Review of Zacks Investment Management

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Updated on Thursday, December 19, 2019

Zacks Investment Management is a registered investment advisory firm that’s based in Chicago but operates across the U.S. and in Puerto Rico. The firm has more than 100 employees, with 11 that serve in investment advisory roles. Though it primarily works with individuals and high net worth individuals, Zacks Investment Management also serves some institutional investors.

All information included in this profile is accurate as of December 13th, 2019. For more information, please consult Zacks Investment Management’s website.

Assets under management: $4,973,528,399
Minimum investment: $500,000 for traditional investment advisory services
Fee structure: A percentage of AUM, depending on account type and size; fixed fees; performance-based fees
Headquarters: 227 West Monroe Street
Suite 4350
Chicago, IL 60606
https://www.zacksim.com/
312-265-9266

Overview of Zacks Investment Management

While Zacks Investment Management has been in business since 1992, its parent company, the financial investment research company Zacks Investment Research, has been around since 1978. Zacks Investment Research is still the backbone of how the firm invests for its clients today, as it is responsible for reviewing and analyzing research to make investment decisions.

Zacks Investment Research, which owns Zacks Investment Management, is in turn principally owned by Mitch Zacks, the firm’s CEO and a senior portfolio manager, and Ben Zacks, the firm’s president and a senior portfolio manager. Mitch Zacks has written two books on investing, “Ahead of the Market” and “The Little Book of Stock Market Profits.” He’s the primary portfolio manager at the firm and has developed many of its proprietary investment models.

The firm’s founder, Len Zacks, is also known for his published work. An article he published in the Financial Analysts Journal in 1978 about using earnings estimate revisions for stock selection led to the creation of Zacks Investment Research and subsequent innovations, including the EPS surprise, a concept still used across the investment industry.

The publicly-traded investment management firm currently has a total of 11 investment advisors on staff who work with both individual and institutional investors.

What types of clients does Zacks Investment Management serve?

Zacks Investment Management provides customized investment strategies and services to a variety of investors, mostly individuals and high net worth individuals. Its primary focus is on individual investors who do not have a high net worth, as this group currently comprises about 80% of the firm’s individual investor client base.

In addition, Zacks Investment Management also works with trusts, estates, pension and profit-sharing plans, investment companies, public and private pooled investment vehicles and other corporations or business entities. On a more limited basis, it works with brokerage firms, investment advisors and independent broker-dealers as well, offering investment strategies that they can utilize.

The minimum investment required to work with Zacks varies depending on the type of account you want to open. For example, the account minimum for Zacks Advantage, the firm’s robo-advisor service, is much lower than the minimums for its traditional investment services:

  • Zacks Advantage: $5,000
  • Wealth management program: Equity assets must equal $500,000
  • Individual fixed-income securities account: Assets must value at least $500,000

Services offered by Zacks Investment Management

Zacks Investment Management offers services for individual investors, financial professionals and institutional investors.

For individual investors, the firm offers comprehensive wealth management, which includes detailed discussions about clients’ current financial situation and goals and the creation of a customized portfolio. Additionally, the firm offers Zacks Advantage, an online investment advisory program that invests mostly in ETFs.

Zacks Index Services, a division of Zacks Investment Management, creates and manages quantitative investment models that are licensed and sponsors of UITs and ETFs. These services used to only be available to institutional investors but are now readily available to individual investors as well.

For clients who request financial planning services, Zacks may refer them to third-party firms that will then provide these services rather than offering them directly.

Here is a list of services offered by the firm:

  • Investment management for individuals, institutions and investment companies (primarily on a discretionary basis)
  • Online investment advisory services through Zacks Advantage
  • Index services through Zacks Index Services

How Zacks Investment Management invests your money

When Zacks Investment Management creates client portfolios, it takes into account several factors, including wealth preservation, income strategies, aggressive growth and tax conscientiousness.

Zacks Investment Management manages clients investments using its in-house research, which considers both quantitative and qualitative criteria. The firm relies on models to determine how attractive certain stocks are across numerous scenarios. Data from parent company Zacks Investment Research is also used when managing client portfolios.

The firm offers a plethora of specific investment strategies. The one used for your portfolio will depend on what your financial goals and your financial advisor’s recommendations.

