate the specific ETF that make up each asset class in their portfolios.

Accounts are protected by SIPC through Charles Schwab & Company. Your account will be protected for up to $500,000 in cash and securities, including up to $250,000 in cash. This protection is for broker failure, and not for losses due to market fluctuations.

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Zacks Advantage Personalized Financial Advice

“Every Zacks Advantage client is assigned a fully licensed advisor who provides full service one-on-one service/relationship that is maintained over the long-term. Full service is one of our key focuses and advantages.” ~Scott Schneider, President, Zacks Advantage

Joining the ranks of Personal Capital Advisors, Betterment Premium, Ellevest Premium and Vanguard Personal Advisors every Zacks Advantage investor has access to full service financial advising.

Zacks Advantage Robo-Advisor Fees

Zacks Advantage has a three-tiered fee structure:

  • Account balances $25,000 to $99,999 – 0.70%
  • Account balances $100,000 to $249,999 – 0.50%
  • Account balances greater than $250,000 – 0.35%

This fee structure stacks up well against traditional human investment advisory services. But, on account balances below $100,000, it’s on the high side. Once an account reaches $100,000 the 0.50% management fee is inline with Qplum (another active management robo-advisor) and many other comprehensive robo-advisors.

However, it must be understood that Zacks Advantage doesn’t function like typical robo-advisors. The vast majority of robo-advisors use passive investment strategies. But Zacks Advantage uses active investment management – in an attempt to outperform the market, and not just match it. The active management component does argue in favor of a higher fee structure.

Zacks Advantage is powered by Institutional Intelligent Portfolios, which is an automated investment management service sponsored by Schwab Wealth Investment Advisory, Inc. However, all accounts held through Zacks Advantage are fully managed by Zacks, and not Charles Schwab.

Zacks Advantage Sign-up Process

Zacks Advantage reports that any popular web browser will work well for the sign-up process, but they specifically recommend using Google Chrome.

Since your account is held by Charles Schwab, you’ll actually sign up for the service on the Schwab investment platform.

Once you enter the sign-up process, you’ll need to complete the questionnaire. That’s the 12 questions that will be used to determine your risk tolerance and investment goals. You’ll be asked the type of investment goals you have, the amount of money you have to begin investing, as well as how much you expect to contribute to your account on a monthly basis.

You will then sign any necessary documents electronically. Naturally, there will be additional documents if you’re opening any type of IRA account. You’ll also be asked to add beneficiaries, either to taxable accounts or IRAs.

You can fund your account in one of four ways:

  • Transfer funds from an existing Schwab account.
  • Transfer an account from another brokerage service.
  • Wire, check or mobile deposit.
  • Fund transferred from a linked bank account.

Transferred funds should arrive in 5 to 7 business days. You’ll be given a suggested portfolio, based on your responses to the questionnaire. You can either accept that portfolio, or discuss it with an account advisor.

Zacks Advantage Pros and Cons

Zacks Advantage Robo-Advisor Pros

  • Unlike most other robo-advisors, Zacks Advantage seeks to outperform the underlying markets, and not just to match them.
  • Zacks investment methodology is based upon premier Zacks research analyses.
  • The service seeks to generate long-term gains, while providing downside protection.
  • Zacks diversifies into asset classes not typically found in most robo-advisor portfolios.
  • Zacks robo-advisor offers all clients financial advisor access.
  • All accounts are held with Charles Schwab & Company, one of the largest and most innovative investment platforms in the industry.

Zacks Advantage Robo Advising Cons

  • Tax-loss harvesting is offered only on account balances over $50,000.
  • Customer contact is limited to regular business hours, Monday through Friday only.
  • The minimum account balance of $25,000 will exclude new and small investors.
  • The fee structure is high compared to robo-advisors (especially for portfolios valued at less than $100,000), but the investment service is actively managed, and more comparable with traditional human investment management, where its fees are much lower. There are many robo-advisors with lower management fees.

Zacks Advantage Robo-Advisor Review Wrap Up

Zacks Advantage is an excellent investment platform if you’re looking for the benefits of automated investing through a robo-advisor. They’ll create and manage a portfolio for you, including automatic rebalancing, and tax-loss harvesting on an account balance over $50,000.

But the main advantage to the service is that it’s actively managed and employs proprietary Zacks research. This gives you an opportunity to outperform the market, and may even provide some protection against market declines during down market cycles. In that way, it functions more like a portfolio with human investment management advice.

Zacks Advantage fees are higher than most other robo-advisors, but it isn’t a direct comparison either. Zacks Advantage provides active investment management, which represents a higher level of service than other robo-advisors.

Due to my familiarity and use of Zacks research over many years, I have a particular interest in following this robo’s progress to find out whether it’s likely to outperform it’s peers over time. Of course, the robo-advisors long term performance numbers won’t be known for several years.

If you’d like more information, or you’d like to open an account, visit the Zacks Advantage website.

Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t personally believe is valuable.

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