Zhang Financial, founded in 1991 in Portage, has been ranked as one of the top wealth management firms in the nation by various financial publications for years.
On March 15, Managing Partner and CEO Charles Zhang flew to Las Vegas and accepted an award from Forbes magazine CEO Steve Forbes as No. 16 on a list of the Top 200 Wealth Managers in the U.S.
Investment industry magazine Barron’s ranked Zhang Financial No. 1 in Michigan for the past four years.
Zhang and his wife, partner and COO Lynn Chen-Zhang, head the fee-only asset management firm, with a team of 25 employees ranging from financial advisors, tax preparers, support staff and attorneys working in the company’s locations in Portage, Battle Creek, Grand Rapids, Troy and Naples, Florida.
In 2016, Zhang Financial reported West Michigan assets under management of around $2.5 billion, up from just over $2 billion in 2015.
Zhang said many firms sink their energy into acquiring smaller firms to grow faster, but his company is strategic about growth, putting more effort into retaining existing clients than securing new ones.
“My first responsibility is to existing clients,” he said. “We’re fee-only. We’re paid by keeping the clients year after year. … Taking new clients is secondary.”
The firm, which began as a franchise of then-American Express Financial Advisors (now Ameriprise), became independent in 2007. Around 2011 or 2012, Zhang switched from fee-based advising, receiving commissions from selling products, to fee-only advising, compensated solely from the client.
Zhang said the fee-only model makes it easier for advisors to remain objective as they guide their clients.
“Why it’s so unique, so different is consumers are looking for objective advisors who don’t have an agenda,” he said. “We don’t take any money from private companies, no kickbacks. A lot of companies take kickbacks” for funneling customers toward their products.
“A lot of companies say, ‘If you take our products, we’ll give you a trip to Europe.’ But you can’t be objective that way. If you go to the doctor and you get a prescription, and you know he will get a kickback from the pharmaceutical company, how can you trust he will give you the right treatment? He can’t be objective.”
Securing a client relationship is a gradual, thorough process at Zhang, he said. To start, prospective clients, usually referred by friends, must bring at least $500,000 to invest if they are in-state and $1,000,000 if they are out-of-state. The investment fee usually is 1 percent or less.
Next, a Zhang wealth manager initiates a face-to-face meeting to give an overview of the company’s principles, services and processes.
If both parties agree the relationship is a good fit, the Zhang manager refers the client up the ladder to a managing partner, usually Zhang, who designs the investment strategy.
“We take a look at where they are and what they want to be,” he said. “Based on their risk level, time frame, tax level and personal objective, we design the investment strategy.”
Data gathering and solution building follow the design phase.
After the initial meeting, Zhang advisors meet with clients about every six months. The firm issues monthly, quarterly and yearly statements thereafter.
Zhang said the firm currently serves about 1,000 families and retains most of its clients year to year.
“We keep 99.5 percent of our clients year after year,” he said. “It’s about consistency.”
Investors, especially young ones, should decide whether they plan to do their own investing or retain the services of an advisor, Zhang said.
“If you have some knowledge and you think you can do it by yourself, do it,” he said. “But once you have more assets, consider advisors and shopping around. Check the fee. Pay lower costs. Go to a more reputable firm.
“I suggest NAPFA (the National Association of Personal Financial Advisors) to find a list of advisors in your area,” he said. “Talk with two, three people before you make a decision.”
Zhang said the biggest mistake clients make is succumbing to fear of risk.
“I think investment has become more and more complicated, and the biggest enemy for investors is themselves because they can’t control their emotions,” he said. “It’s very important in an advisor about how to manage expectations and make sure they are looking to the long term.
“For 26 years, I’ve been doing what I do. Invest early and take some risk. Focus on (the) long term. A lot of times, people, when the markets are up, can’t handle the risk. They call their investor and say, ‘I can’t handle the risk. I want to sell.’ But a good investor will say, ‘Calm down. Ten years from now, we know the market will be doing much better.’”
Zhang said he often hears from clients who are worried his many years in the field mean he is going to leave the business soon.
“My clients are concerned that I’m 50 years old and I’m financially independent, so I’m going to retire or sell the firm. But no. I enjoy what I do, and I plan to do it another 15, 20 years,” he said.
“If you enjoy what you do, the challenge is no issue.”