Portfolio/Fund Name Investment Strategy
 Zacks Quantitative Strategy This stock-ranking model is based on earnings estimate revisions and earnings surprises. It purchases between 125 and 260 stocks and is rebalanced regularly.
 Zacks Focus Growth Strategy Focuses on growth-orientated stocks, with 50 to 100 stocks chosen across many different sectors. The Russell 1000 Growth Index is used as a benchmark.
Zacks International Equity Strategy Invests in markets outside of the U.S., exposed to both developed nations and those with emerging markets.
Zacks International Developed Markets Strategy Invests in developed markets outside of the U.S., using country-specific ETFs.
Zacks International Emerging Markets Strategy Focuses on emerging markets outside of the U.S.
Zacks All-Cap Core Strategy Provides risk-adjusted returns and benefits that mirror either the S&P 500 index or the Russell 3000 index.
Zacks Dividend Strategy Maximizes tax returns from dividends and capital appreciation.
Zacks Fixed-Income Strategy A portfolio manager handles this type of account using a combination of corporate and government bonds through fixed-income ETFs.
 Zacks MLP Strategy Invests in Master Limited Partnerships through a combination of higher-than-average yields and appreciation potential. MLPs focus on energy-focused companies.
Zacks Energy Strategy This strategy focuses on the energy sector that has positive risk/reward features.
Zacks Preferred Income Strategy Concentrates on a mix of traditional, trust, and third-party trust preferred securities that allow investors to yield and generate a high amount of income.
Zacks Market Neutral Fund Focuses on generating positive returns in rising and falling equity markets. Explores into both long and short positions to lower portfolio exposure and risk.
Zacks All-Cap Core Fund Invests in capital appreciation and secondly through dividends income.
 Zacks Small Cap Core Fund Looks into investing 80% of assets into small capitalization companies focusing on U.S. issuers of equity securities.
 Zacks Dividend Fund Focuses on capital appreciation and tries to invest 80% of net assets in equity securities of U.S.-based dividend-paying companies.
Small-Cap Core Strategy Invests in equity securities of mostly small capitalization companies with a diversified growth portfolio.
Mid-Cap Strategy The strategy for this one is capital appreciation by investing mostly in equities of medium market capitalization.
Zacks Premier Select Strategy This strategy focuses on companies with positive earnings estimates.
Zacks Global Tactical Strategy Strategically invests in various asset classes and limit drawdowns in the majority of markets.
Zacks Small-Cap Value Strategy Screens stocks based on quality and valuation. Companies are ranked in each sector before being optimized and applied to a portfolio.
Zacks Small-Cap Growth Strategy Focuses on quality and sustainable earnings growth and portfolio managers qualitatively review before trading.
Zacks Advantage Program Robo-advisor that uses asset allocation and ETF selection parameters created to customize investment strategies for clients.

Fees Zacks Investment Management charges for its services

Zacks Investment Management earns money through asset-based fees, fixed fees and performance-based fees.

The asset-based fee rate you’ll pay depends on which strategy or fund you invest in, as well as how much money you are investing. How often you pay fees also varies by portfolio strategy, with some fees owed quarterly and others owed on a monthly basis.

Retail Wealth Management Program fees

Retail Wealth Management Program
Assets Under Management Quarterly Fee Rate
Up to $500,000 1.80%
Between $500,000 and $1,000,000 1.65%
Between $1,000,000 and $1,500,000 1.50%
Between $1,500,000 and $2,000,000 1.45%
Between $2,000,000 and $2,500,000 1.35%
Between $2,500,000 and $3,000,000 1.30%
Between $3,000,000 and $3,500,000 1.25%
Between $3,500,000 and $4,000,000 1.20%
Between $4,000,000 and $4,500,000 1.15%
Between $4,500,000 and $5,000,000 1.10%
Between $5,000,000 and $10,000,000 1.05%
Over $10,000,000 1.00%

Clients in a Retail Wealth Management Program, the firm’s traditional wealth management account, also may pay other fees. Accounts that are held by the investment management firm FOLIOfn Investments are subject to a number of additional fees, including:

  • An annual, fixed fee for clients who have accounts held at investment management firm FOLIOfn Investments. Fees are $0 for accounts of less than than $20,000; $295 per account between $20,000 and $50,000; and $495 per account over $50,000.
  • A fee for any non-window trades, incurring of margin debt or execution of other specified transactions in FOLIOfn-held accounts.
  • A $50 annual fee for accounts held at FOLIOfn that’s more than 10 portfolios.

Outside of FOLIOfn-related fees, clients may also pay an account administrative fee if they use a Zacks Investment Management investment consultant. Clients with individual fixed-income securities, such as treasury, corporate and municipal bonds, may pay additional quarterly fees that are based on a percentage of assets under management and range from 0.25% to 0.65%.

Fees for other strategies

For other strategies available to individual investors, the asset-based fee schedules are as follows:

Global Tactical Strategy (Retail)
Assets Under Management Quarterly Fee Rate
Up to $500,000 0.95%
Between $500,000 and $1,000,000 0.90%
Between $1,000,000 and $4,000,000 0.80%
Over $4,000,000 0.70%
Premier Select Strategy (Retail)
Assets Under Management Quarterly Fee Rate
All assets under management 1.50%
Zacks Strategies Direct
Assets Under Management Quarterly Fee Rate
Up to $500,000 0.99%
Between $500,000 and $1,000,000 0.90%
Between $1,000,000 and $2,000,000 0.80%
Between $2,000,000 and $5,000,000 0.70%
Over $5,000,000 0.60%
Zacks Advantage
Assets Under Management Monthly Fee Rate
$5,000 to $99,999 0.70%
$100,000 to $250,000 0.50%
Over $250,000 0.35%

The firm has separate fee schedules for institutional clients, with rates varying depending on which strategy is used.

