Zacks Advantage (ZA) is a new entrant to the growing robo-advisor landscape. It's offered by Zacks Investment Management, a legacy registered investment advisor (RIA) founded in 1992. Zacks is well known for its independent investment research.
Similar to its robo-advisor competitors, Zacks Advantage asks risk and goal questions to tailor investment portfolios to specific needs. ZA applies modern portfolio theory and funds the account with diversified, low-fee exchange traded funds (ETFs). ZA offers professional management with a unique strategic asset allocation. Zack’s differentiates its service with strategic allocation. The strategic asset allocation is an active portfolio management approach that regularly adjusts the portfolio’s investment holdings. Unlike other robo-advisors that maintain the same asset allocation regardless of projected market and economic forecasts, ZA integrates forecasts for capital market returns with your personal risk tolerance and goals.
Zack’s selects ETFs using its proprietary Zacks ETF ranking system. Zacks' system evaluates these basic factors: momentum, duration, credit ratings, yields and ETF holdings. It also considers expense ratios as well as bid-ask spreads when selecting ETFs. Zacks' ratings are projected for a six-month time period although the ratings are updated quarterly. (For related reading, see: Hybrid Robo-Advisors Set to Outpace Pure Robos.)
ZA's Unique Assets
The Zacks Advantage divides its portfolios into three core strategies defined with variable risk levels:
- The Total Taxable Return Strategy includes 12 portfolios from conservative allocation to aggressive mix.
- The Total Return Municipal Strategy offers 12 portfolios from conservative allocation to aggressive mix.
- The Income Taxable strategy has 3 portfolios ranging from conservative allocation to aggressive mix.
ZA offers a wide variety of investment categories including growth, growth and income, income, inflation, and defensive assets. In fact, ZA may just have the most diversified portfolios among all of the robo-advisors. Within each category, there are several asset classes not normally found in a typical robo-advisor including preferred stocks, bank loan and floating rate notes, international REITS, master limited partnerships, currencies and international bonds. These less popular asset classes come in addition to the typical U.S. and international stock and bond ETFs.
In addition to rebalancing, accounts worth more than $50,000 have access to automatic tax loss harvesting. This is a tax reduction strategy that sells securities that have lost value in order to offset gains on other securities. Ultimately, the sold security is replaced with a comparable asset in order to maintain your personal allocation. (For related reading, see: How Robo-Advisors Are in Reach for More Clients.)
The Zacks Advantage tiered fee structure charges 0.50% of assets under management for accounts valued between $5,000 and $99,999. Accounts worth over $100,000 haves a lower 0.35% management fee.
In the Zacks Advantage whitepaper, the company explains that with its experienced management team, unique forecasting approach, adaptive asset allocation and proprietary ETF ranking system, its robo can bridge the gap between completely passive and totally active investment management. Finally, its wide range of asset classes offers diversification not found on most other robo-advisors’ platforms. The only robos that come close to the diverse model of ZA are TradeKing Advisors and Personal Capital.
The Bottom Line
For investors interested in an automated investment advisor with a more active bent, Zacks Advantage might be appropriate. With the firm's continuous study of individual ETFs and its integration with economic and market conditions, this platform is somewhat unique among its peers. Its continuous rebalancing and tax-loss harvesting, available for higher AUM accounts, offer an alternative for investors looking for more than a purely passive robo-advisory investment approach. (For related reading, see: Pros and Cons of Personal Capital.)