Zacks Advantage Robo-Advisor Review 2023

Zacks Investment Review – Is This Robo-Advisor Right for You?

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 has consistently performed well on the Robo Report. In the second quarter of 2020, Zacks held the top spot in the Access to Advisors category, beating out robo-advisors like TD Ameritrade and Wealthsimple.

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

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*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.

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

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.

What is Zacks Advantage?

Zacks research and expertise drives this actively managed robo-advisor. Their commitment to research sets this digital advisor apart from the pack.

Zacks Advantage seeks long term performance, with downside risk protection. Therefore, Zack’s Advantage is a solid robo-advisor to consider if you’re seeking the opportunity to beat the average stock and bond market returns.

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. With index fund ETFs plus active management, Zacks joins Personal Capital, T. Rowe Price ActivePlus Portfolios, and Merrill Edge 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 prioritizes diversification 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 Advantage Robo Advising Features at a Glance

Who is the Zacks Advantage Robo-Advisor Best For?

The investor who wants full-service financial advice: Zacks Advantage offers the benefits of a robo-advisor and a personal financial planner in one package. Unlike some robo-advisors, where access to human financial planners cost extra, Zacks includes everything into one set fee.

The investor who wants to beat the market: 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.

Investors who want diversified asset classes: This is also an excellent choice for investors who are looking for a robo-advisor offering portfolios with greater diversification among asset classes.

Investors with a high minimum to invest: Zacks Advantage is tailored toward wealthier investors. The minimum investment is $25,000.

Zacks Advantage Drill Down

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 typically charge more than 1.0% AUM.  While it’s on the high side compared to robo-advisors like Betterment, it stands out against other robos that target wealthier clients.

Zacks Advantage doesn’t function like typical robo-advisors. The vast majority of robo-advisors use passive investment strategies, whereas Zacks Advantage uses active investment management in an attempt to outperform the market, and not just match it. The active management component supports a higher fee structure.

Minimum Investment

Clients will need a minimum investment of $25,000 to open an account at Zacks Advantage. While this is in line with other robos who specialize in actively-managed accounts, this higher investment will likely exclude new investors.

Tax-Loss Harvesting

Clients with $50,000 or more receive automatic tax-loss harvesting. While Zacks limits tax-loss harvesting to wealthier clients, other robo-advisors, like Wealthfront, offer tax-loss harvesting to all clients.

Portfolio Rebalancing

Because Zacks Advantage robo-advisor is actively managed, clients can expect to work with financial advisors to keep their portfolio allocations on-track. They state that their goal is to give clients “an actively managed portfolio built to match your financial objectives.”

Zacks Advantage Robo-Advisor Customer Reviews and Service

Zacks Advantage makes it easy for clients and would-be investors to contact them, with multiple options available on the website. Clients can use a web-based form to ask questions, send an email directly to customer support, or call one of two phone lines depending on their needs.

Their phone line hours, however, are only open Monday through Friday; this is fairly limited considering current trends toward weekend availability.

Admittedly, Zacks Advantage didn’t do too well on the Customer Experience section of The Robo Report. This category measures how easy it is to sign up for an account, the number of clicks a client must make to access their account information, whether the website is accessible, and the customer service hours.

Because of the evaluation criteria for this category, it’s probable that Zacks Advantage scored low because of their limited customer service hours and their fairly sparse website.

Top Robo-Advisors

Robo Advisor	Management Fee	Investment Minimum	Sign up
M1 Finance	$0.00	$100	Sign up
	$0.00	$1.00	Sign up
Wealthfront	0.25% of AUM ($5,000 managed for free)	$500	Sign up
	$5-$9 per month	None	Sign up
	Basic-$0.00 Premium-$30/month ($300 set up fee)	$5,000	Sign up
	0.25% of AUM for accounts worth more than $20,000 | $4.00 for accounts worth less than $20,000	None - $10 to begin investing	Sign up

User Experience – Sign-Up Process

Interested clients must first submit their email address and phone number to begin the account setup process. Zacks Advantage tailors this process in a way few other robo-advisors do: they send all potential clients a Getting Started guide that details every step of the process.

Sign-up is fairly simple after this point.

Clients complete a short questionnaire, which will help them to determine their risk tolerance, investment goals, and time horizon. The robo-advisor will use your answers to create a recommended portfolio. If you’re happy with the recommended portfolio, you can move on to funding the account; if not, a live financial professional is available via telephone to help you.

Funding accounts is also easy: transfers can be made from existing Schwab accounts, checks, wire transfers, or ACH transfers. Clients can also roll over IRAs or 401(k)s.

One word of advice: wait until you can complete the entire sign-up process in one go! Your answers cannot be saved if you leave the sign-up process before completion.

Access to Human 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

By offering access to full-service financial advising, Zacks Advantage joins the ranks of Personal Capital Advisors, Betterment Premium, Ellevest and Vanguard Personal Advisor Services.

Robo-Advisor Security

Zacks Advantage robo-advisor clients are protected by SIPC. Accounts are insured for up to $500,000, which includes up to $250,000 in cash.

Review: Best Robo-Advisor Performance

Investing Strategy

Zack’s uses 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 your investments to reduce risk during market downturns, and accelerates portfolio market participation during cyclical market recoveries.

Active, Passive, or Active-Passive Investments?

Zacks Advantage robo-advisor relies on active management strategies. Actively managed robo-advisors combine the strengths of the robo-advisor with the know-how of human financial professionals to try to beat the market.

Portfolio Diversification

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

How Zacks 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 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 assesses your risk capacity. Risk capacity is another metric that looks at how much of your investment portfolio you can reasonably afford to lose in during a typical market decline. 

Bonus: Michael Kitces has an excellent article describing the difference between risk tolerance and risk capacity.

Investment Funds

Zacks Advantage is clearly set up to diversify into wide ranging types of assets. In addition to asset allocations in stocks and bonds, Zacks Advantage also includes master limited partnerships, bank loans, other floating rate notes, US and international real estate investment trusts, and gold and other precious metals.

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 Protection

• US inflation protected bonds
• US REITs
• International REITs

Defensive Assets

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

Note: the company does not indicate the specific ETFs that make up each asset class in their portfolios.

Zacks Advantage Robo-Advisor Pros and Cons

Pros

• Active management strategies. Unlike most other robo-advisors, Zacks Advantage seeks to outperform the underlying markets, 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.

Cons

• Tax-loss harvesting is offered only on accounts valued over $50,000.
• Customer contact is limited to Monday through Friday.
• 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.

FAQ

Wrap Up

Zacks Advantage is an excellent investment platform if you’re looking for the benefits of automated investing and active portfolio management 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.

Zacks Advantage is for a specific type of investor who’s interested in an actively managed robo-advisor that strives to beat market returns.

For investors seeking a passive investment strategy with live advisors and fee-free management, check out the SoFi Invest platform.

The main advantage to the Zacks 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 traditional investment advisor, with a specialized investment strategy.

Zacks Advantage fees are higher than several other robo-advisors for smaller accounts, 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 outperforms its peers over time.

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

Click here for access to my favorite investment management tracking software (sign up is free, quick and secure).

Comparison – Personal Capital vs Zacks Advantage

Related

• Personal Capital Review
• Best Robo Advisors for Retirees
• SoFi Automated Investing Review
• Interactive Advisors Review

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.