Additional fees clients may pay

In addition to asset-based fees, clients may pay additional fees as well. This includes wrap fees for clients who are involved in wrap fee programs, which are arrangements in which a certain set of fees are offered under one bundled fee. The wrap fee is an annual fee that is charged quarterly based on a price negotiated by Zacks Investment Management and the wrap sponsor.

Additionally, qualified clients are charged performance-based fees that Zacks Investment Management says in its Form ADV are “either based on the total return or above the benchmark return measure against an index.” Clients will be able to negotiate their rate depending on the amount of assets being managed and how long the account has been open. Fees don’t exceed more than 20% of the total annual return of the account and are billed monthly.

Aside from the fees charged by the firm, clients may also incur trading costs and custodial fees.

Zacks Investment Management’s highlights

  • An emphasis on research: Zacks began as an investment research firm, which still exists as the firm’s parent company. While other firms may need to rely on research from third-party companies, Zacks Investment Management keeps it in-house and uses it in every facet of the investment choices it makes for its clients.
  • Different strategies for different investors: Depending on the type of investor you are, how much money you’ll be investing and your long-term goals, ZIM has a strategy for you. The firm offers a total of 21 investment strategies, plus Zacks Advantage, its robo-advisor. Zacks offers both asset allocation strategies as well as alternative investments strategies.
  • Notable awards for investment strategies: Zacks Investment Management’s Dividend Strategy received a six-star ranking in 2017 from PSN Top Guns, an investment manager and evaluation database. The Mid Cap Core Strategy also received a 6-star ranking in 2017. These awards were given to the top 10 performing firms in their peer group over a five-year and three-year period, respectively.

Zacks Investment Management’s downsides

  • Higher than average fees: The fees that Zacks Investment Management charges for certain investment strategies may be above industry average fees. According to RIA in a Box, the average rate is around 1.17%. For Zacks’ wealth management program, you’ll need to invest at least $4 million to pay less than that rate. If you have less than $500,000 in assets under management, you can expect to pay 1.80% every quarter, which is far above the industry average.
  • Performance-based fees: These fees are charged when an investment manager hits a certain goal of investment returns. This fee only applies to certain qualified clients that are using certain strategies, but in those instances this fee can reach upward of 20% of the total return on the account. Additionally, the fee can create potential conflicts of interest, as advisors may be incentivized to take greater risks to increase returns, and it can also lead advisors to favor performance-based accounts over other types of strategies.
  • Additional compensation: Zacks earns money from a plethora of ways outside of the fees that its clients pay. The firm makes money through partnerships, including with affiliates and from recommending certain experts, CPAs and attorneys that pay them fees for sending them new business. This means the firm could be incentivized to make certain recommendations to you.
  • Financial planning only available through third parties: Though Zacks Investment Management does technically offer financial planning services, it offers these services through partnerships with third-party firms instead of directly. This is in contrast to many other firms, which will offer financial planning and investment management services all in-house. Zacks, on the other hand, is focused primarily on investing.

Zacks Investment Management disciplinary disclosures

Zacks Investment Management doesn’t have any disciplinary disclosures within the last decade. The firm has no legal issues reported on its record.

SEC-registered firms are required to report any actions against them, including criminal, civil or regulatory actions. If a firm has any of these, it’s listed on its Form ADV, which is publicly available through the SEC.

Zacks Investment Management onboarding process

If you’re interested in learning more about Zacks and how you can work with them, you can contact them at 1-800-701-9830. Another option is to fill out the contact form available on the firm’s website or email the firm at [email protected].

Each client account is reviewed on a quarterly basis to see if life changes require a portfolio change. For instance, if you’ve lost your job or increased your salary, your allocation might change.

Every time a transaction is confirmed, your broker-dealer will send you a notification of the transaction. You can also expect a monthly statement and quarterly performance reports.

The bottom line: Is Zacks Investment Management right for you?

Zacks Investment Management only has one office, which is in Chicago, but it is registered to work with clients across all 50 states, plus Washington D.C. and Puerto Rico. That means you don’t have to live in a certain state to take advantage of the firm, although to meet face-to-face with your advisor, you’ll need to live around Chicago.

Individuals in the wealth management program might face higher-than-normal fees compared with other firms, especially if you don’t have a few million dollars in assets under management. Additionally, advisors receive performance-based fees and other types of compensation through affiliate relationships, which could create conflicts of interest.

Make sure to ask questions about the firm’s fee structure if you decide to work with them. You may want to choose an advisory firm that doesn’t charge performance-based fees or go through a lower-cost robo-advisor. Before selecting a financial advisor, it’s important to consider your financial situation and to compare several different options.

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